Tuesday, 16 December 2008

Bailout Perspective

Detroit Free Press:

GM's total request now tops $18 billion, with $12 billion in loans and an additional $6 billion as an emergency line of credit should the economy continue to worsen.

GM pledged to shed nine factories, up to 31,500 workers and roughly $30 billion in debt through
2012.

Chrysler did not appear to ask for more than $7 billion, saying it would begin repaying the loan in
2012.

Ford Motor Co. offered a brighter outlook, requesting a $9-billion government credit line that it said it would tap should the economy weaken further.

"We think we're going to be able to get through this and get back to profitability, and be a very viable company in
2011," said Ford Chief Executive Alan Mulally

How much do you trust those numbers? The earliest promised payback start of any loan is 2011.

So... how likely is it that the automakers will ask for more money a year (or less) from now (citing unexpected worsening of the economy) and will push out the pay back date? How often will that cycle repeat itself?

1 comment:

ADHR said...

Speaking just for myself, I'd endorse it until Chapter 11 became viable again. At which point, I'd say let 'em restructure.

Incidentally, Chapter 7 could turn into a firesale, where plants are stripped of anything saleable (materials, machinery, fuel, etc.). There's no guarantee they'd remain intact, hence why it's a bad thing to let that happen.