President George W. Bush will doubtlessly be remembered for many things things, but his parting legacy may yet be his eleventh-hour pledge of $17.4 billion in low-interest loans to General Motors and Chrysler (Ford Motor Company has said it does not require relief at this time).
The funding will reportedly come from the Troubled Asset Relief Program (TARP), the financial industry bailout package signed off on this fall. Up front, the White House will earmark $17.4 billion in short-term financing for December and January, and in February, another $4 billion will be disbursed, provided it can draw the funds from the second half of TARP's $700 billion.
More details are doubtlessly coming, but the bridge loans appear to hinge largely on whether General Motors and Chrysler are deemed "viable" enterprises by the government. In the terms of the agreement, that means that the automakers must prove whether they have a "positive net present value, taking into account all current and future costs, and can fully repay the government loan." There's no word yet on how they will prove said viability, but we expect to learn more soon. In the meantime, expect for both General Motors and Chrysler to stick to their previous production suspension announcements.
Politico has more specifics on the bailout here.
UPDATE: Press releases from General Motors, Ford and Chrysler have been added after the jump.
[Sources: ABC NEWS, Politico, Photo by Brendan Hoffman/Getty]
GM Statement on Administration Providing Bridge Loan to Domestic Auto Industry
We appreciate the President extending a financial bridge at this most critical time for the U.S. auto industry and our nation's economy. This action helps to preserve many jobs, and supports the continued operation of GM and the many suppliers, dealers and small businesses across the country that depend on us.
This will allow us to accelerate the completion of our aggressive restructuring plan for long-term, sustainable success. It will lead to a leaner, stronger General Motors, a GM that is:
*dedicated to great products, exciting design, and world-class quality
*fully committed to leading in energy-saving vehicles and technologies,
*responsive to the needs of our customers, our stakeholders and the communities we live in and serve.
We know we have much work in front of us to accomplish our plan. It is our intention to continue to be transparent as we execute our plan, and we will provide regular updates on our progress. We again thank the Administration for this important support of our industry at this challenging time, and we look forward to proving what American ingenuity can achieve.
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FORD MOTOR COMPANY WELCOMES ACTION TO PROVIDE EMERGENCY FUNDING TO GM AND CHRYSLER
DEARBORN, Mich., Dec. 19, 2008 – Ford Motor Company said today that it welcomes action by the Administration to provide emergency funding for General Motors Corp. and Chrysler LLC.
"As we told Congress, Ford is in a different position. We do not face a near-term liquidity issue, and we are not seeking short-term financial assistance from the government," Ford President and CEO Alan Mulally said. "But all of us at Ford appreciate the prudent step the Administration has taken to address the near-term liquidity issues of GM and Chrysler. The U.S. auto industry is highly interdependent, and a failure of one of our competitors would have a ripple effect that could jeopardize millions of jobs and further damage the already weakened U.S. economy."
Ford recently submitted to Congress its comprehensive business plan, which details the company's plan to return to pre-tax Automotive profitability by 2011. In the plan, Ford said the transformation of its North American automotive business will continue to accelerate through aggressive restructuring actions and the introduction of more high-quality, safe and fuel-efficient vehicles – including a broader range of hybrid-electric vehicles and the introduction of advanced plug-in hybrids and full electric vehicles.
"Ford has a comprehensive transformation plan that will ensure our future viability – as evidenced by our profitability in the first quarter of 2008," Mulally said. "While we clearly still have much more work to do, I am more convinced than ever that we have the right plan that will create a viable Ford going forward and position us for profitable growth."
Ford is asking for access to a line of credit of up to $9 billion in bridge financing, but reiterated that it hopes to complete its transformation without accessing a government loan.
"For Ford, a line of credit would serve only as a critical backstop or safeguard against worsening conditions, as we drive transformational change in our company," Mulally said.
Ford reiterated that it is continuing aggressive actions to reduce costs and improve Automotive gross cash to fund its product-led transformation plan, despite the continued weakness in the global automotive market and economic environment. Ford said it is more committed than ever to deliver more of the safe, affordable, high-quality, fuel-efficient vehicles that consumers want and value. The company's plans include:
* Delivering best-in-class or among the best fuel economy with every new vehicle introduced.
* Investing approximately $14 billion in the U.S. on advanced technologies and products to improve fuel efficiency during the next seven years.
* Introducing industry-leading, fuel-saving EcoBoost engines on today's vehicles for up to 20 percent better fuel economy and up to 15 percent fewer CO2 emissions versus larger-displacement engines.
* Bringing to market by 2012 a family of hybrids, plug-in hybrids and battery electric vehicles.
* Upgrading the Ford, Lincoln, Mercury lineup in North America almost completely by the end of 2010.
* Bringing six European small vehicles from global B-car and C-car platforms to be built in Ford's North America plants.
* Retooling three North American truck plants to produce small, fuel efficient vehicles.
* Building on vehicle quality that is now on par with Honda and Toyota – and that consistently is being recognized by important third-parties like J.D. Power and Associates' Initial Quality Study – driven by Ford's disciplined and standardized processes for every product.
* Building on vehicle safety leadership – with the most U.S. government 5-star safety ratings of any auto company and recently moving past Honda for the industry's most IIHS "Top Safety Picks" – plus new smart safety features, such as the industry-first MyKey technology that limits top speed and audio volume for teens and the first forward crash-avoidance system for mainstream vehicles.
* Supporting Ford's products with a lean, flexible global manufacturing system on par with leading Japanese and European facilities.
To read Ford's submission to the U.S. Congress and for more information about Ford's plan, please visit www.thefordstory.com.
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Chrysler LLC Thanks the Administration and Treasury for Their Confidence
Auburn Hills, Mich., Dec 19, 2008 - Chrysler LLC Chairman and CEO Bob Nardelli said on behalf of the men and women of Chrysler and its extended enterprise, that he would like to thank the Administration and Treasury for their confidence in the Company.
"A letter of intent was signed which outlines the specific requirements that must be achieved," said Nardelli. "These requirements will require consideration from all constituents, requiring commitment first in principal, leading to implementation this coming year. Chrysler is committed to meeting these requirements."
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Nardelli said the Company would remain focused on its challenge and this initial injection of working capital would help bridge the liquidity crisis the industry is facing and assist in helping return Chrysler to profitability.