General Motors (GM) and Chrysler LLC will receive $13.4 billion in initial government loans in exchange for implementing a restructuring plan, announced U.S. President George W. Bush on Friday.
Allowing the bankruptcy of the auto industry under current conditions would be irresponsible, Bush stated at the White House."These are not ordinary circumstances. In the midst of a financial crisis and recession, allowing the collapse of the auto industry is not a responsible course of action. There is a danger that bankruptcy under these conditions could lead to the liquidation of the auto industry," Bush said. The funds will be drawn from the bank bailout program, known as TARP, and manufacturers will receive an additional $4 billion from the fund in February out of a total of $17.4 billion in assistance, Bush’s administration announced. This will allow GM and Chrysler to remain operational until March.
Receiving assistance is a relief for GM, the largest American automaker, and Chrysler, the third largest, which announced they would run out of operational funds by the end of this month. The administration’s assistance came after last week’s rejection of the auto industry aid package in the Senate, and the bankruptcy of GM and Chrysler threatened job losses for millions of people. GM has recorded nearly $73 billion in losses since 2004, and this year its sales have fallen by 22 percent, while Chrysler’s sales have decreased by 28 percent, the highest among major automakers.
