General Motors Gets First Installment of Treasury Loan

[rohan]

General Motors Gets First Installment of Treasury Loan
Wednesday, December 31, 2008


DETROIT  ?  General Motors Corp. may be well on the way to keeping its New Years' resolution to restructure with the arrival Wednesday night of the first tranche of $9.4 billion in low-cost loans from the U.S. Treasury.

The installment came in time for the world's largest automaker to avert a financial disaster in which it may have been unable to sustain operations and pay suppliers.

"Treasury today finalized the loan transaction for GM and funded the first tranche of $4 billion," said Treasury spokeswoman Brookly McLaughlin in a written statement.

The Detroit automaker had been working feverishly with Treasury officials to close on the installment. The money will be available for GM to use almost immediately.

GM is obligated to a make a large payment to a major supplier in early January, but has declined to offer details on the amount of money it owes or to which supplier.

"We appreciate the Administration extending a financial bridge to GM at this critical time for the U.S. auto industry," said GM in a written statement shortly after the Treasury announcement. "We are committed to successfully executing the viability plan we submitted on December 2 and remain confident in the future of General Motors."

The loans come from the $700 billion bank rescue plan, approved by Congress in September. President Bush said earlier this month that the ailing automakers could tap part of those funds in the form of low-interest loans.

GM is burning through approximately $33 million a day, based on spending $1 billion per month during the third quarter. That daily amount is likely lower for the fourth quarter as GM has reduced spending on operations, sponsorships, utilities and even office supplies.

GM previously said it might not make it through the end of the year before running out of cash without government aid.

Auburn Hills, Mich.-based Chrysler LLC is expecting $4 billion in cash as well, but the Treasury has yet to announce the closing of the first round of loan money.

"We're working expeditiously with Chrysler to finalize that transaction and we remain committed to closing it on a timeline that will meet near term funding needs," McLaughlin said.

Chrysler is nearing the minimum level of cash ? $2.5 billion ? it needs to operate. Chrysler is already fending off angry parts suppliers and other vendors demanding cash payments on delivery. It generally pays suppliers $7 billion every 45 days.

Chrysler issued a statement Wednesday night, updating the status of its talks with the Treasury.

"We recognize the magnitude of the effort by the Treasury Department to complete these multiple financial arrangements quickly and sequentially," the company wrote in a press release. "The discussions relating to Chrysler have been positive and productive, and we look forward to finalizing the details of our financial assistance in the immediate future."

Dearborn, Mich.-based Ford Motor Co. said it does not intend to use government money to fund operations, as it is in a better financial position than its competitors.

The Detroit automakers are trying to weather the biggest auto sales slump in more than 26 years.

Shares of GM fell 15.8 percent Wednesday, or 60 cents to $3.20, before the Treasury's announcement. Shares of Ford closed unchanged at $2.29.

Earlier this week, GM's financial arm, GMAC Financial Services, received $5 billion in aid from the Treasury Department. In addition, the Treasury said it would lend up to $1 billion to GM so that the automaker would be able to buy more equity from GMAC. Those purchases are expected to raise more capital for GMAC, and separate from the $4 billion received from the Treasury Wednesday.

http://www.foxnews.com/story/0,2933,474805,00.html

[Speed_Racer]

$33 million a day...that's nearly impossible for me to comprehend.

[Secret Chimp]

I have a feeling this is going to be K-car part deux.

[MX793]

I have a feeling this is going to be K-car part deux.

Might not be bad if GM's K car ends up being the Kappa or Sigma lite platform.

[dazzleman]

How long before they're back looking for more money? 

As for GMAC, they lent my cousin $43K for a second mortgage.  She's a financial disaster, and has not paid the mortgage for 5 months, and hasn't heard a word from them.  'Nuff said. 

[Speed_Racer]

How long before they're back looking for more money? 

January 21st, 2009

[S204STi]

I understand the UAW is dropping pay to 16 an hour plus benefits by 2010... now if they could just do that today instead that would be nice.

[Secret Chimp]

How long before they're back looking for more money? 

As for GMAC, they lent my cousin $43K for a second mortgage.  She's a financial disaster, and has not paid the mortgage for 5 months, and hasn't heard a word from them.  'Nuff said. 

Snap, put me in touch with whoever gave her that...

[dazzleman]

Now I just saw this little gem:
_____________________________________________

http://www.bloomberg.com/apps/news?pid=20601087&sid=a5m5_7JC.xtQ&refer=worldwide

Treasury Opens Door to Aid for Broad Array of Firms, Industries

By Rebecca Christie

Jan. 1 (Bloomberg) -- The U.S. Treasury threw the door open to taxpayer financing for a widening array of companies and industries by drafting broad guidelines on aid to the auto industry.

The Treasury?s guidelines, published yesterday, would let officials provide funds to any company they deem important to making or financing cars. That leaves room for the government to provide money from the Troubled Asset Relief Program beyond loans already committed to General Motors Corp., GMAC LLC and Chrysler LLC.

