Bailout Watch 296: GM, Chrysler Get $17.4b Bailout

The New York Times reports that President Bush has revealed his bailout plans for GM and Chrysler. The Gray Lady says the loans “include roughly the identical requirements in that bill, which had been approved by the House.” More specifically [via Bloomberg]: “Under the terms of the plan, if the companies can’t demonstrate financial viability by March 31 the loans will be called and the money must be returned… The government’s debt would have priority over any other debts. In exchange for the money, the automakers must provide warrants for non-voting stock, accept limits on executive pay, give the government access to financial records and not issue dividends until the debt is repaid. The government will have the authority to block transactions larger than $100 million. The automakers much cut their debt by two thirds in an equity exchange, make half of the payments to a union retirement fund in equity, eliminate a program that pays union workers when they don’t have work and have union costs and rules competitive with foreign automakers by Dec. 31, 2009. The requirements could be modified by negotiations with the union and debt holders.” The bottom line…$13.4b straightaway, $4b in February. If the Prez gets his way, the bailout bonanza will come from the Treasury Department’s Troubled Asset Relief Program (TARP)– despite the fact that Bush had warned Congress against any such move, as the funds were earmarked for banks and other lending institutions.So why no bankruptcy? The Commander-in-Chief noted that consumers would be “unlikely to purchase cars from a bankrupt manufacturer.”And here’s something odd. “Government officials will examine all financial statements and records of the car companies.” You mean they haven’t already? The Prez wants to fork-out $17.4b without knowing the exact size of the hole into which he’s throwing US. taxpayer money? How great is that? Anyway, reaction from ChryCo was as swift as it was pre-packaged.In an open letter to their saviors, ChryCo CEO Bob Nardelli thanked his friends in Washington and opted for a surprisingly strident tone with the company’s suppliers. “We are… mindful that they are going through a difficult period as well. But we must cooperatively find ways to further reduce our costs while maintaining normal operations. We will ask our suppliers to maintain their commitment to reasonable trade terms and normal fulfillment of orders for as long as the federal loan is outstanding.”Business as usual, then? Yup.“The bridge loan allows us to meet cash needs, pay our suppliers, continue developing great products and move forward with the restructuring and streamlining of our organization that we began in 2007. This restructuring will reduce the number of personnel layers while increasing managers’ span of control, enabling us to reduce costs, make faster decisions and do our jobs effectively with fewer resources.” So where are GM’s promises, promises, promises? Right here!“This will allow us to accelerate the completion of our aggressive restructuring plan for long-term, sustainable success,” GM statement pronounced. “It will lead to a leaner, stronger General Motors, a GM that is:*dedicated to great products, exciting design, and world-class quality*fully committed to leading in energy-saving vehicles and technologies,*responsive to the needs of our customers, our stakeholders and the communities we live in and serve.”Once again, GM CEO Rick Wagoner has slipped the hangman’s noose without promising any quantifiable goals or metrics for future success. The General’s generals have scheduled a press conference for 11am.