(Update1) TARP: Troubled Automaker Relief Program?by Tim Manni
Well not exactly. As merger talks continue between GM and Chrysler, the White House has begun to discuss federal-financing avenues for the two automakers — one option could include pulling funds from the allotted $700 billion set aside for rescuing financial institutions. The Treasury Department confirmed this week that no money would be diverted from TARP funds; that money had been designated solely for capital infusions to banks and insurance companies only.
Individuals close to the two automakers claim they have requested approximately $10 billion from the federal government to foster a merger between the two failing automakers. One breakdown sees the government providing $3 billion in exchange for preferred stock, the White House taking over $3 billion in pension obligations (extensive pension obligations for retired autoworkers have gobbled up tremendous amounts of funds from both automakers), and “a credit line that could include U.S. government purchases of commercial paper issued by GM to relieve short-term pressure on liquidity.”
The failure of just one of the “Big Three” auto manufacturers could have devastating economic effects. Combined, the Big Three employ 200,000 US workers, not to mention the millions of other jobs, like parts suppliers and dealerships, that rely on them.
Any potential federal aid that may be provided to US automakers will be in addition to the recently-approved $25 billion designed to bolster the production of more fuel-efficient vehicles. A decision could come as early as this week.
Phil LeBeau of CNBC is quite confident GM and Chrysler will get the money they are after. But that’s not the “tough sell” General Motors should be worried about. According to LeBeau, “(GM’s Chairman and CEO Rick) Wagoner’s personal push for loans is not a tough sell. He’ll get the money and once he does, then the real pressure starts. Then he and his top lieutenants will have to move quickly to integrate Chrysler.”
“Washington doesn’t have much of a choice but to give GM the money.”