GM and Chrysler to Receive Up to $17.4 Billion in Loans

[Ford Jellymoulds]

General Motors and Chrysler will receive up to $17.4 billion in short-term loans from the US government as part of an aid package to the troubled auto industry.

 

President Bush announced the agreement at the White House.

http://www.cnbc.com/id/28312112

Edited December 19, 2008 by Ford Jellymoulds

[NickF1011]

Not like it's your taxes. :rolleyes:

[Ford Jellymoulds]

Not like it's your taxes. :rolleyes:

 

Coming from you Nick that always never stops complaining about paying tax on BON that sounds kinda funny.

 

Cerberus are loaded, why is Bushie bailing out Chrysler when Cerberus are solvent just interested why?

Edited December 19, 2008 by Ford Jellymoulds

[NickF1011]

Coming from you Nick that always never stops complaining about paying tax on BON that sounds kinda funny.

 

Ceberus are loaded, why is Bushie bailing out Chrysler when Cerberus are solvent just interested why?

 

There are taxes spent on worthwhile projects, and taxes spent on non-worthwhile projects. I have no problems with tax money going to the former. I consider this loan package part of the former as well.

 

And well, Cerberus isn't "loaded". If Cerberus is "loaded" so are all the combined shareholders of General Motors. In fact, I'm sure the combined shareholders of GM have a larger net worth than the shareholders of Chrysler.

 

Anyhow....here's more information.

 

 

Fact Sheet: Financing Assistance to Facilitate the Restructuring of Automobile Manufacturers to Attain Financial Viability

 

Purpose: The terms and conditions of the financing provided by the Treasury Department will facilitate restructuring of our domestic auto industry, prevent disorderly bankruptcies during a time of economic difficulty, and protect the taxpayer by ensuring that only financially viable firms receive financing.

 

Amount: Auto manufacturers will be provided with $13.4B in short-term financing from the TARP, with an additional $4B available in February, contingent upon drawing down the second tranche of TARP funds.

 

Viability Requirement: The firms must use these funds to become financially viable. Taxpayers will not be asked to provide financing for firms that do not become viable. If the firms have not attained viability by March 31, 2009, the loan will be called and all funds returned to the Treasury.

 

Definition of Viability: A firm will only be deemed viable if it has a positive net present value, taking into account all current and future costs, and can fully repay the government loan.

 

Binding Terms and Conditions: The binding terms and conditions established by the Treasury will mirror those that were voted favorably by a majority of both Houses of Congress, including:

 

-Firms must provide warrants for non-voting stock.

 

-Firms must accept limits on executive compensation and eliminate perks such as corporate jets.

 

-Debt owed to the government would be senior to other debts, to the extent permitted by law.

 

-Firms must allow the government to examine their books and records.

 

-Firms must report and the government has the power to block any large transactions (> $100 M).

 

-Firms must comply with applicable Federal fuel efficiency and emissions requirements.

 

-Firms must not issue new dividends while they owe government debt.

 

Targets: The terms and conditions established by Treasury will include additional targets that were the subject of Congressional negotiations but did not come to a vote, including:

 

-Reduce debts by 2/3 via a debt for equity exchange.

 

-Make one-half of VEBA payments in the form of stock.

 

-Eliminate the jobs bank.

 

-Work rules that are competitive with transplant auto manufacturers by 12/31/09.

 

-Wages that are competitive with those of transplant auto manufacturers by 12/31/09.

 

These terms and conditions would be non-binding in the sense that negotiations can deviate from the quantitative targets above, providing that the firm reports the reasons for these deviations and makes the business case to achieve long-term viability in spite of the deviations.

 

In addition, the firm will be required to conclude new agreements with its other major stakeholders, including dealers and suppliers, by March 31, 2009.

[ANTAUS]

And is there a time limit that the loan must be paid by ?

[NickF1011]

And is there a time limit that the loan must be paid by ?

 

The fact sheet says that the terms and conditions are similar to those of the bill that was debated in Congress. I believe the deadline for re-payment in that bill was 2015 or 2017.

Edited December 19, 2008 by NickF1011

[FordBuyer]

DEARBORN, Mich., Dec. 19 /PRNewswire-FirstCall/ -- Ford Motor Company (NYSE: F - News) said today that it welcomes action by the Administration to provide emergency funding for General Motors Corp. and Chrysler LL

 

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.

