| BanningZ |
12-12-2008 03:13 PM |
Quote:
Originally Posted by bboypuertoroc
(Post 6743)
This is really bad news.
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Nope maybe not. Looks like that $700,000,000,000 TARP package that was for the banking and credit crisis may be partially used for the "Big 3."
Good thing we got to vote on all this money we will be paying in taxes.:ugh2:
Quote:
GM, Chrysler May Win Reprieve With TARP Aid After Senate Rebuff
Dec. 12 (Bloomberg) -- General Motors Corp. and Chrysler LLC, draining cash as sales slump, won a reprieve to stay alive until January as the Bush administration said it might finance an industry rescue with funds set aside for banks.
The White House’s reversal on tapping the Troubled Asset Relief Program for short-term aid came a day after the Senate rejected a short-term loan package for GM and Cerberus Capital Management LP’s Chrysler, pushing the companies toward a bankruptcy they said they were working to avoid.
Treasury assistance would be “far more attractive for the industry than the very complex legislation that was being prepared,” David Cole, chairman of the Center for Automotive Research, told Bloomberg Television. “This provides some stability.”
GM, the biggest U.S. automaker, and No. 3 Chrysler welcomed the prospect of TARP funds, the details of which weren’t spelled out. GM said it would trim first-quarter output by about 30 percent, a reduction of 250,000 vehicles, as sales slump.
With GM saying it will run out of cash by month’s end and Chrysler forecast for the same outcome early next year, financing from TARP may help the companies stay in business until the new Congress takes office on Jan. 5.
“Under normal economic conditions we would prefer that markets determine the ultimate fate of private firms,” White House spokeswoman Dana Perino said. “However, given the current weakened state of the U.S. economy, we will consider other options if necessary -- including use of the TARP program -- to prevent a collapse of troubled automakers.”
‘Stand Ready’
The Treasury Department “will stand ready to prevent an imminent failure,” spokeswoman Brookly McLaughlin said in a statement. Secretary Henry Paulson had resisted Congress’s bid to finance an industry rescue with the TARP money, saying the funds were intended only to bolster ailing banks.
GM dropped 24 cents, or 5.8 percent, to $3.88 and Ford Motor Co. rose 12 cents, or 4.1 percent, to $3.20 at 2:58 p.m. in New York Stock Exchange composite trading. GM plummeted as much as 37 percent earlier, while Ford had tumbled 27 percent.
Cole, who is based in Ann Arbor, Michigan, said TARP aid would be “a Christmas present” to automakers that had pinned their hopes for survival on the congressional rescue plan that failed late yesterday.
“It is just great news,” he said.
GM was “encouraged” by the White House’s shift on TARP, according to a company statement, while Chrysler Chief Executive Officer Robert Nardelli told employees in an e-mail that the company was “pleased.” Ford, which wasn’t seeking short-term loans, had no immediate comment.
Avoiding Bankruptcy
GM CEO Rick Wagoner told Congress last week and has said repeatedly that the Detroit-based automaker is trying to avoid bankruptcy at all costs. Lead director George Fisher said last week that GM considered and rejected the idea and it was “way down the list” of alternatives.
Still, GM also has said it will lack the minimum $11 billion needed to pay bills by the end of this month, raising the prospect of bankruptcy should it fail to win a cash infusion. GM reported having $16.2 billion as of Sept. 30.
An attempt to restructure GM in bankruptcy would end up as liquidation, because sales would plummet as buyers flock to solvent car companies, Wagoner has said.
Chrysler has said it will run out of money early next year. It ended the third quarter with $6.1 billion in cash and needs at least $3 billion on hand to operate, Nardelli told Congress on Nov. 18.
Default Risk
The risk GM and Chrysler could default in the coming months “remains very high” Standard & Poor’s credit analyst Robert Schulz said in a statement today. “In addition, we remain concerned about the spillover effects of an automaker failure” on parts suppliers, he said.
Pressure was mounting on GM and Chrysler this week before the congressional failure as both faced demands from a small number of partsmakers for payments in advance because of the bankruptcy concerns, people familiar with the matter said.
Ford, GM and Chrysler are idling production in Canada for parts of January to adjust for surplus inventory, Canadian Auto Workers President Ken Lewenza told reporters at a briefing in Toronto.
Chrysler’s plant in Brampton, Ontario, where the Dodge Charger and Challenger are built, will shut down from the end of next week until Jan. 19. Chrysler’s Windsor plant, which assembles minivans, will be closed from the end of next week through January, he said.
‘Limp Into January’
United Auto Workers President Ron Gettelfinger endorsed the idea of emergency aid from the Treasury’s TARP program or from the Federal Reserve, saying the automakers would be liquidated without U.S. assistance.
“We could work for nothing and GM couldn’t limp into January,” he said at the union’s headquarters in Detroit.
GM’s 8.375 percent bonds due in July 2033 lost 2.5 cents to 14.5 cents on the dollar, according to Trace, the bond-pricing service of the Financial Industry Regulatory Authority. The yield was 57.5 percent.
Ford’s 7.45 percent bonds due in July 2031 dropped 2.4 cents to 22 cents on the dollar, yielding 33.9 percent, Trace data showed.
GM is reeling from almost $73 billion in losses since 2004 and a 22 percent slump in U.S. sales this year. The automaker last month said it lost $4.2 billion in the third quarter.
Chrysler has been battered by a 28 percent plunge in U.S. sales through November, the most among major automakers.
Job losses would total 2.5 million to 3.5 million from an automaker failure in 2009, including 1.4 million people in industries not directly tied to manufacturing, according to a Nov. 4 report from the Center for Automotive Research, which does studies for government agencies and companies.
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