Shortly after 9AM EST today, President Bush announced that the federal government will be providing a bailout for GM and Chrysler.
They will be providing 13.4 billion in December. They will also be providing an additional 4 billion in February. The funding for the automakers will be provided from the 700 billion Troubled Asset Relief Program, which was originally intended for the ailing financial sector.
The President claims that if by March 31st the companies cannot show that they are financially viable, they will have to repay all monies lent by the federal government. This call by Bush is being presented as an opportunity to buy time for the companies to restructure.
The plan also puts limits on executive compensation and frivolous spending such as corporate jets. It also requires that automakers follow fuel efficiency, emission standards and open books to government scrutiny. Will Chrysler adhere to opening their books completely to the government. They weren’t willing to present a credible restructuring agreement to Congress a few weeks ago, but they will all of a sudden support total transparency now? It seems that the “big two” have finally realized that they do not hold the cards to the deck in this hand of play.
The big three have recently temporarily suspended production in over 59 plants until January because of their current financial troubles.
It seems that desperate times have called for desperate measures but will this plan work?