[FordBuyer]

Ford can now separate itself further from GM and Chrysler, especially if it can make through this recession without any loan at all from the government. If it does need a loan in future, hopefully it will be from bank and not government. Ford can stay independant and even declare a dividend in future if it wants to. GM and Chrysler now have a third party looking in all the time and Ford can operate itself the way it wants to, and will get any UAW concessions GM and Chrysler receive. Also, as of now, Ford stock is not diluted by a government stake in company.

[NickF1011]

Also, as of now, Ford stock is not diluted by a government stake in company.

 

As of now, there is no government stake in GM or Chrysler stock either.

[Ford Jellymoulds]

And is there a time limit that the loan must be paid by ?

 

CNBC said Obama can rewrite the terms and conditions when he takes over from Bushie so they are not really binding, glad to see Obama is more Detroit friendly. Gotta say looking in as a neutral and a Non US taxpayer like Nick mentioned poor ole Obama has been left with a dreadful mess by this Bush administration, a 1930's type of depression, high unemployment, credit crunch, housing slump, made the US one of the most hated countries on earth, billions in bank bailouts. Poor old Obama has been handed a dreadful mess to fix.

 

If Cerberus are solvent then they should be made to bailout Chrysler not the taxpayer, Bushie sucks.

Edited December 19, 2008 by Ford Jellymoulds

[NickF1011]

CNBC said Obama can rewrite the terms and conditions when he takes over from Bushie so they are not really binding, glad to see Obama is more Detroit friendly. Gotta say looking in as a neutral and a Non US taxpayer like Nick mentioned poor ole Obama has been left with a dreadful mess by this Bush administration, a 1930's type of depression, high unemployment, credit crunch, housing slump, made the US one of the most hated countries on earth, billions in bank bailouts. Poor old Obama has been handed a dreadful mess to fix.

 

If Cerberus are solvent then they should made to bailout Chrysler not the taxpayer, Bushie sucks.

 

When unemployment reaches into the 20 percentile range, then we can talk about 1930's type depressions. This one still isn't even close.

 

And frankly, I don't think Obama will "fix" much of anything. Of course, I don't really think most things are as "broken" as some want to portray in the first place.

 

And for Christ's sake, stop using the word "bailout". It's plainly a LOAN. A LOAN the government will get back in short order if these companies fail to show they can become viable. Either way, the money will be repaid, with interest. Additionally, this money is coming from the TARP fund, which was already allocated to be spent anyway. At least compared to the banks, this money has a shot at being repaid eventually.

Edited December 19, 2008 by NickF1011

[Ford Jellymoulds]

When unemployment reaches into the 20 percentile range, then we can talk about 1930's type depressions. This one still isn't even close.

 

And frankly, I don't think Obama will "fix" much of anything. Of course, I don't really think most things are as "broken" as some want to portray in the first place.

 

.

 

If it's not a 1930's type depression why all the bailouts Nick

 

Bet you didnot buy the Obama "Yes we can" then Nick

http://uk.youtube.com/watch?v=jjXyqcx-mYY

[NickF1011]

If it's not a 1930's type depression why all the bailouts Nick

 

Bet you didnot buy the Obama "Yes we can" then Nick

http://uk.youtube.com/watch?v=jjXyqcx-mYY

 

Why all the bailouts? To PREVENT another 1930's era depression from happening.

 

And no, I didn't buy the "Yes we can" video. His whole administration amounts to a joke already based on his promise of "change" during his campaign. His cabinet is full of Washington insiders. Expect more of the same.

 

 

 

 

 

 

 

 

Now...back to the topic at hand -- WILL THIS WORK???

Edited December 19, 2008 by NickF1011

[Critic]

Viability Requirement: The firms must use these funds to become financially viable. Taxpayers will not be asked to provide financing for firms that do not become viable. If the firms have not attained viability by March 31, 2009, the loan will be called and all funds returned to the Treasury.

 

Definition of Viability: A firm will only be deemed viable if it has a positive net present value, taking into account all current and future costs, and can fully repay the government loan.

The paperwork can't be written this simply. The loophole has to fall in the definition of Viability.

 

And Viability depends on selling product!

[Ford Jellymoulds]

Now...back to the topic at hand -- WILL THIS WORK???

 

Poor ole taxpayer will have almost zero disposable income to spend on new cars or afford loans for them they will be up to their eyeballs in tax debt in the future, they will be to busy paying for a solvent Cerberus who are laughing and pissing all over the American tax payer.

Edited December 19, 2008 by Ford Jellymoulds

[NickF1011]

The paperwork can't be written this simply. The loophole has to fall in the definition of Viability.

