Automaker Bridge Loan Deal Announcement

President Bush addressed the nation this morning about Chrysler and GM, announcing a bridge loan auto deal that has been under discussion ever since the Senate shot down the previous automaker bailout proposal.

The deal starts as a $13.4 billion short-term loan and could grow to as large as $17.4 billion.

General Motors Corp. and Chrysler LLC will get $13.4 billion in initial government loans to keep operating in exchange for a restructuring under a rescue plan announced by President George W. Bush.

The money will be drawn from the Troubled Asset Relief Program and the automakers will get an additional $4 billion from the fund in February for a total of $17.4 billion in assistance, according to a statement from the Bush administration. The funds would allow GM and Chrysler to keep operating until March.

President Bush said that chapter 11 "is unlikely to work at this time." He later added that the short-term loans are designed to either allow the auto companies to prove that they can become viable or to prepare themselves legally and organizationally for an orderly chapter 11 bankruptcy.

The deal became urgent as GM and Chrysler appeared to be headed for serious trouble, idling plants and selling off prized property -- like the GM heritage collection.

The aid package being spearheaded by the White House would demand that both automakers restructure by seeking new concessions from unions and creditors, two people briefed on the talks said.

Both GM and Chrysler have been forced to idle plants and lay off thousands of workers across North America as they try to shore up cash and have warned they could face bankruptcy without federal assistance.

CONDITIONS OF THE AUTO DEAL

CNBC and Bloomberg have reported on some details of the deal that Bush announced:

*The loan to the automakers is intended to keep them afloat through February
*Automakers must show positive net present value by March 31 -- this is an element of what has been called an "orderly bankruptcy" plan -- or loans must be repaid
*Companies must accept executive compensation limits
*Labor costs much be competitive with those of foreign automakers working in the US
*There will be no "car czar," but the deal will be overseen by a presidential designee, in this case Treasury Secretary Henry Paulson
*Government officials will watch the companies' financial statements and can veto any transaction in excess of $100 million
*The deal can be renegotiated by the Obama administration once Obama is in office, prompting commentators to call it a "Bridge to Obama" loan

Comments

[retiredblues]

The auto industry built the middleclass and now they are taking a lot of heat for the current economic conditions. Not to mention the fact that the goverment is giving them a LOAN and not a bailout like the banking community is getting. They are the ones responsible for the current mess the economy is in and not the auto industry. Support working families by giving them a livable wage and healthcare. Also, demand accountability for the billions given to all the financial companies as is demanded by the LOAN to the auto industy. Remember also the word LOAN. That's what the auto industry has. The finacial debacle we are in and the companies responsible have a BAILOUT.

[sunbeltvoter]

This is all part of the Bush Plan to transfer as much of your tax money as possible to Good Republicans. Bush just approved a $4 billion TARP fund loan to Chrysler by Dec. 29. Cerberus Capital Management owns 80% of Chrysler. Dan Quayle is the Director of one of Cerberus Capital Management divisions. On October 19, 2006, John W. Snow, President George W. Bush's second United States Secretary of the Treasury, was named chairman of Cerberus.

Keeping those $$$$$ All in the Republican Family.

[AnotherMcIntosh]

"Bush Announces $17.4B TARP Loan To Automakers"

The real story is:
"Democrats Approve Final $350 Billion in Exchange for Temporary Auto Bailout"

Bush, Paulson, et al, aren't even required to confine the distribution of the first or the second half of the $700 billion bailout to U.S. banks.

[leftLibertarian]

Bush is a criminal and belongs in prison

[nonamenm]

I am not a fan of bailouts but I think this is very important for the country and frankly haven't been able to understand the resistance. Bankruptcy for GM and Chrysler at this point in time would have a devastating effect on an economy that is already reeling.




























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[Beninn]

It's time for the American people to be bailed out. A clean slate, a do-over, all our debt wiped out.

All regulations pre-Reagan put back into place. credit companies no longer allowed to charge usury rates. No more privatization of US government services and resources. All tax breaks for corporations moving jobs overseas ended.

That's how you put Americans back to work and get the economy back on track, Americans spending again and working toward the American dream.

[sunshinerain]

Great, I like your ideas. Let's get moving on them. Seriously. Now. I'm ready.

