They Won't Get This One
GM and Chrysler are asking for another $14 billion.
General Motors and Chrysler asked the government for an additional $14 billion in aid, a dramatic acknowledgment that conditions in the U.S. auto industry have grown significantly worse in just two months. GM presented a survival plan that also calls for cutting a total of 47,000 jobs globally and closing five more U.S. factories. That represents the largest work force reduction announced by a U.S. company in the economic downturn. Chrysler said it will cut 3,000 more jobs and stop producing three vehicle models [...]
GM said it could need up to $30 billion from the Treasury Department, up from a previous estimate of $18 billion. That includes $13.4 billion previously allocated and $9.1. billion in new loans. The world's largest automaker said it could run out of money by March without new funds.
GM's request includes a credit line of $7.5 billion to be used if the downturn in the auto industry is more pronounced than expected. But the automaker claimed it could be profitable in two years and fully repay its loans by 2017.
Chrysler LLC requested $5 billion in new loans on top of the $4 billion it received in December. The company had said it might need an extra $3 billion.
Both requests were part of restructuring plans the two automakers owed the government in exchange for earlier loans.
I just don't think this is going to fly. The Congress couldn't muster enough votes for the first bailout, relying on George Bush to divert some TARP money. Unfortunately, carmakers don't have the juice of wealthy banksters, and they don't have an endless well of political capital to draw from. In fact, the well's empty.
The UAW, by the way, did everything asked of them, reaching agreement with the Big Three and sacrificing for the sake of the industry. Needless to say, it won't be enough for the GOP.
Geithner and Summers, who make up the new two-headed car czar, will have a politically dicey decision to make. Will they cut the bondholders loose and restructure the auto company debt? If not, we're seeing basically the end of the American auto industry. What a shame.