Bush saves GM, Chrysler with US$13.4bn
December 20, 2008 by David Twomey
US President George W. Bush has announced emergency government loans to prevent the collapse of General Motors and Chrysler LLC.
US$13.4 billion will be made available in December and January from the US$700 billion fund that was originally designed to rescue struggling financial institutions, but the loans would be called back if the carmakers cannot prove they are viable by March 31, a US government official said.
The White House, in Washington, made the announcement of the unprecedented action.
The President took the action after Congress last week rejected legislation to provide US$14-billion in loans, a move which would have required more federal aid next year.
Reports from the US say Bush Administration officials had repeatedly said this week that under normal circumstances they would want companies to reorganise under bankruptcy provisions, but that these were not normal times.
GM and Chrysler have repeatedly warned that they could run out of cash within a few weeks as vehicles sales in the US have dropped to levels not seen since the early 1980s.
Ford Motor Company said it does not face a similar crisis but wants access to a federal line of credit in case market conditions worsen or one of its rivals fails.
The Chief Executive Officers of the three Detroit-based carmakers told Congress in hearings December 4 and 5 that they need at least $34 billion from the federal government to weather the economic downturn.
In a statement GM said, “We appreciate the President extending a financial bridge at this most critical time for the US auto industry and our nation’s economy. This action helps to preserve many jobs, and supports the continued operation of GM and the many suppliers, dealers and small businesses across the country that depend on us.
This will allow us to accelerate the completion of our aggressive restructuring plan for long-term, sustainable success. It will lead to a leaner, stronger General Motors.
Ford also welcomed the move.
“As we told Congress, Ford is in a different position. We do not face a near-term liquidity issue, and we are not seeking short-term financial assistance from the government,” Ford President and CEO Alan Mulally said.
“But all of us at Ford appreciate the prudent step the Administration has taken to address the near-term liquidity issues of GM and Chrysler. The US auto industry is highly interdependent, and a failure of one of our competitors would have a ripple effect that could jeopardise millions of jobs and further damage the already weakened US economy.”
Chrysler LLC Chairman and CEO Bob Nardelli said on behalf of the men and women of Chrysler and its extended enterprise, that he would like to thank the Administration and Treasury for their confidence in the Company.
Print it: 
What a waste of money……GM has $60 billion of debts…….cant see this working at all…..does this mean Obama will fork out billions more to an inefficient company? let them die……..
if they are still bust come march 31 next year, how to they recall the loan??
The sale of company assets would be used to repay the loans. BTW if they do go bankrupt it is unlikely either company would cease to exist, they would simple re-emerge as new , leaner businesses, without all the Healthcare debts they currently have. What will Obama do, well he’s a smart guy, he could let them go and then blame Bush for it!
…and being a government loan they will be first inline to be repaid if they go into chapter 7 liquidation, although this is unlikely in the near term. Chapter 11 bankruptcy is looking very likely though. In reality Bush didnt have much alternative as he wont be around long enough to deal with it in any substantial way. This short term solution may actually help enough for them to survive. There is still a significant level of consumer demand that cannot currently be serviced because of the continuing lack of consumer finance available. If the captive finance arms of GM and Chrysler would lend to more people, they would sell more cars…
I like the spin that has been put on the the loans being conditional to the drop in wages and and benefits. It’ll be interesting to see if the UAW agree to this. I guess it is just making it look like everyone has done everything they can before the inevitable happens and the two do close. If they close they will re open without the UAW wages and conditions.
It seems this is just a way of ensuring that the liquidation of Chrysler and the Chapter 11 reorganisation of GM is handled in a managed and structured way, rather than the chaos that would ensue with a sudden collapse.
I thought Ford might have been in as bad a position as the other two…….how come they arent ?
Ford saw it coming and started to reorganize some time ago; ie they planned for it.
This reminds me of that time on Simpsons when the nuclear power plant was switched back on , then you see the fake vomit factory back in production and all the workers start cheering!
Ford began a reorganisation when Mulally arrived and he has significantly restructured the business and its borrowings so their only real concern is the other two going under and Ford’s supplier base being affected by that. Plus the overall effect on consumer confidence, which harms sales.
Maybe ford is in better position because of all the reorganisation and thay prob have better cars people wont or need than GM
I still dont know why GM didnt reoranise their assets like ford did to raise some loot when they saw this coming.
Its like GM and Chrysler have sat back and refused to help themselves.
Mulally has been praised for his business minded actions taken. The credit is certainly due to him for Fords more stable financial position
Andrew M, nobody knows why GM didnt reorganise themselves. They have an exceptionally bad reputation for decision making, including not actually making decisions. The have been on a downward spiral for years, yet have not done anything, and now they dont have the cash to do anything either. Some people keep banging on about them shutting certain brands ect, but even this costs money. It cost them $1billion to shut Oldsmobile in 1990. it would cost them far more now to shut pontiac and saturn. Basically they are stuck between a rock and bankruptcy.
Dlr1,
i reckon they would have been better off filing for bankruptcy.
it would have been the only real way to clear the ridiculous pensions etc that are a burden on their purse.
are the unions still going to come to the party? or are they going to play it tough again??
if they want to play a game of all or nothing, they will certainly look like idiots going down swinging, when there is nothing to swing at
Thats the only good thing George W Bush has ever done being President of the United States of America! ;)
^^^^^Big MISTAKE. Not him being president, but the best and only good thing he has done as president.
