If you haven’t been keeping tabs on the government related news over the past several months, a lot has been going on. And there have been a lot of zero’s attached, all of which are coming out of the pockets of consumers. Chrysler and General Motors (GM) have asked the government for billions in bailout money.
What they Want
It is hard for most of us to fathom the amount of money that the two automakers are seeking and why they need so much. After all, there millions of cars sold each year. So how did these manufactures get into this mess?
The two have been selling vehicles, even with many of them being priced higher than foreign ones. While they have lost some of the market share over the last few decades, it is their business practices and debt which have gotten them into financial trouble.
In March, President Barack Obama rejected both of their proposed business plans and asked for a new one to be delivered within 30 days. Some have likened what is going on between the President and the automakers as a game of chicken and they are waiting to see which one blinks first. The Treasury is suggesting they prepare for Chapter 11 bankruptcy, while many do not believe the President will allow something like that to happen to the American auto industry.
What is at Stake
For GM, there’s about $28 billion in debt, thousands of jobs and the ability to continue providing healthcare to its retirees at stake. While all the final numbers are ironed out, the Treasury Department is already providing GM with working capital for a 60-day period. It is reported that Chrysler Corporation was seeking $5 billion in loans and was recently issued $1.5 billion. Since the start of the year the pair has already received over $17 billion.
In addition to the bailout funds, they are also seeking loans in an effort to create more fuel efficient vehicles. In fact, GM will be receiving $25 billion in May for Energy Department loans, while Chrysler’s is asking for $8 billion in such loans to develop electric vehicles.
In the End
At this point, all we know for sure is that two of the world’s largest automakers are struggling and about to sink. The world will continue to watch to see what happens and what the American auto industry scene will look like when all the dust settles.
In the meantime, Ford is being applauded by many for their strong Mustang mentality and work ethic. The automaker has chosen to not participate in seeking any bailout money. And because of this, the $5 billion in loans they are asking to develop fuel efficient vehicles will likely not be held up.
