Bush: GM, Chrysler to receive $17.4b federal loansby Andrew Ganz
United States President George W. Bush, in a press conference this morning, announced that the federal government will provide $17.4 billion in short-term, low interest loans to the General Motors and Chrysler in exchange for wage concessions at all levels - management, unions and suppliers - and an ultimatum that the companies must have thorough plans in place by March 31 or the loans will have to be repaid and the automakers will be forced into a controlled Chapter 11 bankruptcy.
Bush said that the two automakers will not be forced into Chapter 11 bankruptcy unless they are unable to turn around their companies by March 31. He said that allowing the automakers to fail would be an "unacceptably painful blow" for the country.
The loans, in the President's word, are "similar to those offered by Congress last week," except that they require "meaningful concessions" for all levels, including the unions. Bush said that worker compensation must be comparable to those paid by foreign automakers operating on United States soil, thus delivering a potentially crippling blow to the United Auto Workers.
Bush said that the $17.4 billion will come out of the $700 billion financial rescue package known as TARP passed by Congress for use on Wall Street earlier this year. The first $13.4 billion will be made available immediately and the remaining $4 billion will come from the remaining $350 billion in the TARP fund.
"[The automakers have] three months to put in place plans to structure viable companies - which we believe they can do," President Bush said. He stressed his reluctancy to have to provide the loans, but said that they were necessary given the current financial turmoil.
President Bush issued the ultimatum that the federal loans must be repaid by March 31 if the automakers do not come up with a viable plan for going forward, "or the only option will be bankruptcy."
"[The automakers must] show the world once again they can meet challenges with ingenuity," Bush concluded.
GM CEO Rick Wagoner has scheduled a press conference for 11 a.m. Eastern today. Check back here for coverage.