The Latest Bailout Plans for GM, Ford, and Chrysler

The Latest Bailout Plans for GM, Ford, and Chrysler

American Automakers are next in line to receive federal money in the form of a bridge loan.

General Motors shares rose by 21%, while Ford Motor (F) shares climbed 24% on the news. Chrysler is private and majority-owned by private equity firm Cerberus Capital Management.

Congress, having worked through the weekend, delivered a bill on Monday, Dec. 8, to the White House that is designed to bail out the ailing U.S. auto industry with $15 billion in loans. Despite lingering objections by the Bush Administration and Congressional Republicans, it looks as though the aid package will pass.

President George W. Bush has questioned the ability of the wounded car giants to survive, but Democrats have said they remain confident a deal can be struck by the end of the week.
Under the proposal, similar to recent banks and insurance company  rescue plans, the government is expected to take non-voting shares in General Motors, Ford and Chrysler. Also expected is the appointment of a “Car Tsar” to oversee the money.

However, The White House wants greater assurances that the automakers would be able to reorganise and recover after they get the cash injection.

The rescue aims to avert the collapse of General Motors Corp and Chrysler LLC, saving more than 350,000 jobs and millions of others that depend on the industry.

“This is no blank check or blank hope,” Senate Majority Leader Harry Reid said.

GM, Ford and Chrysler submitted business plans to Congress last week along with a $34 billion bailout request.

The Bush administration hopes for a deal but insists that the companies be commercially viable.
“Viability means that all aspects of the companies need to be re-examined to make sure that they can survive in the long term,” Mr Bush said in an interview with ABC News’ “Nightline.”
Both GM and Chrysler have requested billions by month’s end to replenish dwindling cash reserves.

Will this be the solution to the problem, or just a short term fix? Once again, the taxpayors are having to step up to the plate to rescue these American icons. Hopefully, this will not be another case of throwing good money after bad. At least this time the auto executives used their own products, and drove from Detroit instead of flying their private jets.

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