Bush Bails Out Automakers

Ceding that Chapter 11 is likely still in the cards for General Motors Corporation (GM) and Chrysler LLC (Ford Motor Company {F - Analyst Report} is not part of this bailout), President Bush today allocated around $15 billion in an emergency loan to assist two of the Big Three. The money will be drawn from the $700 billion Troubled Assets Relief Program (TARP) already passed by Congress to bailout the U.S. finance industry.

"This is the price of failure," the president said. Three months from now, after President Obama will have settled into the Oval Office, inability by the companies to pay back the money likely means that Chapter 11 bankruptcy would be the next step for the automakers. President Bush said Chapter 11 was "unlikely to work at this time," meaning without this near-term loan.

How this loan is going to result in a "positive net value" over the next 3 months, however, is a good question. The answer may well be "it isn't." But President Bush's decision, at the very least, avoids the possibility that the U.S. auto industry will crash and burn on his watch.

Email	Print	Share	RSS	Rate Pos	Rate Neg	Comment