They’ve done it, the Detroit boys have managed to secure federal emergency loans to execute their plans to stay afloat. Initially their request for money was rejected by the US Senate, but the Bush administration has decided to take money from the US$700 billion that was allocated to bail out their failed banks.
The amount to be given to GM and Chrysler (Ford doesn’t need the money apparently as they build cars that people actually want to buy, thanks to their extensive European involvement) totals up to US$17.4 billion. US$4 billion will go to Chrysler this month and GM will get the same this month, with the remaining US$5.4 billion set to fall into their hands next year pending the release of the other half of the US$700 billion by the congress.
George Bush says the bailout was because he and the American people did not want the indigenous auto companies to fail, and he also did no want to hand over the administration over to Barack Obama next year with the auto industry in shambles.
The two companies have until March 31st 2009 to become “financially viable”, otherwise the loan will be recalled and all funds are to be returned to the U.S. Treasury. In this case, financially viable is defined to be “having a positive net value, taking into account all current and future costs, and can fully repay the loan.”
Other terms and conditions include: firms must provide warrants for non-voting stock, firms must accept limits on executive pay and eliminate perks such as corporate jets, debt owned to the government would be placed at higher priority than other debts to the extent permitted by law, firms must allow the government to examine their accounting books and records, firms must report any transaction greater than US$100 million and the government has the power to block any of these transactions greater than US$100 million, firms must comply with Federal fuel efficiency and emissions requirements, and firms must not issue new dividends while in debt with the government.
Ford, the healther of the Detroit 3, is still asking for a US$9 billion government line of credit in case conditions worsen or one of the other Detroit 3 fails. But they do not need any money immediately at the moment, unlike as claimed by GM and Chrysler.
Canada has also extended help to the Canadian arms of GM and Chrysler. The Canadian government will provide C$2.7 billion while the Ontario state government will top up another C$1.3 billion for a total of C$4 billion. Of this total, C$3 billion will go to GM while C$1 billion will go to Chrysler. Canadian production capacity represents 20% of total North American auto production capacity, but this aid amount only represents 16% of all total aid offered by North American governments.
So far the response from the industry have been mixed, but the positive ones so far are only coming from pro-Detroit government officials and GM dealers and other industry-related people who stand to benefit from the loan. Standard and Poor equity analyst Efraim Levy expects GM to quickly blow the billions they are getting and then request another multi-billion dollar loan on March 31st 2009. Jerry Webman, chief economist at Oppenheimer Funds said this bail-out is much like the government infusing the blood in on arm while it’s bleeding out the other arm in attempt to keep them alive.
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STILL WONDERIN' WHEN THESE ECONOMIC CRISIS GONNA BE SOLVED !!!!! THIS CRISIS WAVE STARTED HITTIN' ASIAN SHORES BADLY !!!!!
Not only proton, GM and Chrysler also bailed out by their gov. So what?
for what ever reason, there's still only 'a good reason' behind it. This thing unseen by common people.
From the economic of view, national is a very good this.It's about who running it.
Bmpower – correct me if i am wrong, but our Govt never bail out Proton. Bailing out simply put is directly injecting fresh funds when the company is in the red, as in the case of GM and Chrysler. Proton got some relief on duties as do Perodua and Inokom, being the other "National cars', but never direct funds from the Govt, else the taxpayers and the oppoition parties will be screaming for blood.
Yeah, i know bashers will say 'same thing'.
i'm sure alot of american folks are pissed about this. money spent on unworthy companies.
other than ford, i think the other 2 should just be blown out into oblivion.
they're gonna ask for a fresh round of money come next year. alot of people know this.
Naah, these 3 detroit company go bankrupt saja lah… waste time with them… nothing good coming out from them too… no point saving them right now, or after… like paul said, inject them with fresh blood while the wound is still torn wide open…
Yeah, it's too late rly. To build a whole brand new car, it would've take abt 4 yrs. Sure, design can be safe, engine n gearbox just take from somebody else, like say a small peug/fiat diesel? But there's also the machineries, the softwares to tell the robot how to stamp, mold press blabla. That'll take time. N those detroit 3, doesn't hv that luxury.
Might as well sell them to somebody else. A chance for perodua to own them n enter US market? They can offer them small compact hatchback to the americans, n we'll finally be satisfied that perodua is actually doing something rather than becoming the jap's dog all the time.
After the shoe-throwing incident, Bush is very desperate to avoid another instance to his disaster-filled legacy. So, a loan will push the eventual demise of the Detroit big 3 to Obama’s era and not his. What a clever move.
The initial push for a clearer business direction for the big 3 was taken a back seat. If you guys remember, the very reason why the loan was not approved was because of this very issue. Back then. the 3 CEO’s were not able to clearly and convincingly tell the Senate and the American public what they would do to bring their respective corps out of the mess. They still don’t !. Yet the loan somehow get approved. Do you see the logic?
bmpower…
thought ford dont need bailout.. cause they 'build car that people want'.. if Proton doing this as well, they wont need bailout as well. hope the different is clear, and stick to building what people want, and people get what they paying for. Everyone will be happy this way :)
its no choice.. bailout will be the solution.
charles27 said,
December 22, 2008 @ 11:17 am
its no choice.. bailout will be the solution.
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indeed.. so for sure it 'not at the very last minute to die" right?
Who said they build car that people want? The also facing what proton's faced.
I wont point anyone, it's also about the taste!. Everyone taste's different.. many american also Japanese wannabe nowaday, Overdosed with evo.. GTR etc etc.. That's tipical lah..
For the rest of president either Bush or Obama, BOTH know 1 thing for sure. (just in case whose to be blame if bailout fail = more loss = so they kept quite who to do the thing = bailout)..
BOTH of them knww 1 thing for sure:
Make your own car was better than JUST BUYING from outside.
It's not only About The Car, but it's about YOUR MONEY and YOUR ECONOMY!.
And.. Japan as one of the big economy company.. guess how much they get from their CARS brands spread all over the world? BILLIONS or might be TRILLIONS..
if they don bailout, usa will suffer even more losses
its all about ego. The US govt won't want to see their made in America own by others but will see how long things will last
most of you dont touch on the "fallout" of these companies failing, coz thats the more important thing.
what do you do with the thousands of workers who lose their jobs, and what more in tough times, when other jobs are hard to come by.
imagine you're running a country, and then imagine how you're going to deal with that.
its not as simple as 'let them close-shop'.
besides their hummers, corvettes, vipers and mustangs. name me something else besides tony starck's jericho missiles and iron man which is made in USA