Last Auto News - Treasury Denies Helping GM with Merger
Last Auto News -
General Motors’ hopes of saving itself through a merger with rival Chrysler are beginning to fade, but calls for government intervention to help the three largest U.S. automakers are growing.
An unidentified “Bush administration official” told Reuters that “the U.S. Treasury Department is not negotiating with General Motors Corp and the owners of Chrysler LLC on a request to provide direct government aid to their proposed merger” this morning. The denial comes after reports yesterday that the Treasury and Energy departments were prepared to offer GM $5 million each to help complete the deal. Instead, the source said, “the administration is working to speed the distribution to automakers of $25 billion in factory retooling funds authorized by Congress last month.”
As the law currently stands, that money may not be available until sometime in 2009.
TheStreet.com speculates that the Treasury denial “puts any merger of the struggling automakers on hold until after the U.S. presidential election.” The move also “opens the door for Cerberus, Chrysler’s owner, to restart talks with the Nissan-Renault alliance,” which many analysts see as Chrysler’s fallback position if GM talks fail.
Many analysts believed government help with the merger was unlikely because, Business Week estimates, “GM’s acquisition of Chrysler would result in the loss of 30,000 to 40,000 jobs.” Government officials might not want to be seen as aiding that process. However, “allowing one or the other to go bankrupt could easily result in the loss of 100,000 to 200,000 jobs.” Instead, Bush administration officials may be working on a plan to speed release of the already approved $25 billion - perhaps, Business Week reports, even allowing automakers to use the funds “o offset billions the automakers have already spent…rather than restricting the loans to offset investments in 2008 and 2009.”
State governments have begun to call for some sort of aid. The AP reports, “The governors of six states have asked the treasury secretary and Federal Reserve chairman to take ‘immediate action’ to help the troubled domestic automakers.” In a letter to the officials, “The governors of Michigan, Delaware, Kentucky, New York, Ohio and South Dakota reminded Treasury Secretary Henry Paulson and Federal Reserve Chairman Ben Bernanke that the domestic automakers are “particularly challenged” in the down economy and warn that, ‘as a result, the financial well-being of other major industries and millions of American citizens are at risk.’”
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