U.S. Treasury ends talks with GM/Chrysler for merger funds
Any merger talks between Chrysler and General Motors appear to be on hold after the U.S. Treasury has talks with the struggling automakers over their request for a loan. The two automakers were reportedly asking for as much as $10 billion to support a merger, but some say the Treasury was unwilling to give money away for a deal that could potentially result in thousands of lost jobs. The Treasury says automaker financial arms like GMAC and Ford Credit are still eligible for assistance with troubled assets, which could number in the billions of dollars. The Bush administration is said to be working to speed up the $25 billion in loan guarantees that the industry was appropriated to retool factories. Massive government loans can sometimes take 6-18 months to take affect, but the way automakers are burning through cash, GM may need the cash as soon as possible.
There is no doubt these are very troubled times for the U.S. auto industry, and it seems everything is happening very quickly right now. Most forecasts are pointing to a similarly dismal 2009, too, so this mess is far from over.
[Source: Automotive News, sub. req'd]
Reader Comments (Page 1 of 3)
Gstill 12:48PM (10/31/2008)
"The Bush administration is said to be working to speed up the $25 billion in loan guarantees that the industry was appropriated to retool factories."
Really? They're doing work? From now on, in history, the term "lame duck" is just going to be called a Bush.
I figured they'd be too busy packing up their offices to work on anything.
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Gabagool 1:46PM (10/31/2008)
While i do understand that you may be angered by Bush and his decisions but the federal government is not a credit card.
Ask yourself this, if Dell wanted to buy HP, would you be OK if government gave Dell money to do so?
The Luigiian 5:15PM (10/31/2008)
So, wait, your point is that the Bush Administration is too busy packing their office to do any work?
That's the only coherent thing I picked up from your comment.
What the hell was that arbitrary jibe for?
MemphisNET 12:51PM (10/31/2008)
Chrysler is better off this way. GM will be bailed out regardless. Chrysler has cash, something GM does not and Ford is slowly but surely rebuilding. Cerberus just needs to chill out and actually stay in for the long haul instead of flipping prematurely.
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DesiAuto 12:51PM (10/31/2008)
I am all for GM bail out / assistance etc ... but sometime I feel it might be better if these incompetent giants die.
Unfortunately GM leadership is in a position where no matter what happens they will not feel any pain. They will not lose their homes, 401K nothing. Even if they lose their job, they feel find some other job thru their connections. I hate the fact that they will never pay for their bad decisions, but everybody else will.
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Tourian 12:54PM (10/31/2008)
They're just going to wait until next week after Obama wins and go ask him.
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Frank 12:56PM (10/31/2008)
easy killer, IIIFFF he wins.
Nightcrawler 1:50PM (10/31/2008)
Well, yeah. Technically "if" he wins. But that's not much of an if.
I hope whoever wins is concerned with saving auto industry jobs over just giving GM what they want. Why give money to GM to make Chrysler disappear? If you don't give money to GM, they'll probably disappear anyway, but why pay to make certain it happens when it's not really what you want anyway?
JN 12:56PM (10/31/2008)
OK, so let me get this straight: The Feds don't want anything to do with a merger that might (in fact, likely will) lead to "thousands" of job cuts.
Ummm ... all righty ... so let's just watch GM and Chrysler wither on the vine and eliminate hundreds of thousands of jobs instead. Makes absolutely no sense at all, does it? But after nearly 8 years of this administration's complete incompetence on damn near everything, I suppose that should not surprise me.
I don't have a head count of how many people work for GM, or Chrysler, or any of the two companies' suppliers, but I can guarantee that if we see a bankruptcy come out of this, you will see ripple effects that will make the Great Depression look tame in comparison.
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Big Rocket 1:15PM (10/31/2008)
Would it really be so bad if GM entered into Chapter 11 bankruptcy? I argue it would be a good thing in the long run, for GM to re-emerge leaner and meaner, without being weighed down by unsustainable and unaffordable executive compensation and labor contracts. And I strongly disagree with the fear tactics that you and others are using, that America as we know it would end if GM declared bankruptcy. Like any lobbyist on Capitol Hill, the Big 3 advocates are just exaggerating the importance of their industry, exaggerating the number of jobs that will be lost without a government bailout, in the hopes of fleecing the American taxpayers. Because the leeches know they have fleeced the Big 3 corporate accounts as much as they possibly can, with egregious executive pay and labor contracts, the parasites are now looking for new victims to rip-off: you, me, and every American taxpayer. These parasites, from executives with corporate private jets and multi-million-dollar salaries, to UAW workers that cost their companies $60+ per hour in labor and $100K in contract buy-outs, deserve to suffer from all the consequences of their very own corporate plunder.