[GerryS]

I am not one for going to big pricey shows and extravagances such as in Las Vegas, but I would like to put my name on the list for tickets to see the cast of BUSHCO(tm) doing the perp walk. After the last year, I would probably only be able to afford the stand up tix in the back, but I would really like to see it LIVE!

[sunshinerain]

I'll just settle for seeing it on Youtube. Rumsfeld goes first. (He of the "light footprint" in Iraq).

[NWBrunette]

Oh great, more oversized cars we don't need, guzzling gas we don't have, to drive on roads falling apart, to pollute more niches of the Earth so our children can't breathe. Good work moving us toward the new economy. But at least all those workers are safe for a few more months in a dead industry since we spent boatloads more taxpayer money delaying the inevitable. Merry Christmas.

[Icantbelieveher]

Americans have seen their pay cuts for the last 8 years! If they want the UAW's wages in line with the foreign automakers by next year, that gives those foreign automakers only a few months to get their wages up!

Why should Americans take pay cuts so that they can live in poverty with horrible education like the workers at those southern plants? I'm tired of making concessions, republicans need to work harder for their constituents rather than the rest of America coming down to their level!

[metfan5567]

Oh, piffle!

Next thing you know, you will be believing in such myths as a "Constitution" or a "Bill of Rights"

Don't forget that "right to work" isn't far from "right to be a sl_ave"

[CologneCitizen]

very well said.

I live in Germany where BMW makes cars and works closely with the German unions. No reason why the American worker is stripped of all the benefits a German worker enjoys. I understand they cannot apply the same rules which are relevant over here. Still BMW should be ashamed the way they treat their workforce in the USA.

[Arthur954]

If we had a national health care and retirement system , this would not be an issue. The government could take care of these two things at a fraction of the cost and aggravation.

Instead now we have some workers that receive a lot, some little and some none at all

How complicated everything is ! Until this unfair privatised health and retirement system is eliminated, this is a great disadvantage for the US economy. I hope Obama / Daschle DO NOT " IMPROVE " IT, INSTEAD ELIMINATE IT ALTOGETHER and start all over by taking a look at what is proven to work and be cost effective in Europe , for example

[rich misty]

So Bush is giving them tarps to cover their mothballed plants in hopes that one day they can be reopened

Meanwhile the rest of the GOP is cheering the demise of America and Americans, all according to plan:

http://www.google.com/search?hl=en&q=drown+it+in+a+bathtub+government&aq=0&oq=drown+it+

Methinks Bush is struggling at the last moment with his Hoover legacy, and previous annoitments as the worst president in history which sticks nicely...

[loki]

I think I see whats going on here. rethugs refuse to the bail out loan. Bad Cop
Bush and Paulson had over 17 billion of their precious tarp money, Good Cop
DumboCraps will now hand over 350 billion to Paulson so he can distrubute it to his and Bush's
greedy friends and probably stash a good sum into off shore accounts for themselves.
As usual, i hope I am completely wrong.

[rich misty]

Sounds all according to plan to me... You are dealing with people to whom American lives mean nothing at all.

[larry278]

The embalmers who are working on W & Cheney are incompetent. Each photo of either one requires the use of Photo Shop for 6 hours to make either one look as if either one had been alive 4 hours ago.

[AZterritory]

Problem is, Bush thinks the 'tarp' loan is something he can use to cover this up until he leaves office and sticks Prez O with it.

[hortonhearsawho2]

Wal-mart hs the same tarp for $1.34, price roll back and all....

[NWBrunette]

and that's the one we ought to be using on the industry.

[lisakaz2]

Yet again no limits on executive pay but workers gotta make concessions. These guys never met a CEO (no matter how disastrous a job they do) that they didn't want to "help."

[TonyOnly]

I watched Bush say concessions would have to be made by everybody including management, labor, suppliers and crediters. The only one that leaves out is the actual union itself.

[schatsie]

You gotta believe that they did not want bankrupcy because management did not want to loose its millions and millions in DEFERRED Compensation AND MANAGEMENT PENSIONS...

ANY TARP money release should be with the same conditions, it should not go to management at all or the shareholder dividends...it is supposed to alleviate FORECLOSURES...

[schatsie]

huhhh? are you saying labor is not union?

[dandypuddin]

Many seem to forget there are lots of layers of middle management between CEOs and the line workers. It seems people are either for CEOs taking huge pay cuts (agree) and the unions caving into pressure once again to lower their benefits (disagree). There's a lot of layers inbetween.