President Bush announces in late December $17.4 billion in low-interest loans to General Motors Corp. and Chrysler LLC, a cash lifeline meant to keep the auto makers from tumbling into bankruptcy and provide a bridge to a second rescue package expected later next year.
Detroit's auto makers responded to the package with pledges to restructure their businesses quickly. Although the support does not include the “orderly bankruptcy” Bush suggested earlier and the industry roundly opposed, it orders the auto makers to put their United Auto Workers union retirement plans on sustainable footing, persuade bondholders to convert their paper into equity, and make their blue-collar labor costs competitive with foreign transplants.
“We know we have a lot of work in front of us,” GM Chairman and CEO Rick Wagoner tells journalists in a press conference following Bush's announcement. “We look forward to working closely with the administration and the appropriate government officials, our debt holders, union, dealers, suppliers and other key stakeholders. We look forward to proving what American ingenuity can achieve.”
Bush's plan would seem to solidify Wagoner's position atop GM, which was shaken when Sen. Christopher Dodd (D-CT) called for him to “move on.”
Wagoner says he has no plans to leave GM, where his career began out of college in 1977. “You think I'd have gone through the last two months if I didn't want to stay?” he says.
Chrysler Chairman and CEO Robert Nardelli says the auto maker will hold itself accountable to conditions of the support, which threatens a recall of the loans if auto makers do not make significant restructuring progress by March 31.
Bush's plan does not address Ford Motor Co.'s request for an emergency credit line of $9 billion in case the economic situation worsens.
Ford says it has enough cash to get through 2009, but it faces the same depressed market and credit crunch as GM and Chrysler, a combination forcing it to burn cash at a comparable rate.
UAW President Ron Gettelfinger says all stakeholders should share in the sacrifices required as conditions of the loans.
The loans approved by Bush immediately send approximately $9 billion to GM and $4 billion to Chrysler. It makes another $4 billion available in February when comprehensive restructuring plans from GM and Chrysler are due to the government.