BREAKING: President George W. Bush approves $17.4 billion in loans for Detroit’s Big 3

Posted: Dec 19, 2008

Filed under: Chrysler, Ford, GM, Industry News

Looks it will be very Merry Christmas and a Happy New Year for Detroit. President George W. Bush announced today a $17.4 billion emergency loan that will help GM and Chrysler from going bankrupt while saving hundred of thousands of jobs.

Chrysler and GM are expected to access the money immediately while Ford said that its liquidity is adequate for now and did not need a loan at this point. A total of $13.4 billion will be made available in December and January from a $700 billion Wall Street bailout or TARP.

“If we were to allow the free market to take its course now, it would almost certainly lead to disorderly bankruptcy and liquidation for the automakers,” Bush said. He said that doing nothing would deepen and prolong the U.S. recession.

There are a couple of strings attached to the bailout. For instance, Bush said that if the companies don’t prove that they can restructure their businesses by March 31 (or a total of 102 days), the loans will be called back.

Follow the jump for a video from Reuters for more information.

Source: Reuters

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zermatt

Just a couple of thoughts:

I hate to sound like a broken record, but the UAW better come to the reorganization party ready to make wage concessions that will bring them into line with their contemporaries at the foreign manufacturers. Otherwise this is all for naught.

I do still not understand how a merger between Chrysler and GM will work when there has been such excessive production capacity and unwieldy dealer networks. There are too many brands at GM now, so how will they integrate Dodge and Chrysler into a product line that is already morbidly obese?

What will Washington be able to do to help GM and Chrysler with the various state franchise laws that make dealer termination difficult and expensive?

I wonder about how responsive all of the parties will be to getting this done in the time frames outlined in the loan. Will the UAW drag their feet like they have done so far? Will bond holders balk at the proposed equity exchange? Will suppliers begin to shift away from making components for the American automakers because of the demands for even lower prices?

At least for the time being, Rick Wagoner gets to keep his job. For being in his job for as long as he has he has no excuses for why GM is not in better shape. The GM board of directors should be concerned about shareholder suits over their continued admiration of Wagoner.

Finally, if GM doesn’t sell the Pontiac G8 Sport Truck there won’t be a single GM or Chrysler vehicle that I will want to buy.