 

And Viability depends on selling product!

 

Defining viability is at the discretion of the administration, so it isn't set in stone. Either way, if things aren't looking better in another 3 months, don't expect to see them getting any additional money. It would be a political nightmare for Obama's administration to do so.

[NickF1011]

Poor ole taxpayer will have almost zero disposible income to spend on new cars or afford loans for them they will be up to their eyeballs in tax debt in the future, they will be to busy paying for a solvent Cerberus who are laughing and pissing all over the American tax payer.

 

Again, this money is coming out of the TARP fund which was ALREADY funded. And I don't think Cerberus is laughing at anybody. If you ran Chrysler, would you be laughing? No. Why? Because they've just acquired more debt that may or may not help them in the end. Cerberus stands to lose a ton of money if Chrysler folds. If they do, the government liquidates them and gets back their money. Yay for the taxpayer. If Chrysler doesn't fold, great! They pay back their loans then plus interest. Again, yay for the taxpayer. No harm, no foul.

 

Would taxpayers be happier paying for millions (or even billions) in unemployment benefits for laid off GM and Chrysler workers and sharing the burden of a smaller tax base since those workers would also no longer be paying income taxes? I sure wouldn't be happier in that case.

[FordBuyer]

When unemployment reaches into the 20 percentile range, then we can talk about 1930's type depressions. This one still isn't even close.

 

And frankly, I don't think Obama will "fix" much of anything. Of course, I don't really think most things are as "broken" as some want to portray in the first place.

 

And for Christ's sake, stop using the word "bailout". It's plainly a LOAN. A LOAN the government will get back in short order if these companies fail to show they can become viable. Either way, the money will be repaid, with interest. Additionally, this money is coming from the TARP fund, which was already allocated to be spent anyway. At least compared to the banks, this money has a shot at being repaid eventually.

 

Not even close, huh? You do realize that back a few years ago they reformulated the way they come up with unemployment figures? They no longer include those who have given up looking for work and those underemployed and working part time because full time is not offered. You also have millions of temps that can be let go in a minute with nothing. Millions of home foreclosures and millions more on way. No one has accurate figures on homelessness. No one knows how many living in their cars, but it is shocking to know number is significant nonetheless. Many families now living with relatives in basement or in small, efficiency apartments barely hanging on.

 

Last I heard, using old formula, U.S. unemployment is around 12% and Michigan unemployment is about 18%. That is now, and by end of 2009 U.S unemployment will be around 16% and Michigan over 20%. That is if you count those who have given up and those way underemployed working part time and minimum wage and can't support themselves adequately. Also add in another 50 million with no health insurance. Finally, many baby boomers have been laid off or bought out, and many have given up trying to find job in their late 50's or early 60's. Many have health problems and could not pass physical, and many no one want because some employers don't want older workers. Even those employers that love older workers are not hiring right now or cutting back.

[NickF1011]

Not even close, huh? You do realize that back a few years ago they reformulated the way they come up with unemployment figures? They no longer include those who have given up looking for work and those underemployed and working part time because full time is not offered. You also have millions of temps that can be let go in a minute with nothing. Millions of home foreclosures and millions more on way. No one has accurate figures on homelessness. No one knows how many living in their cars, but it is shocking to know number is significant nonetheless. Many families now living with relatives in basement or in small, efficiency apartments barely hanging on.

 

Last I heard, using old formula, U.S. unemployment is around 12% and Michigan unemployment is about 18%. That is now, and by end of 2009 U.S unemployment will be around 16% and Michigan over 20%. That is if you count those who have given up and those way underemployed working part time and minimum wage and can't support themselves adequately. Also add in another 50 million with no health insurance. Finally, many baby boomers have been laid off or bought out, and many have given up trying to find job in their late 50's or early 60's. Many have health problems and could not pass physical, and many no one want because some employers don't want older workers. Even those employers that love older workers are not hiring right now or cutting back.

 

When I start seeing bread lines open up in my neighborhood I'll concede your point. Until then, it's not even comparable.

[rkisler]

Fact Sheet: Financing Assistance to Facilitate the Restructuring of Automobile Manufacturers to Attain Financial Viability

 

Thanks for posting.

 

Everyone in GM and Chrysler's management, with concentration on Finance, Purchasing, and Labor Relations now has a 24-hour a day job until March 31 at least. They have to show a positive NPV by then.

