GM and Chrysler close to getting loans

UPDATE #2 Statement from GM on approval of the loan – "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."

Chrysler has released this statement in response to the Bush administration offering $17.4 billion in bridge loans to General Motors and Chrysler.

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."

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.

12/19/08 President Bush will announce this morning that he is awarding $13.4 billion in short-term loans to prevent General Motors Corp. and Chrysler LLC from collapse, offering loans with extremely strict conditions.

The plan calls for another $4 billion in February, contingent on Congress opening the second half of the $700 billion Wall Street rescue package. Bush rejected bankruptcy as an option for the automakers.

The White House expects to announce the specific amounts for GM and Chrysler later today and both automakers are expected to sign contracts agreeing to conditions in exchange for loans. The loan is a three-year-loan that is "automatically" callable by March 31 if automakers have not complied with specific conditions. They must show they are viable and have a "positive net cash value."

The White House said there would not be a "car czar" but that Treasury Secretary Henry Paulson would oversee the program for the remaining 30-odd days of the Bush Administration.

The plan requires automakers to provide warrants for non-voting stock, and they must have strict limits on executive compensation and perks like corporate jets. The government will have the power to block transactions of more than $100 million. The Bush Administration set targets for sacrifice by various stakeholders, but didn't lay out requirements.

"We don't believe its appropriate for the government to dictate" concessions between bondholders, the United Auto Workers and others, the White House said. Detroit News

12/19/08 General Motors Corp. and Chrysler LLC would get U.S. loans to stay afloat until March under a Bush administration rescue plan that may be unveiled as soon as today, people familiar with the talks said.

The government could take back the money should the automakers not comply with federal restrictions as a condition of receiving the funds, said the people, who asked not to be identified because the discussions are private. The plan isn’t final and may change, the people said.

The aid is intended to help GM, the largest U.S. automaker, and No. 3 Chrysler avoid collapse because they may run out of operating funds by early next year. GM and Chrysler have said they need $14 billion to stay in business through March and are temporarily idling plants to trim expenses.

“I’m worried about a disorderly bankruptcy and what it would do to the psychology of the markets," President George W. Bush said yesterday during a forum at the American Enterprise Institute in Washington. Bush said he doesn’t want to “dump a major catastrophe" on his successor, Barack Obama. Still, he added, he also is “worried about putting good money after bad." Bloomberg