Bush approves a $17.4 billion economic aid package to rescue GM and Chrysler

A few days ago we mentioned that the White House could be the saviour of the car groups Chrysler and General Motors, and in the end it has happened just as predicted. US President George W. Bush has today approved an economic aid package of $17.4 billion for the two manufacturers so that they can carry out their restructuring plans, which will be granted under certain conditions.

According to Bush‘s statements during the speech he gave after approving the aid, in other circumstances that money would not have been given, but since the American economy is in the midst of a financial crisis and a recession, it would not have been responsible to let the manufacturers go bankrupt, as this would harm the situation even further.

The $17.4 billion will be granted in two phases: first, the manufacturers will have access to $13.4 billion (about €9.6 billion) coming from the $700 billion fund created for the financial crisis, and in the second, General Motors may apply for another $4 billion if within two months it has met its objectives.

Of the first $13.4 billion, $9.4 billion goes to General Motors, and the remaining $4 billion to Chrysler. Ford claims to have sufficient liquidity and does not urgently need money. This money will be handed over only if GM and Chrysler commit to carrying out the following actions before 31 March: getting rid of two-thirds of their debt, reducing workers’ wages to the levels of foreign brands, selling their jets and limiting their executives’ salaries.

By then, the government of Barack Obama will be in charge of monitoring that they have done everything that was demanded of them. If not, they will have to return all the money to the State. The manufacturers will have to demonstrate within three months that they can recover, be profitable and reach a viable agreement with the workers’ unions, shareholders, suppliers and dealers.

In the hypothetical event that the groups failed to meet these objectives, the consequences would be quite damaging for Obama’s government. There is also the fact that many workers elected the incoming president of the United States because of his promises to protect their jobs, and yet, with this aid, his first months will be marked by the unions having to give in on issues they had taken decades to win.

In short, General Motors and Chrysler have finally secured economic aid to undergo their transformation and thus demonstrate that they can become profitable again, but they will have to meet certain specific requirements, some of which will mean a setback for plant workers if they do not want to have to return the borrowed money, all surrounded by the numerous criticisms of those who would have preferred to punish the groups with bankruptcy for the bad decisions they made in the past.

Via | The New York Times