US government throws Detroit a lifeline
Author: Robin Brown
Published: 19 December 2008
The US government has thrown a lifeline to GM and Chrysler after agreeing to hive off $17.4bn from the Wall Street TARP bailout to keep the ailing car-makers afloat over Christmas and New Year.
Both manufacturers were thought to be weeks, or even days, away from running out of enough cash to maintain operations and were actively seeking bankruptcy advice.
The emergency loans were put together over a week's worth of frantic negotiations after Republican Senators voted down a previous package of loans.
The cash will keep both operating until President-Elect Barack Obama takes office in late January 2009, by which time a more comprehensive package to refund and restructure GM and Chrysler may be on the table.
Ford did not seek any immediate cash, but may request a loan in the longer term.
The loans are likely to come with stiff conditions which are likely to see significant reductions in staff and costs and the likely elimination of several brands. The two manufacturers have been given until 31 March to prove they are a viable ongoing concern.
Volvo and Saab are likely to be sold off at some point in 2009; Hummer is already on the market; and brands such as Pontiac, Saturn and Dodge may also be in the firing line.
The loan conditions will also deal some sickening blows to the UAW union, requiring wage parity with foreign automaker salaries.
GM said the cash would be used to accelerate its restructuring plans. "We know we have much work in front of us to accomplish our plan," read a statement.
"It is our intention to continue to be transparent as we execute our plan, and we will provide regular updates on our progress."
Chrysler Chief Executive Bob Nardelli indicated in a letter to employees that the loan conditions "will require consideration from all constituents, requiring commitment first in principal, leading to implementation this coming year. Chrysler is committed to meeting these requirements."
Nardelli indicated that Chrysler will receive $4bn. It is not known how much GM immediately received.
• Our timeline of the Big Three and US auto industry's recent history has hundreds of article and events detailing the near-downfall of Detroit.
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