Washington (DC) – President George W. Bush has agreed to release $13.4 billion in loans to General Motors (GM) and Chrysler LLC (a privately held corporation), as part of a rescue plan/bailout. Said Bush, “These are not ordinary circumstances. In the midst of a financial crisis and a recession, allowing the U.S. auto industry to collapse is not a responsible course of action.”
The $13.4B will be issued out of the Troubled Asset Relief Program. An additional $4B will be available in February if needed. In exchange, the automakers must provide warrants for non-voting stock, accept limits on executive pay, give the government access to financial records and not issue dividends until the debt is repaid. The government also has the authority to block any transaction over $100 million.
GM is currently sitting on $73B in losses since 2004 and indicated it would run out of money before the end of December. Chrysler has indicated it would run out of money in January. Ford is also troubled, though has money to last well into next year.
Personally, I have an idea to help both GM and Chrysler (and Ford) come out of this slump in the black: Build better cars.
Read more at Bloomberg.