President Bush just announced emergency loans to GM and Chrysler. More details on the $17.4 billion in emergency loans from the Treasury's TARP program below along with a video of Bush's conference.
DJ reports the White House will give struggling U.S. auto makers $17.4 billion in emergency loans from the Treasury Department's Troubled Asset Relief Program, senior administration officials said. The funds will be distributed in two stages, the first totaling $13.4 billion. A second $4 billion tranche will be available in February, contingent on the release of the second half of the $700 billion TARP. An official said he expected General Motors (GM) and Chrysler to take advantage of the loans later Friday. Ford Motor (F) has said it doesn't need the emergency cash for now. Under the White House plan, the loans will be called on March 31 if the companies have not proven that they are viable. The terms and conditions of the deal mirror those in the bill that passed the House of Representatives last week.
GM's press release:
GM Statement on Administration Providing Bridge Loan to Domestic Auto Industry
We appreciate the President extending a financial bridge at this most critical time for the U.S. auto industry and our nation's economy. This action helps to preserve many jobs, and supports the continued operation of GM and the many suppliers, dealers and small businesses across the country that depend on us.
This will allow us to accelerate the completion of our aggressive restructuring plan for long-term, sustainable success. It will lead to a leaner, stronger General Motors, a GM that is:
*dedicated to great products, exciting design, and world-class quality
*fully committed to leading in energy-saving vehicles and technologies,
*responsive to the needs of our customers, our stakeholders and the communities we live in and serve.
We know we have much work in front of us to accomplish our plan. It is our intention to continue to be transparent as we execute our plan, and we will provide regular updates on our progress. We again thank the Administration for this important support of our industry at this challenging time, and we look forward to proving what American ingenuity can achieve.
Ford's press release:
FORD MOTOR COMPANY WELCOMES ACTION TO PROVIDE EMERGENCY FUNDING TO GM AND CHRYSLER
DEARBORN, Mich., Dec. 19, 2008 – Ford Motor Company said today that it welcomes action by the Administration to provide emergency funding for General Motors Corp. and Chrysler LLC.
“As we told Congress, Ford is in a different position. We do not face a near-term liquidity issue, and we are not seeking short-term financial assistance from the government,” Ford President and CEO Alan Mulally said. “But all of us at Ford appreciate the prudent step the Administration has taken to address the near-term liquidity issues of GM and Chrysler. The U.S. auto industry is highly interdependent, and a failure of one of our competitors would have a ripple effect that could jeopardize millions of jobs and further damage the already weakened U.S. economy.”
Ford recently submitted to Congress its comprehensive business plan, which details the company’s plan to return to pre-tax Automotive profitability by 2011. In the plan, Ford said the transformation of its North American automotive business will continue to accelerate through aggressive restructuring actions and the introduction of more high-quality, safe and fuel-efficient vehicles – including a broader range of hybrid-electric vehicles and the introduction of advanced plug-in hybrids and full electric vehicles.
“Ford has a comprehensive transformation plan that will ensure our future viability – as evidenced by our profitability in the first quarter of 2008,” Mulally said. “While we clearly still have much more work to do, I am more convinced than ever that we have the right plan that will create a viable Ford going forward and position us for profitable growth.”
Ford is asking for access to a line of credit of up to $9 billion in bridge financing, but reiterated that it hopes to complete its transformation without accessing a government loan.
“For Ford, a line of credit would serve only as a critical backstop or safeguard against worsening conditions, as we drive transformational change in our company,” Mulally said.
Ford reiterated that it is continuing aggressive actions to reduce costs and improve Automotive gross cash to fund its product-led transformation plan, despite the continued weakness in the global automotive market and economic environment. Ford said it is more committed than ever to deliver more of the safe, affordable, high-quality, fuel-efficient vehicles that consumers want and value. The company’s plans include:
* Delivering best-in-class or among the best fuel economy with every new vehicle introduced.
* Investing approximately $14 billion in the U.S. on advanced technologies and products to improve fuel efficiency during the next seven years.
* Introducing industry-leading, fuel-saving EcoBoost engines on today’s vehicles for up to 20 percent better fuel economy and up to 15 percent fewer CO2 emissions versus larger-displacement engines.
* Bringing to market by 2012 a family of hybrids, plug-in hybrids and battery electric vehicles.
* Upgrading the Ford, Lincoln, Mercury lineup in North America almost completely by the end of 2010.
* Bringing six European small vehicles from global B-car and C-car platforms to be built in Ford’s North America plants.
* Retooling three North American truck plants to produce small, fuel efficient vehicles.
* Building on vehicle quality that is now on par with Honda and Toyota – and that consistently is being recognized by important third-parties like J.D. Power and Associates’ Initial Quality Study – driven by Ford’s disciplined and standardized processes for every product.
