$17.4 Billion Auto Bailout Approved

Chevytrucks

This morning, President Bush announced that GM and Chrysler would receive billions in federal loans to keep them afloat through March of 2009. The deal includes an immediate $13.4 billion in short-term financing, with another $4 billion to come in February.

President Bush addressed the country on live TV and described the terms of the bailout as necessary, considering the current economic crisis. "Allowing the U.S. auto industry to collapse is not a responsible course of action," he said.

Many of the conditions that Congress was looking for in its own bailout plans are included in the White House deal, which taps into the $700 billion fund set up earlier this year to help financial institutions. The conditions include:

  • Both companies need to prove viability by March 31, 2009 or their loans will be called.
  • Executive pay will be curtailed.
  • Perks like private jets will be lost as well.
  • Both companies will have to open their books to government agencies.
  • Plans will have to include steps to meet fuel efficiency standards.
  • Negotiations with stakeholders including the United Auto Workers union will be needed to bring pay in line with foreign automakers, with a Dec 31,2009 deadline.

There will clearly be more news coming about the plan, but for now it seems to be the lifeline both automakers were requesting in front of Congress weeks ago. GM will receive $9 billion in loans while Chrysler will receive $4 billion.

What will happen over the next three months to make each company viable? Expect more layoffs and plant closings and vehicle lineups to shrink. But beyond those forgone measures, it remains to be seen how radically each company will have to alter its way of life.

By David Thomas | December 19, 2008 | Comments (22)
Tags: In The News

Comments 

tk

Now that the government is putting our money into these companies anyway, how about we all start buying their cars too. It would have been less costly for us and our country if we bought them in the first place. . .

Happymantis

Tk,
I will never settle for poorly made cars, whether they be import or domestic... i will consider a couple of Fords for my next car, but most likely it will either be a Honda or a Hyundai... but never a Chrysler, that is one company that deserves bankruptcy, have you driven the new Sebring lately?!

Tk

Happymantis

As a matter of fact I own an Avenger R/T, and I can say I haven't had one issue with it since I bought it 7 months ago. I know this isn't a very long time, dont get me wrong. Please keep in mind the people who are responsible for the faults with Chrysler's mid-size cars is Daimler. Hyundai, Honda, Toyota, they all make great cars but I'm saying if we give our domestics a chance (we got three to pick from) their cars can/should only get better. The way I see it, even the people who didn't buy domestic cars are still giving their money to the Big Three with this loan they are getting. So would it not have been less costly? I'm not arguing with you, this is just the way I see it. (the Sebring is on its way out btw lol)

DodgeFan

Chryslers real problem is non-competitive gas milleage. They get a short term break with lower gas prices. But long term they need to get the house in order. I think the EV line will be a good job forward if it is ever produced.

cody

I agree with DodgeFan. Fuel economy is very important (as it should have always been) and there really is no car in Chrysler or Dodge's line up that is competitive.

Stephen P.

It's embarrassing to be seen driving a Chrysler or General Motors vehicle. Low quality companies, low quality vehicles, low income drivers. They are the welfare companies of the automotive world. Be smart, have class, buy a Ford or Nissan.

Happymantis

Tk,
I definitely agree with you, when I was in the market for a new car, none of the domestics offerings were good enough as the imports' offerings, which is why I own a Honda and a Toyota as of right now, but I do see that GM and Ford have some pretty competitive offerings, like the 2010 Equinox and the 2009 Fusion... I think that a lot of import buyers can be brought back into the domestic fold, but its important for domestic manufacturers to produce quality items that draw in customers, without rebates or massive amounts of advertising dollars. I will certainly look at what the domestics have to offer for my next car, if the quality, reliability, and resale value are present.

J

Tk,

What happened is, they haven't been listening to what the consumers wanted for a long time, and manipulating what the consumers need for the past decade or so. And that is costing them now.

I am not saying your Avenger is a bad vehicle. But when I ride in my friend's rental, I saw mostly hard plastic inside. That is gonna cost them as well.

Its really great & well written post, thanks for information..

I see it, even the people who didn't buy domestic cars are still giving their money to the Big Three with this loan they are getting. So would it not have been less costly? I'm not arguing with you, this is just the way I see it.

Max

What J is saying is exactly right. They didn't make the cars according to the customers needs/wants.

Honda and Toyota both made small cars and GM failed to recognize the potential. Instead they just made bigger and less fuel efficient trucks.

Wow, this REALLY makes me mad that these auto industries are treated with special rights as businesses than other businesses or industries. I mean, yeah I understand why, they're a vital part of our economy, but I mean, the fact that we're willing to treat other companies better than others to me is ridiculous.

I guess what Orwell said is true, we're all equal, some are just more equal than others.

Iam glad you have a blag so i can learn more. thanks for information..

President Bush ! some old times

Auto Bailout project indeed can help these car manufactures...

Great blog. Keep up the good work.

Crysler will win when they will make cars with low fuel consumption, in USA and especially in Europe

fox

Chrysler 300c it's a wonderful car

Chrysler and GM both are good companies. GM is in the market for quite a long time. And as the financial crisis is over and now they are making a good progress.

I was watching the news and read that Chrysler had it's biggest rise in sales for 2011 than previous years. Looks like it was Jeep that gave them a lot of those new sales. Always good to hear about American car companies coming back!

Glad that GM and Chrysler prevailed through that hard ship. Bush did something right.

Finally the American Auto industry is coming back and thriving. Also thankfully the American public can also afford to purchase the vehicles from the same companies they bailed out!

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