Finally The Us Automakers Got Government Loans For Rescue Plan

Written By: admin on December 19, 2008 No Comment

Friday, December 19, 2008. Finally the US automakers got the government loans. President Bush announced a rescue plot for General Motors and Chrysler LLC Friday morning that will make $13.4 billion in federal loans available nearly immediately.

A senior administration official briefing reporters said he expects that GM and Chrysler LLC will be signing the loan papers to access the cash later Friday morning.

The money will come from the $700 billion fund set aside to bailout Wall Street firms and banks in October.

With these loans, Treasury will have committed virtually all of the $350 billion of that fund that it can hand out without additional authorization from Congress. Once Congress releases the other $350 billion, the two automakers will be able to borrow an additional $4 billion.

The loans are three-year loans but the money will have to be repaid immediately if the firms do not show themselves to be viable by March 31. It is expected that the companies will have to negotiate new agreements with unions and creditors in order to do so.

During brief remarks at the White House, President Bush said in normal times he would have not been in favor of preventing a bankruptcy of the two companies. But the current state of the economy and credit markets left him no choice but to act.

“Government has a responsibility to safeguard the broader health and stability of our economy,” he said. “If we were to allow the free market to take its course now, it would nearly certainly lead to disorderly bankruptcy and liquidation for the automakers.”

“In the midst of a financial crisis and a recession, allowing the U.S. auto industry to collapse is not a responsible course of action,” Bush added.

GM and Chrysler immediately issued statements thanking the administration for taking action.

“We know we have much work in front of us to accomplish our plot,” GM said. “We thank the Administration for this vital support of our industry at this challenging time, and we look forward to proving what American ingenuity can achieve.”

The White House and Treasury Department signaled a week ago that they were willing to use cash from the bank bailout fund to help keep GM and Chrysler afloat after the Senate failed to vote for a $14 billion bailout for the two companies. The bill had already passed the House and had the support of the administration.

U.S. auto sales plunged to 26-year lows last month as tight credit, rising job losses and weak consumer confidence have led to a virtual collapse in the auto market.

Excellent news for the workers, they will not worries about their loosing job.