?There are going to be other industries that are going to have just as good a case,? as the auto companies, former St. Louis Federal Reserve Bank President William Poole said in an interview on Bloomberg Television. ?We don?t know what those other industries are going to be. Where does this process stop??

Shares of auto suppliers including American Axle & Manufacturing Holdings Inc. and Lear Corp. jumped yesterday after Treasury announced the guidelines. The Motor & Equipment Manufacturers Association has been lobbying for the use of federal funds as a backstop in case parts makers can?t collect money the auto manufacturers owe them.

Analysts have speculated that companies such as GM?s bankrupt former parts unit Delphi Corp., might be eligible for assistance. The Treasury guidelines may encourage more guessing on what companies and industries are next, said Vincent Reinhart, resident scholar at the American Enterprise Institute in Washington.

?Constructively Ambiguous?

Treasury officials ?much prefer discretion, and so they would view the statement as being constructively ambiguous,? Reinhart said. ?It?s appropriate that they end the year the way they spent most of it -- that is, adding uncertainty into an environment in which there?s a lot of uncertainty.?

The guidelines don?t bind the government, so the lack of specifics gives President-elect Barack Obama plenty of leeway to decide who succeeds and fails when he takes office in three weeks. The bailout was originally designed to buy assets from banks and has instead become a fund for Treasury to prop up lenders, insurers, carmakers, auto-finance companies and, now, any firm that may be important to those industries.

Slippery Slope

?The further you go, the slipperier the slope becomes, the more you open the door to anyone who says, ?Look, my firm is in trouble, I need help too,?? said Lyle Gramley, a former Fed governor and now a Washington-based senior economic adviser for Stanford Group Co. ?We don?t want to go any further down that road than we absolutely have to.?

The Treasury already has provided $6 billion in aid to GMAC, the financing arm of GM, and up to $17.4 billion in financing for GM and Chrysler, using funds from the $700 billion bank-rescue package.

?Treasury will determine the form, terms and conditions of any investment made pursuant to this program on a case-by-case basis,? the Treasury said in the new guidelines. ?Treasury may consider, among other things, the importance of the institution to production by, or financing of, the American automotive industry.?

The government will weigh ?whether a major disruption of the institution?s operations would likely have a materially adverse effect on employment and thereby produce negative spillover effects on economic performance? or on credit markets, the Treasury said.

Supplier Shares Leap

Shares of American Axle, GM?s largest supplier of axles, and Lear, the world?s second-largest maker of auto seats, both leapt in the minutes after the Treasury?s announcement yesterday. Detroit-based American Axle rose 56 cents, or 24 percent, to $2.89 in New York Stock Exchange composite trading. Southfield, Michigan-based Lear, which gets almost a third of its revenue from GM, rose 26 cents, or 23 percent, to $1.41.

This week?s funding agreement between the Treasury and GMAC opened a new rescue program for the auto industry as part of the TARP. Treasury said then that the GMAC agreement was ?part of a broader program to assist the domestic automotive industry in becoming financially viable.? A Treasury official said there?s no cap or deadline for aid to the auto industry under the TARP.

?We would not be surprised to see additional government funds to GM to support a Delphi solution,? JPMorgan Chase & Co. analyst Himanshu Patel said in a report Dec. 30.

With this week?s funding for GMAC, the Treasury has now earmarked $358.4 billion out of the $700 billion bailout. Its actual spending has been less -- for example, the department so far has handed out only $172.5 billion out of the $250 billion designated for bank capital injections.

Treasury Checkbook

When Congress approved the TARP in October, it gave the Bush administration the first of two $350 billion tranches. After injecting capital into GMAC on Dec. 29, the Treasury reiterated its call for legislators to release the rest of the money.

The auto-rescue program could range anywhere from full bailouts of specific companies to merely keeping others going while in bankruptcy to ensure production isn?t interrupted, said Kirk Ludtke, an analyst at CRT Capital Group Inc. in Stamford, Connecticut.

?The Detroit three are still at risk,? Ludtke said, referring to GM, Chrysler and Ford Motor Co. ?The government is acknowledging it needs to assure at least an orderly restructuring of the key players in the auto industry.?

[dazzleman]

Snap, put me in touch with whoever gave her that...

She'll probably lose her house, but GMAC will never get their money back, because they're second in line behind the primary mortgage, and there won't be money left to pay them other than a nominal amount.

[the Teuton]

She'll probably lose her house, but GMAC will never get their money back, because they're second in line behind the primary mortgage, and there won't be money left to pay them other than a nominal amount.

She's not too good with money, is she?

[Gotta-Qik-C7]

January 21st, 2009

[dazzleman]

She's not too good with money, is she?

That's an understatement.

[Soup DeVille]

$33 million a day...that's nearly impossible for me to comprehend.

Okay, just imagine having the ability to shit diamonds, and you eat a lot of fiber.

Now multiply that by ten.

[Rich]

Hopefully they can use the money to remedy their website.  I took that a few minutes ago

[the Teuton]

All aboard the FAILBOAT!

[dazzleman]

That about sums it up.