You think you have it hard: U.S. automakers have 3 months to make good on bailout money
Under terms of a $17.4 billion bailout approved by President Bush on Friday, General Motors and Chrysler have three months to turn things around. If they don't, they have to repay the loans and face bankruptcy.
Does anyone really think that companies that are failing after years of bad business decisions will really get their act together by the end of March 2009? People have spent more time trying to stick to a diet.
The emergency loans start with $13.4 billion now and $4 billion more in February. The Obama administration will determine at the end of March if the automakers are meeting the conditions of the loans and will continue getting government aid, or if they must repay the loans and go bankrupt.
The loan conditions include sweeping reorganizations to show they can return to profitability. They must reduce debt by two-thirds, mostly through debt-for-equity swaps, and become competitive with foreign automakers by reaching an agreement with the United Automobile Workers union to cut wages and benefits. The automakers must also put limits on executive pay and get rid of their private corporate jets.
If they can't meet those loan terms, then the U.S. Treasury could call for immediate repayment, putting the government ahead of all other creditors.
I thought trimming my household budget was difficult. Cutting $13.4 billion in three months has to be one of the most difficult cost-cutting moves in history. With auto sales at their worst since the early 1980s and banks making it more difficult to get car loans, Chrysler and G.M. have their work cut out for them in trying to sell cars and lower costs.
Rick Wagoner, the chief executive of G.M., said at a news conference in Detroit, "We obviously have to deliver on our plan, but we'd like to get more focus back on what we think is a very competitive set of cars and trucks that are competitive in fuel economy and quality and in most cases have better designs," according to the New York Times.
Maybe somebody can start with the Pontiac Grand Am, a car my wife owned that gave us endless problems until we gave it away to a charity. We wanted a dependable car. What did we buy? A Mazda, made in Japan.
Aaron Crowe is an unemployed journalist in the San Francisco Bay Area. Read about his job hunt at www.talesofanunemployeddad.blogspot.com