General Motors has today received the first US$4 billion in emergency loans that the United States federal government has promised the car-maker.
Both GM and Chrysler are scheduled to receive a total of $17.4 billion in federal loans that the Bush administration offered to extend after the companies warned they were close to running out of cash.
Treasury Department spokewoman Brookly McLaughlin said, “We’re working expeditiously with Chrysler to finalise that transaction, and we remain committed to closing it on a timeline that will meet near-term funding needs.”
Chrysler said it remained in talks with the US Treasury to finalise its own US$4 billion loan agreement and expected to receive its share of the funding soon.
“The discussions relating to Chrysler LLC have been positive and productive and we look forward to finalising the details of our financial assistance in the immediate future,” Chrysler spokeswoman Shawn Morgan said in a statement.
GM spokesman Greg Martin said his company and the Treasury agreed on the government loan at about 4:30pm Wednesday, and GM subsequently received confirmation of the transfer of US$4 billion from the federal government.
The Bush administration has promised another US$9.4 billion for GM in the next few weeks. The final US$4 billion of that amount will require congressional action.
The Treasury Department this week also approved US$6 billion in aid for automotive lender GMAC, after allowing it to become a bank, and has signalled a willingness to help those suppliers whose shut-down would bring car-makers to a halt.
Car-makers receiving emergency loans must file plans by February 17 describing how they will restructure to become viable for the long term.
Unless agreements are changed by the incoming-Obama administration, a President’s designee, or ‘car czar’, is to decide by March 31 if a car-maker’s restructuring plan is sufficient. If not, the first loans will be called in, possibly forcing that company into bankruptcy.
Ford Motor Company is not seeking an emergency loan but wants to be able to tap a US$9 billion government line of credit if necessary.
Together the Detroit three (GM, Chrysler, Ford) CEOs told politicians early in December they need access to at least US$34 billion from the government to get through the extreme economic downturn.
Some analysts and economists say much more government help will be needed.