Obama Denies GM and Chrysler Extra Funds

General Motors & Chrysler

GM given 60 days to prove its viability, Chrysler has 30 days to hammer out an alliance deal with Fiat

By Alex Ricciuti
March 30, 2009 4:04 PM
Filed Under: American, Chrysler, Corporate/Financial, General Motors

The Obama administration will be presenting its bailout plans for the US auto industry today, but the Financial Times is already reporting that there will be no new loans for troubled automakers GM and Chrysler - at least, not as of yet.

The Presidential Task Force for the Auto Industry has made its recommendations to the White House and it appears that both GM and Chrysler have failed to meet the administration's requirements for further help. GM will be given 60 days to once again prove its viability and get restructuring concessions from autoworkers and bondholders to reduces their costs and debt. Chrysler will get 30 days to solidify its alliance deal with Fiat and demonstrate that any financial aid given will remain with the company and be invested inside the United States.

The Obama administration is certainly getting tough with Detroit and is living up to its promise of not simply continuing to hand out money to cash burning companies. Although, the FT reports that the US government will continue to provide GM and Chrysler with operating capital, which may end up exceeding the additional 21.6 billion US dollars the automakers have asked for.

One issue that looms large is GM's unsecured debt. GM is being highly pressured to reduced the amount it owes in bonds. Bondholders hold about 27.5 billion in GM debt and are weary of GM's offer to swap that debt for equity in the troubled automaker. A condition of the bailout was that GM reduce that debt to 9 billion.

Sources told the FT that the Obama administration still believes GM can be restructured into a viable company but that Chrysler cannot survive on its own. The administration has been pressuring Chrysler to come up with an alliance deal with Fiat that keeps the company afloat and the bailout money invested in the United States. They have also added a condition, that if Fiat were to acquire more than 50 percent of Chrysler, then the loans would have to be paid back.

Source: ft

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Tags: Obama, Presidential Task Force on the Auto Industry, GM bailout, Chrysler-Fiat alliance

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Comments

Prince_Ash

March 30, 2009 4:06 PM

good! shape up or ship out!

sw1000

March 30, 2009 4:18 PM

Good news, give the money to someone like Tesla who are looing to the future.

It's a shame for the honest people that work in the factories though

Joe_Limon

March 30, 2009 4:49 PM

As much as I like Tesla, I would never give them billions. If people don't work for their money they get lazy and sloppy. It would ruin the company. But back to the article, way to grow some balls Obama!

Aesthetics

March 30, 2009 4:59 PM

big has to completely change. whatever reputatin they had as car makers hould be compltely open to change. if they stay arrogant, ill be seeing them in museums

CarLife

March 30, 2009 5:16 PM

Maybe GM should consider buying Tesla as part of their restructuring... Although, I do not think there's a future with Tesla. The new S model is probably just a ponzi scheme to milk the over enthusiastic of their money and not deliver any cars before the outfit folds.

eddie

March 30, 2009 6:11 PM

I agree. Money should go to Tesla and Karma Fisker// Future technology not smoke stack technology

jandrews90

March 30, 2009 6:22 PM

"Way to grow some balls Obama" are you kidding me? He's not being tough, bluffing is all he's doing, he gave them another 60 days, if he had some balls he'd say "Too late, now give me back my money" There's no way Obama will let GM go bankrupt

Joe_Limon

March 30, 2009 6:38 PM

That's not balls, that's arrogance and being pessimistic. If Obama was that way he wouldn't be trying fixing the rest of the us debt.

500lbman

March 30, 2009 7:26 PM

BANKRUPTCY NOW

SLASH AND BURN GM

captwhizbang

March 30, 2009 7:43 PM

Exactly what is supposed to be accomplished in 60 days? Do you think anyone is going to buy a car from a company knowing they might not be around in two months? This is basically a death sentence, it is becoming obvious that this current cabinet is going to force GM into a "Structured Bankruptcy" so that the Special Interest groups that got it elected will be able to get their hands on the money, then they can just blame the prior management for making it impossible to save, meanwhile pocketing Billions in the name of viability research.

mldrieling

March 30, 2009 8:09 PM

As an American, I think this is junk. Sure, GM and Chrsyler built bad cars (I've had cars from Germany, America and Japan) but they were selling. They built cars people wanted. When our gas prices soared, everyone changed what they wanted overnight. The government has sunk over 160 billion into AIG and is complaining about the 18 billion into both Chrysler and GM. Now they say they're not changing fast enough when it takes several years to develop and produce a car? How fast, and what cars? Now that gas is about $2.00/gallon people aren't buying small cars, truck sales are up. Sure GM and Chrsyler have problems but at what cost are we going to lose almost 2 million jobs (140,000 direct)?

