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December 19, 2008, 11am EST By William Bulbrook AllAmericanHybrid.com Writer At 9:01 am EST, Friday, December 19, 2008, President Bush made the general announcement that funds would be made available “from the financial rescue package Congress approved earlier this fall.” President Bush stated that the financial crisis and recession caused problems within the industry at a much faster pace than anyone had anticipated. “The convergence of these factors means there’s too great a risk that bankruptcy now would lead to a disorderly liquidation of American auto companies. My economic advisors believe that such a collapse would deal an unacceptably painful blow to hardworking Americans far beyond the auto industry.” Said the President, “It would worsen a weak job market and exacerbate the financial crisis. It would send our suffering economy into a deeper and longer recession. And it would leave the next President to confront the demise of a major American industry in his first days in office.” The White House has resisted the use of the financial rescue package throughout the past several months of this issue, but finally relented. “Unfortunately, despite extensive debate and agreement that we should prevent disorderly bankruptcies in the American auto industry, Congress was unable to get a bill to my desk before adjourning this year.” The President stated, “This means the only way to avoid a collapse of the US auto industry is for the executive branch to step in. The American people want the auto companies to succeed, and so do I.” He said sternly, “So today, I’m announcing that the federal government will grant loans to auto companies under conditions similar to those Congress considered last week.” The statement also made clear that the loans would provide, if the companies were unable to restructure in a timely manner, the ability for the industry to put together an orderly Chapter 11 bankruptcy. President Bush stated that he felt that this would help consumer confidence in purchasing American cars. He outlined that specific conditions must be met and outlined: “Because Congress failed to make funds available for these loans, the plan I am announcing today will be drawn from the financial rescue package Congress approved earlier this fall. The terms of the loans will require auto companies to demonstrate how they can become viable. They must pay back all their loans to the government, and show that their firms can earn a profit and achieve a positive net worth. This restructuring will require meaningful concessions from all involved in the auto industry – management, labor unions, creditors, bondholders, dealers, and suppliers.” In a statement from General Motors, “We appreciate the President extending a financial bridge at this most critical time for the US auto industry and our nation’s economy. This action helps to preserve many jobs, and supports the continued operation of GM and the many suppliers, dealers and small businesses across the country that depend on us…. We know we have much work in front of us to accomplish our plan. It is our intention to continue to be transparent as we execute our plan, and we will provide regular updates on our progress. We again thank the Administration for this important support of our industry at this challenging time, and we look forward to proving what American ingenuity can achieve.” Chrysler issued the following: “We have received news that US Treasury Secretary Henry Paulson will provide $4 billion of initial funding to Chrysler LLC from the TARP (Troubled Assets Relief Program) as a loan to help bridge the current financial crisis. We appreciate the Administration’s confidence in Chrysler.” According to Robert Nardelli, “As outlined in our submission to Congress, we intend to be accountable for this loan, including meeting the specific requirements set forth by government, and will continue to implement our plan for long-term viability. The receipt of this loan means Chrysler can continue to pursue its vision to build the fuel-efficient, high-quality cars and trucks people want to buy, will enjoy driving and will want to buy again.” “As we told Congress, Ford is in a different position. We do not face a near-term liquidity issue, and we are not seeking short-term financial assistance from the government,” Ford President and CEO Alan Mulally said. “But all of us at Ford appreciate the prudent step the Administration has taken to address the near-term liquidity issues of GM and Chrysler. The US auto industry is highly interdependent, and a failure of one of our competitors would have a ripple effect that could jeopardize millions of jobs and further damage the already weakened US economy.” In a release by the United Auto Workers: “We’re pleased that the Bush administration has acted today to provide urgently needed emergency bridge loans to America’s auto companies and to pursue a process for restructuring outside of bankruptcy,” said UAW President Ron Gettelfinger. “This will keep the doors of America’s factories open, keep Americans working and prevent the devastating economic consequences for millions of Americans and thousands of businesses that would have resulted from a liquidation of operations by one or more auto companies…. While we appreciate that President Bush has taken the emergency action needed to help America’s auto companies weather the current financial crisis, we are disappointed that he has added unfair conditions singling out workers. These conditions were not included in the bipartisan legislation endorsed by the White House, which passed the House of Representatives and which won support from a majority of senators.” According to Press Secretary Dana Perino: “... in addition to the House conditions that are included in the loan terms, we’ve added some additional conditions as targets that basically says, you [have] got to come forward with a plan for long-term viability. And we would expect to see in this plan for long-term viability a plan to reduce the debts of your bondholders by converting them from debt to equity in the amount of two-thirds to make one-half of the VEBA payments, the payments to the labor retiree health benefits; to make one-half of those VEBA payments in the form of stock instead of cash; to eliminate the jobs bank that pays – continues to pay workers even though they have been laid off; work rules that are competitive with foreign manufacturers that are operating in the United States by the end of 2009; and, finally wages and benefits that are competitive with those foreign manufacturers operating in the United States also by the end of 2009.” In a further statement she included that it might result in surrendering health and retirement benefits, amongst others. The test for the loan and long term liquidity is the net present value of the company, which must be positive within a time period decided by March 31, 2009. There will not be a ‘car czar’ for the bridge loan; instead the White House designee will be the Secretary of the Treasury with the option for the Obama Administration to put a representative under a specific title. In Ms. Perino’s press statement it was made quite clear that there was not to be a taxpayer stake in the companies, other than warrants from Chrysler, a private company. In a response from the UAW, Mr. Gettelfinger stated: “We will work with the Obama Administration and the new Congress to ensure that these unfair conditions are removed, as we join in the coming months with all stakeholders to create a viable future for the US auto industry.” AllAmericanHybrid.com will continue to report on this topic as details are provided.
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