 

It will be very tough for Gettlefinger to commit absolutely to any labor concessions by March 31 or even by the end of the year as he will not be able to predict the outcome of a vote. There are a lot of UAW employees who would be willing to take the ship down with them. It's very likely that he will have to sacrifice himself to save autoworker jobs. I'm very happy they included work rules -- UAW plants are overstaffed vs. Japanese and Korean transplants.

 

One caution. After the Obama administration comes on board, we are likely to have them allow state-by-state California's CO2 requirements on the industry. These limits might be great for the environment, but they will do nothing but detract from the bottom line (at least in the near term), and the complexity would be overwhelming trying to manage fuel economy at the state level. However, if the new administration allows the rules, then part of the financial equation will be that if you don't meet the rules, you can't sell in California and other participating states. At any rate, all of this complexity on top of what they are already evaluating could be uncontainable.

[lfeg]

Poor ole taxpayer will have almost zero disposable income to spend on new cars or afford loans for them they will be up to their eyeballs in tax debt in the future, they will be to busy paying for a solvent Cerberus who are laughing and pissing all over the American tax payer.

 

 

Last I heard, taxes have not yet reached the level of those in the UK. But I must thank old FJ, as his taxes are furnishing the UK governments very expensive bailout of a bank I do business with.

[TomServo92]

When I start seeing bread lines open up in my neighborhood I'll concede your point. Until then, it's not even comparable.

 

We're having a boom here. Spending and employment are both up. New housing construction is also up. Another thing I've noticed: lots of new vehicles with paper plates on them. There are parts of the country not being affected by the economic downturn.

[markc]

It's hard to believe that roughly a year ago, Ford Mo Co was considered the "Sickman" of the Detroit 3. Now, Dearborn is basicaly the Capital of the US Auto Industry.

 

Man, this is better than day-time TV. You can't make this stuff up.

[Critic]

When I start seeing bread lines open up in my neighborhood I'll concede your point. Until then, it's not even comparable.

ahh but it is. I'm sure every business is taking a hit. Fast-food sales down? gas sales down? To equate today with the 1920's: Cities were starting to spring up MAINLY because of manufacturing, And that was because of auto's taking hold. People moved off the farms, and sold the land and moved to the cities for a better life. then that life dropped out from under them. and they had no place to go, but stand in lines.

 

Today that fall off in manufacturing is start to trickle thru-out the economy. and it has declined to one of the lowest levels in GDP ever. because of that smaller businesses are just now starting to feel the trickle down and their letting go and reducing. I'm afraid if we just maintain the economy at this rate we have right now, THRU '09 we will have escaped the worst, But you won't hear about it for a good 6 to 9 months. That's how it's always been, even in the depths the gov. shouts everything is fine.

 

Demanding viability in 3 months?? I think after Jan 20, their will come a new loan package out of Washington with a better plan than this, W has NOT had a workable plan for the last 8 years.

[NickF1011]

ahh but it is. I'm sure every business is taking a hit. Fast-food sales down? gas sales down? To equate today with the 1920's: Cities were starting to spring up MAINLY because of manufacturing, And that was because of auto's taking hold. People moved off the farms, and sold the land and moved to the cities for a better life. then that life dropped out from under them. and they had no place to go, but stand in lines.

 

Today that fall off in manufacturing is start to trickle thru-out the economy. and it has declined to one of the lowest levels in GDP ever. because of that smaller businesses are just now starting to feel the trickle down and their letting go and reducing. I'm afraid if we just maintain the economy at this rate we have right now, THRU '09 we will have escaped the worst, But you won't hear about it for a good 6 to 9 months. That's how it's always been, even in the depths the gov. shouts everything is fine.

 

Demanding viability in 3 months?? I think after Jan 20, their will come a new loan package out of Washington with a better plan than this, W has NOT had a workable plan for the last 8 years.

 

Yes. Things are down. But you are not seeing bankruptcies at the same rates as the Great Depression, and I'm sorry, no matter what anyone says, unemployment isn't nearly as high as it was during the Great Depression. In certain locales? Sure. But nationwide? No. Are things tough? Sure. Are they as tough as they were for our grandparents in the 1920's and 1930's? Not even close. I don't have dozens of friends who are too poor to go out and grab a beer or are dying from common colds because they can't afford to miss a day of work to see a doctor. I don't see lines of people around the corner at the unemployment office. I haven't seen a rampant increase in homeless people when I'm walking downtown. The mall parking lot is still full every time I drive past it. I haven't changed my spending habits for squat over the past year or two. If anything, I've been spending more. If things were as dire as some are trying to say they are, don't you think I'd be noticing it a little more?