Parkerman 1:17PM (10/31/2008)
If GM acquires Chrysler [god lets pray it doesnt happen]. More jobs will be lost. GM will pretty much be killing a whole corporation. Just about everyone working for Chrysler will lose their jobs. You think GM will keep a Chrysler employee over their own? And GM already has to many employees as is.
Ian 1:43PM (10/31/2008)
Just like when they asked for a bailout for foreclosing mortgages for regular people the Bush Administration turned their back. As soon as the CEO's asked for it they broke out the checkbook.
JN 2:09PM (10/31/2008)
Look, it's come down to the point where we either shed a few thousand jobs or hundreds of thousands. That's all I'm trying to say, guys.
Don't get me wrong; the companies put themselves in this predicament, by and large. But if gov't is going to be in the business of bailing out big banks and investment firms, why should they not work to help companies that employ so many blue-collar workers?
It just seems wrong to me that the truly bad boys of high finance are going to make out like bandits while those who punch a clock and put America on wheels have to suffer. And trust me, if something is not done, it WILL happen. It isn't a question of "if," but "when" and "how many."
Big Rocket 2:29PM (10/31/2008)
@JN:
1. You honestly don't think of the UAW as one of the bad guys? These are guys whose union labor costs ran as high as $67/hour, and whose labor contracts the Big 3 had to buy out at up to $100K per worker. Yes, they are suffering now, and they deserve every bit of their suffering for decades of looting the financial health of the Big 3. They reap what they sowed.
2. One mistake is poor justification for a second mistake. Just because our government made the mistake of bailing out Wall Street and its tycoons, that's hardly a good reason to make a second mistake of bailing out the Big 3 now. What's more, as I (and others) have pointed out, we don't believe in the fear-mongering and high-pressure sales tactics being used by lobbyists to portray an economic doomsday scenario if GM does not receive Billions of tax dollars to kill off a competitor.
miles 5:34PM (10/31/2008)
The bankruptcy problem is that if one goes bankrupt, the others will be operating at such an enormous disadvantage that they likely will be forced into bankruptcy as well.
Anyone want all 3 to go belly-up? Would that be ok? My opinion is no, it's not ok. I'm not encouraging a bailout - and I surely don't know the answer - but I do think 3 bankruptcies is not ok. Our supplier industries would be crushed and China would be the big winner.
The real problem here is the "look out for #1" mentality that all sides share - Union & Management and Customers too. It's destroying this country. When's the last time you've heard anyone make a sacrafice for the greater good? It just doesn't seem to happen any more.
Sad.
dkw 12:56PM (10/31/2008)
A federal loan that can save US jobs, end up saving taxpayers money in the long run, and strengthen American industries which keep wealth in the US is a good idea, in my book.
Remember, the money the government loaned Chrysler back in the day, actually netted the taxpayers a $300 million profit when all was said and done.
However, a loan from the government to help two companies merge that would undoubtably eliminate jobs seems very wrong.
Spend money now, so GM and Chrysler can become one, so that we can all pay even more later for unemployment, and the other consequences that go along with a massive round of job losses? Not a smart move.
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Rocketboy 1:20PM (10/31/2008)
When the gov't bails out a company that cannot survive, we all lose. It's throwing good money after bad, and it teaches companies that if you are large enough, no matter how bad you screw up, Uncle Sam will be there with someone else's money to bail you out.
If they cannot learn how to survive on their own money, what makes you think that they will survive on our money?
Judy Zik 1:02PM (10/31/2008)
The reality is that the talks are on hold until next week. Then they will start talking to the next President. I think the hope was around Detroit and Washington that Bush would take responsibility for this rather unpopular deal leaving the next president with his hands clean.
Meanwhile back at Cerbyler they will continue talks with Nissan/Renault about selling off a few key pieces to them.
The biggest problem is the longer this drags on the more GM and Chrysler will suffer for it. The uncertainty is going to hit their sales like a lead balloon and they both seem to have put their future development into a holding pattern until this deal is done. Come next week when October's sales data comes out both companies will be even more desperate. With GMAC's credit stunt and all this uncertainty those numbers will be the real nightmare before Christmas.
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Shipey 1:13PM (10/31/2008)
No matter who wins on the 4th, inauguration day isn't until January 20. Bush is still president until then.
Judy Zik 1:19PM (10/31/2008)
No kidding. But I wouldn't expect GM to wait until the 20th of January to start lobbying the winner. The reality is they are already lobbying the campaigns. They will simply step that up once the race is decided. Especially now that it appears that Bush has chosen not to do anything.