According to some of the US media the UAW announced only 2 hours after Bush’s speech that they were not going to make any concessions in relation to pay or retirement benefits.
^^^^^^lmao this is all so pointless, there goes 15 bill down the gurglar :(
If what Dlr1 says is correct, then these idiots are every bit as stupid as everyone thought they were. What would you rather have – 70% of something or 100% of absolutely zero? These union clowns seem to be in complete denial of what’s going on in the world, so they deserve no place in whatever emerges to take the place of GM and Chrysler.
Dlr1,
Thats hilarious!!!
I havent read that, but its exactlly as i predicted it.
I think its the union reps that are more worried about losing THEIR jobs.
They will take the whole ship down with them if they dont jump by themselves
What will the new president do??
The Americans are very up-beat about their future now Bush is gone.
Captain,
Too right,
noone is looking at the bigger picture
Bankruptcy now could have meant a stronger future, and 90% of staff kept.
now that its only delayed, it possibly means a weaker future and only 80% staff kept, plus billions burnt
typicall GM and chrysler need daddy to help em out. Better of gettin rid of these tin cans and letting efficient cars being produced than these gas guzzlers. Im sure this is there last chance of bein helped out cause im sure when they go bankrupt that somebody is allready there ready to pounce and produce better cars than GM and chrysler. Go ford always doin better than the rest.
The UAW reminds me of a Billy Joel song, “Allentown”.
It’s about a steel producing town that eventually had massive unemployment after the Unions refused any concessions for their workers.
The line “and the Union People drove away” sticks in my mind.
Captain Mainwaring is correct; 70% of something is better tha 100% of nothing.
But what about the Health Care Policy in the US?
Why do companies have to foot the bill for the health care of their employees?
Surely that’s the Gov’ts job?
Australians may have their health care issues, but at least we don’t burden every company with having fund all their employees health costs from Induction Day to the grave!
The simple fact is that the Big 3 cannot compete against the Japanese (& other) carmakers, who often employ staff who aren’t a member of the United Auto Workers Union.
If you have to pay your line workers more, and fund their health care, how do you compete on Labour costs against those who don’t have those burdens?
And if you think that other Gov’ts don’t assist or bailout their car companies, you’re living in a fools paradise.
The Japanese Gov’t has long manipulated the Yen against the US Dollar, to help their exports be cheaper.
Mazda was bailed out by Ford many years ago.
Nissan was bailed by Renault. Renault itself is largely State controlled, & gets major concessions from the French Gov’t.
Mitsubishi was bailed out by Daimler Benz.
There is a law in Germany that prevents VW from falling into foreign hands.
And now Everybody’s Darling, Toyota, have announced a nearly $2 Billion dollar loss for the next half year.
Never, ever count out The Seppos………….
They’ll restructure, & they’ll be baaack……..!
“They’ll restructure, & they’ll be baaack……..! ”
YES, but not as we know it Jason :}
Fiat also broke up with GM a few years ago of what was it, $2Billion to get out of the deal and in return GM got diesel technology from them… Gotta Love the italians.
Jason:
I think Germans also have the same rule for their beer industry as well…I agree with every bit of it.
All this money given to GM and chrysler will get them through to March……..GM is 60 billion in debt……..how will getting to March save them? what happens after march?
George W should ‘ave done the automotive world a BIG favour and let G.M go Broke.
I use to like Bush until now.
Dlr1 – Oldsmobile was shut in 2004, not 1990.
Quote [Mark Greenbug]: “Oldsmobile was shut in 2004, not 1990.”
Yeah; but it should have been shut down in 1990.. shouldn’t it?
All Oldsmobile models were simply cars from other GM divisions with subtle styling differences. The only unique car that the division had was the Aurora, an attempt at competing against high-end entry luxury European & Japanese rivals. The cost of keeping the division going was therefore small. Sales were obviously strong enough throughout the 90s to keep it going. I don’t think the problem therefore was the cost, but the brand’s image, which it could never shake.
That’s one of the problems wihtin GM and Ford US.. they have a range of similar sized cars with differences that only a trainspotter would be able to pick. That competing not only against the Europeans and Japanese cars but against other cars within the GM Family.
If GM are going to continue this porcess [which I doubt they will as a result of restructuring] Instead of each company having individual factories [both operating at less than 80%] making the same car with subtle changes..
They should close down one of the plants and make them at the one factory ans simply change the badges bonnet or grille etc – Like Holden does with Pontiacs and Chevrolets which are based on the Commodore..
The other thing that GM should get rid of is dedicated plants where one factory just makes coupes another just makes sedans and another just makes pck ups – and become more “flexible”
Like Holden which makes Sedans Utes Wagons [Coupes] and Limos in both RHD and LHD on the same line
Holdens Flexibility and Ingenuity etc is one of the reasons GM has said that they will be Holden onto Holden.
Wang, what the hell are you on about? Bush is gone dude.
Your type of post really worries me – it’s the type of thing they find during the investigation after someone goes on a rampage in a US school.