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US Treasury still working on auto bailout terms

Latest update : 2008-12-30

The US Treasury has said it has still not finalised the multi-billion-dollar loans that are desperately awaited by troubled manufacturers GM and Chrysler. A Treasury source said they "should not expect the funding to take place today."

AFP - The US Treasury said Monday it was still working on multibillion-dollar loans for troubled automakers General Motors and Chrysler, announced 10 days ago to avert the companies' collapse.
"We're making good progress finalizing the automaker loans and are committed to closing them on a timeline that will meet their individual near-term funding needs," Treasury spokeswoman Brookly McLaughlin told AFP.
The Treasury announced on December 19 a massive rescue of cash-strapped GM and Chrysler, facing a threat of imminent bankruptcy that could create economic chaos and throw millions out of work across the country.
GM, the biggest US automaker of the Detroit Big Three, would get 4.0 billion dollars and Chrysler, the smallest, would get up to 4.0 billion dollars in the first segment of the bailout on the closing date of December 29, the Treasury had said.
"You should not expect the funding to take place today," said a person close to the situation who requested anonymity.
GM was to receive an additional 5.4 billion dollars in mid-January and would be eligible for a further 4.0 billion dollars from February pending congressional action.
GM and Chrysler, battered by falling auto sales amid a deepening US recession, agreed to the loan terms which require them to provide warrants for non-voting stock, accept limits on executive pay and perks and give priority to the government loans over other debts, to the extent permitted by law.
Under the agreement, the automakers will have to prove their viability by March 31 or the government could require the funds to be repaid within 30 days.
The funds will come from the Treasury's 700 billion dollar Troubled Asset Relief Program (TARP) approved in October to bail out struggling financial institutions.
Ford Motor Company, the second-largest US carmaker, has asked the government for a line of credit as a backstop in the face of plunging sales.

Date created : 2008-12-30