Wickedated

March 30, 2009 11:07 PM

You should probably READ about AIG and its impact in the financial world at a global scale before you use it as an example to support your case with GM, because you're comparing a company that could destroy the financial market with one that will effect 3 million people MAYBE (out of 290 million people in the US). Yeah people would lose jobs but these jobs are technical and people can be rehired by other companies and suppliers, the impact would be insignificant to the broad economy, whereas AIG would take down every mom, dad and kids with them. Again, inform yourself on AIG.

Andres2007

March 31, 2009 3:00 AM

But you're underestimating the impact of GM. It's not three million people, it's also the tire suppliers, the radio manufacturers, the sales associates in CarMax or Maroone, it's the advertising industry, etc.

I'm not saying GM is more important than AIG, but a country's industry is at the very heart of its economy. You cannot underestimate what it would do to the US economy if GM, Ford, and Chrysler failed. And that thing you said, that it's only 3 million out of 300 million people... I recommend you don't say that in front of anyone that has lost or will lose their job because of GM's failing. Remember, it'll be 1 in 100 people and they might slap you in the face for saying that. If a company's failing increases a country's unemployment by 2% that's HUGE.

hata0101

March 31, 2009 6:42 PM

but remember, UAW play a huge part of GM fail! look at the figure...there is 21 billions of debt for retiree health benefits funding!!!! as a honest american, working hard, i would LOVE to have a job @ GM which "protect" by UAW! lay-off? no problem, i'm in the job bank & earn 90% of my salary during awaiting for re-loacation for job! & still having health benefits. oh, don't forget lots of employees also "benefits" by that 25-year employment rules. if i started at 18 @ GM, i can retire at age 43 & earn all retirement benefits (+ health benefits, again)!!!! who else in this world can have THAT kind of "benefits"?? yes, let it bankrupt, let those UAW members lost their job AND BENEFITS! if they came up to me, i'll be the one SLAP ON THE FACE & tell them WAKE UP, A-HOLE!

Viking79

March 30, 2009 9:43 PM

I'd say Obama has balls; he both fired Wagoner's useless ass and has told the world that is bowling skills are akin to "the special olympics". Ballsy!

MutantSushi

March 31, 2009 1:10 AM

Having both of these companies go bankrupt would not be the end of the world as always intimated. If they can add a clause against Fiat buying control of Chrysler (Somebody actually wants to buy it!? And they want to stop that!? At the least that seems contra to WTO and bilateral US/EU agreements), they can certainly write up a custom bankruptcy law to help keep productive assets still producing (providing short term loans only to plants whose product can sell). As many have said, truck sales are up - GM/Chrysler's truck business is certainly competitive and should be a salable asset in bankruptcy court. Likewise, Chrysler has certain lines like it's mini-Vans that do fine, in fact VW rebrands them as it's own - If Chrysler went belly up, why wouldn't VW buy up part of it for pennies on the dollar to keep it in production in anticipation of increasing the marketshare for locally produced VW models?

Bankruptcy means the purchaser is NOT saddled with the Debt, making the business viable: the Debt issue will be dealt with, but the Bond holders only get as much as they can sell off the company assets for... End of story.

About labor costs (benefits always mentioned as expensive): National single payer health care is the option to save money. No altruism towards poor people without health-care is necessary. Covering everybody is cheaper. Period. Less HMO beaurocracies, less clinic staff to negotiate between multiple Insurers, WAY more scale to negotiate the same (or better) deals on pharmaceuticals & equipment that impel US consumers to buy drugs from Canada/Mexico. This just implies that owners of Pharma/HMO stock aren't priviledged over the viability of the rest of the economy. Think that over.

And sure, one can say the Financial Derivatives industry had become 'crucial' to the entire economy (even though it's parasitic of the real economy). That doesn't lead to CONTINUUING TO EMPLOY THE SAME PEOPLE WHO CREATED THE PROBLEM, and putting them in charge of how the zillions of Government issued Money will be spent. One would think finding real economists and financial pro's WHO WERE AGAINST THE DERIVATIVE DEREGULATION in the Clinton years would be a good place to start for the new heads of these banks and financial casinos.

joshg_5

March 31, 2009 4:10 AM

Darwin's Law:

SURVIVAL OF THE FITTEST.

WildMaverick1200

March 31, 2009 4:26 AM

Obama should fund Tesla instead of the Detroit makers. I'm pretty darn sure that any American would love cheaper cars with 90% energy efficiency than old reinvented cars with 20% efficiency.