Bush Gives GM and Chrysler a Chance to Suvive
President George W. Bush is leaving office with the nation facing serious economic conditions He did not want to add to that the collapse of the domestic automotive industry which could lead to the loss of over two million more jobs. As a result, he has authorized a "bridge loan" that allows GM and Chrysler to survive until March 31st. This gives the new Obama Administration about ten weeks to work up a longer lasting solution.
According to Bloomberg: Bush announce that General Motors Corp. and Chrysler LLC will get $13.4 billion in emergency government loans in exchange for substantially restructuring their businesses. Another $4 billion will be available to GM in February provided Congress releases the second half of the $700 billion Troubled Asset Relief Program fund originally set up to bail out financial institutions. The automakers have until March 31 to meet the conditions of the loans, including demonstrating they have a plan to become profitable, or be forced to repay.
Winning the assistance is a reprieve for GM, the biggest U.S. automaker, and No. 3 Chrysler after they said they would run out of operating funds as soon as this month.
The loan term is three years. GM would get $4 billion by Dec. 29 and $5.4 billion by Jan. 16. Chrysler would get $4 billion by Dec. 29. GM would get another $4 billion by Feb. 17, provided Congress releases the TARP funds. Under the terms of the plan, the government’s debt would have priority over any other creditors. The automakers also must provide warrants for non-voting stock, accept limits on executive pay, and give the government access to financial records.
No dividends may be issued until the loans are repaid. In addition, the automakers must cut their debt by two-thirds in an equity exchange. For workers, GM and Chrysler would be required to make half of the payments to a union retirement fund in equity and eliminate a program that pays union workers when they don’t have work. Unions and management would have to negotiate a plan to have compensation and work rules in place by Dec. 31, 2009, that will make the U.S. companies competitive with foreign automakers. The requirements could be modified by negotiations with the union and debt holders.
GM and Chrysler will pay at least 5 percent on the loans, and would pay 3 percentage points over the London interbank offered rate should Libor exceed 2 percent. The average cost of loans to high-risk, high-yield companies in dollars is a premium of 10.5 percentage points more than Libor, according to Standard & Poor’s Leveraged Commentary and Data unit.
Tags: auto industry, bailout, Bloomberg, Chrysler, GM To share or post to your site, click on "Post Link". Please mention / link to the ARRA News Service. Thanks!
According to Bloomberg: Bush announce that General Motors Corp. and Chrysler LLC will get $13.4 billion in emergency government loans in exchange for substantially restructuring their businesses. Another $4 billion will be available to GM in February provided Congress releases the second half of the $700 billion Troubled Asset Relief Program fund originally set up to bail out financial institutions. The automakers have until March 31 to meet the conditions of the loans, including demonstrating they have a plan to become profitable, or be forced to repay.
Winning the assistance is a reprieve for GM, the biggest U.S. automaker, and No. 3 Chrysler after they said they would run out of operating funds as soon as this month.
The loan term is three years. GM would get $4 billion by Dec. 29 and $5.4 billion by Jan. 16. Chrysler would get $4 billion by Dec. 29. GM would get another $4 billion by Feb. 17, provided Congress releases the TARP funds. Under the terms of the plan, the government’s debt would have priority over any other creditors. The automakers also must provide warrants for non-voting stock, accept limits on executive pay, and give the government access to financial records.
No dividends may be issued until the loans are repaid. In addition, the automakers must cut their debt by two-thirds in an equity exchange. For workers, GM and Chrysler would be required to make half of the payments to a union retirement fund in equity and eliminate a program that pays union workers when they don’t have work. Unions and management would have to negotiate a plan to have compensation and work rules in place by Dec. 31, 2009, that will make the U.S. companies competitive with foreign automakers. The requirements could be modified by negotiations with the union and debt holders.
GM and Chrysler will pay at least 5 percent on the loans, and would pay 3 percentage points over the London interbank offered rate should Libor exceed 2 percent. The average cost of loans to high-risk, high-yield companies in dollars is a premium of 10.5 percentage points more than Libor, according to Standard & Poor’s Leveraged Commentary and Data unit.
Tags: auto industry, bailout, Bloomberg, Chrysler, GM To share or post to your site, click on "Post Link". Please mention / link to the ARRA News Service. Thanks!
Posted by Bill Smith at 10:15 PM - Post Link
0 Comments:
Post a Comment
<< Home