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December 19, 2008

GM, Chrysler Struggling to Survive

The Bush administration finally made an announcement today over a short term rescue plan for GM and Chrysler who it has been agreed to get financing until March. Treasury Secretary Paulson said that even if bankruptcy is the outcome then it’s important that it’s orderly.

“There’s an orderly way to do bankruptcies that provides for more of a soft landing,” Ms. Perino, a spokeswoman for President Bush, “I think that’s what we would be talking about. That would be one of the options.”

In February last year, General Motors reported a fourth quarter’s loss of $722 millions which signalled the threat of bankruptcy. Five months later, analysts warned investors that the crisis is going to be deep and will certainly hit the automakers. The worst scenario was being materialised and General Motors was slowly but steadily running out of cash.

Ford Motor Co, the second biggest auto manufacturer in the US, has declared that it has the capacity to continue operating without any financial aid for the time being.

The TARP (Troubled Asset Rerlief Program) funds was GM and Chrysler’s only hope. The real threat to the economy is the loss of million of jobs. The bailout has finally been approved, after it’s been rejected last week, and a total of $13.4 billion in government loans is set to keep the giant automakers alive for another three months. By the end of March, the companies will need to demonstrate financial viability or the loans will be called.

Don’t expect though a happy merry Xmas for everyone. GM and Chrysler could still end up in bankruptcy…. we’ll all know more after the scrutinisation of the automakers’ books and numbers.

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