How automakers will get short-term fix
Questions and answers about the bailout for General Motors Corp. and Chrysler:
What did the president announce?
The Bush administration will make $13.4 billion available for loans to GM and Chrysler. Another $4 billion might be available in February.
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Why the two-step?
The money is coming from the Troubled Asset Relief Program approved by Congress to rescue the financial industry. That program was divided into two parts, each worth $350 billion. Friday’s loan program uses up the first batch of TARP money, so the February loan money would have to come from the second allocation.
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Who gets what?
GM gets $9.4 billion and Chrysler gets $4 billion. Ford says it doesn’t need immediate help.
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What are the loans for?
The loans are a short-term fix designed to give the automakers breathing room to work out restructuring plans by March 31. The government can demand that the loans be repaid if negotiations among parties -- including dealers, unions, stockholders, bondholders and suppliers -- fail to lead to a new business structure that is deemed viable.
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What do taxpayers get?
GM and Chrysler must provide the government with warrants giving it the option to buy their stock at a specific price. In addition, debt to the government would be senior to all other debt.
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What do companies give up?
Carmakers must agree to limits on executive pay and eliminate perks such as corporate jets. Also, the government will be able to block expenditures of more than $100 million.
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So what forces the parties to come to an agreement?
Most of the terms of Friday’s actions are nonbinding, but the hope of the government hopes that the threat of calling in the loans will motivate the parties to reach an agreement.
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Why did Bush act?
The administration said the loans were needed to prevent a disorderly bankruptcy during the current recession.
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Didn’t Congress try to deal with this?
The House approved a bailout plan, but the Senate did not, largely because of Republican opposition.
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What is the position of President-elect Barack Obama?
He was generally supportive of Bush’s move, calling it a necessary step. In a statement, he also warned the parties that they must come together to find a solution to the industry’s problems.
But many of the conditions imposed by Bush are not compulsory and could be changed by Obama and the incoming Congress.
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michael.muskal@latimes.com