* Building on vehicle safety leadership – with the most U.S. government 5-star safety ratings of any auto company and recently moving past Honda for the industry’s most IIHS “Top Safety Picks” – plus new smart safety features, such as the industry-first MyKey technology that limits top speed and audio volume for teens and the first forward crash-avoidance system for mainstream vehicles.
* Supporting Ford’s products with a lean, flexible global manufacturing system on par with leading Japanese and European facilities.
Chrysler's press release:
An Open Letter From Bob Nardelli
To Chrysler employees and other stakeholders:
We have received news that U.S. Treasury Secretary Henry Paulson will provide $4 billion of initial funding to Chrysler LLC from the TARP (Troubled Assets Relief Program) as a loan to help bridge the current financial crisis. We appreciate the Administration’s confidence in Chrysler.
As outlined in our submission to Congress, we intend to be accountable for this loan, including meeting the specific requirements set forth by the government, and will continue to implement our plan for long-term viability. The receipt of this loan means Chrysler can continue to pursue its vision to build the fuel-efficient, high-quality cars and trucks people want to buy, will enjoy driving and will want to buy again.
For Chrysler to succeed in its mission to return to profitability, we need the continued support of our many business partners. Terms associated with the bridge loan include Chrysler’s commitment to work with key constituents – including our owners, lenders, suppliers, dealers, management and employees – to identify and achieve the cost-savings concessions we need to build a long-term viable enterprise. These concessions discussions will happen quickly, as a full governmental review and approval of our plan is expected by March 31, 2009.
We are meeting with our suppliers, mindful that they are going through a difficult period as well. But we must cooperatively find ways to further reduce our costs while maintaining normal operations. We will ask our suppliers to maintain their commitment to reasonable trade terms and normal fulfillment of orders for as long as the federal loan is outstanding. This will assure that neither Chrysler, nor our suppliers would suffer the substantial losses caused by the plant/production shutdowns that result from stop shipments or other disruptions.
We will seek continued dealer cooperation to improve our cash position and consolidate our U.S. network. Project Genesis is on the path to aligning our product portfolio with a smaller, healthier tri-branded dealer network based on the realities of our business environment. Because strong, healthy dealers are essential to our success, we are also working with our dealers to keep dealer inventories in line with the marketplace, focusing on how they can support their business despite the falloff in sales through sales of used vehicles, service and parts.
As a condition of the bridge loan, we have committed to work with our lenders to seek their participation in concessions as well.
Cerberus has already agreed to forgo any benefit from the upside that would, in part, be created from the bridge loan and any other government assistance that the Company may obtain.
All employees have and will continue to help support Chrysler’s recovery. We have also partnered with the UAW to find new opportunities to increase our competitiveness. The Company has already undertaken and will continue to undertake significant cost reduction actions related to salaried workers also.
The bridge loan allows us to meet cash needs, pay our suppliers, continue developing great products and move forward with the restructuring and streamlining of our organization that we began in 2007. This restructuring will reduce the number of personnel layers while increasing managers’ span of control, enabling us to reduce costs, make faster decisions and do our jobs effectively with fewer resources.
In our drive to profitability, we will not slow down on plans to provide the cars and trucks that people in markets around the world want to buy. We have 24 major launches in our plan from 2009 through 2012, with a key feature of this future product strategy being our capability as an electric vehicle company. Building on our status as the largest producer of electric-drive vehicles in the United States today with our GEM unit, we are focusing on electric as our primary clean-vehicle technology. Combined with our new products from our ENVI group, we expect that 500,000 Chrysler electric-drive vehicles will be on the road by 2013.
It is essential that we continue to promote our lineup of current and future products so that our customers understand the profound changes taking place at Chrysler. With that in mind, we will be revealing several important new products at the upcoming North American International Auto Show. We also sought the support of our local Detroit area dealers for the auto show, and I want to express my appreciation to all those that have provided assistance to help fund our exhibit.
While promoting our products, we will also appropriately scale back some of our presence at the auto show because of current business conditions. We have conserved costs in our press event with vehicle reveals that are product-focused and straightforward, and a simplified product display.
As we draw to the end of this very eventful and difficult year, I want to extend my thanks to all who contributed to Chrysler this year, including our many colleagues who have moved on. Against the difficult conditions of a global recession, you have once again shown the resilience that is the hallmark of Chrysler people. In recent weeks, I have received hundreds of letters of support from those in the extended Chrysler family, confirming that there is great enthusiasm to restore our company to success.
With the holidays upon us, I hope you can take time to enjoy the warmth and companionship of good friends and family. Please have a safe and joyous holiday season, and let’s all return in 2009 with a renewed commitment to making Chrysler the great company we all want it to be.