After two failed attempts to get emergency bridge loans from Congress, General Motors and Chrysler LLC received good news today when President George W. Bush announced as much as $17.4 billion in immediate aid to stave off the collapse of the companies.
Before month's end, Chrysler will receive $4 billion with GM tapping into $4 billion with a second $5.4 billion forthcoming on January 16. Subject to Congressional action, GM may be able to access an additional $4 billion on February 17.
In terms similar to those contained in the failed Congressional package, the companies have been given a deadline of March 31 to produce plans for long term viability including the ability to be competitive with foreign brands imported to the United States.
In his remarks the President said allowing one or both companies to go into bankruptcy "would not be a responsible course of action." Additionally Bush said he accepted the industry's contention that consumers would not buy vehicles from a company in bankruptcy.
"If you hear that a car company is suddenly going into bankruptcy, you worry that parts and servicing will not be available, and you question the value of your warranty,'' he said.
Under the terms of the agreement executive compensation will be limited as will other perks and warrants for nonvoting stock will be required. The loans funds are being drawn from the $700 billion Troubled Asset Relief Program originally targeted for troubled financial institutions.
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