This morning, President Bush announced that GM and Chrysler would receive billions in federal loans to keep them afloat through March of 2009. The deal includes an immediate $13.4 billion in short-term financing, with another $4 billion to come in February.
President Bush addressed the country on live TV and described the terms of the bailout as necessary, considering the current economic crisis. "Allowing the U.S. auto industry to collapse is not a responsible course of action," he said.
Many of the conditions that Congress was looking for in its own bailout plans are included in the White House deal, which taps into the $700 billion fund set up earlier this year to help financial institutions. The conditions include:
- Both companies need to prove viability by March 31, 2009 or their loans will be called.
- Executive pay will be curtailed.
- Perks like private jets will be lost as well.
- Both companies will have to open their books to government agencies.
- Plans will have to include steps to meet fuel efficiency standards.
- Negotiations with stakeholders including the United Auto Workers union will be needed to bring pay in line with foreign automakers, with a Dec 31,2009 deadline.
There will clearly be more news coming about the plan, but for now it seems to be the lifeline both automakers were requesting in front of Congress weeks ago. GM will receive $9 billion in loans while Chrysler will receive $4 billion.
What will happen over the next three months to make each company viable? Expect more layoffs and plant closings and vehicle lineups to shrink. But beyond those forgone measures, it remains to be seen how radically each company will have to alter its way of life.