The White House announced they would be making up to $17 billion available in loans to the domestic auto makers in order to stave off their bankruptcy. But, in order to qualify for the loans, some new rules and proof of viability.
There must be a two-thirds reduction in debt by exchanging debt for equitey, more flexible work rules and cuts in wages.
According to Bush, the most important rule is the company must become viable, but not necessarily profitable. "this does not mean the firms has to be profitable but clearly to have a positive net present value the firms have to be profitable soon."
Bush noted, "In the midst of a crisis and a recession allowing the US auto industry to collapse is not a responsible course of action."
The money will come from the $700 billion set aside for the Troubled Asset Relief Program (TARP). $13.4 billion will be available immediately, while another $4 billion is contingent upon congressional approval of the second portion of TARP.
Chrysler has already signed a letter of intent. According to LLC chariman and chief executive Bob Nardelli, "These requirements will require consideration from all constituents, requiring commitment first in principal, leading to implementation this coming year," Nardelli said.
"Chrysler is committed to meeting these requirements."
I would expect GM to follow suit given how badly they've pushed for government loans, while Ford has said they don't need the loans right now.
Update: As expected, word out of GM is they will be applying for the loans, too.
DETROIT – General Motors Corp. CEO Rick Wagoner says the automaker has significant work ahead after receiving a federal bailout Friday, but he is confident GM will work with stakeholders to make the company viable.