Feds Giving GM $2B More in Loans - NBC New York

Feds Giving GM $2B More in Loans



    Feds Giving GM $2B More in Loans
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    GM already has received $13.4 billion in government loans, while Chrysler has received $4 billion.

    General Motors is getting another $2 billion in federal loans, while Chrysler is trying to work out a deal to keep it out of bankruptcy courts.

    The Treasury Department says it has provided General Motors Corp. (GM) (GM) with more money in federal loans as the giant automaker struggles to restructure. The Treasury said that the payment was made to GM on Wednesday and provides working capital to the company.

    Meanwhile, with a government-imposed deadline for massive restructuring less than a week away, Chrysler LLC and Treasury Department officials are still holding out hope that they can reach deals to keep the troubled automaker out of bankruptcy courts, two people briefed on the talks said Friday.

    The wounded automaker already is living on $4 billion in government loans and could get another $500 million in temporary financing. Chrysler must take on Fiat Group SpA as a partner, cut debt and reduce labor costs by Thursday if it wants an additional $6 billion.

    A government report revealed earlier this week that the Treasury was prepared to provide GM with up to $5 billion more in federal loans and Chrysler with up to $500 million more in bailout support as they race against deadlines to restructure.

    GM has until June 1 to complete restructuring plans that satisfy the government's auto task force, while Chrysler has until April 30.

    Absent completed deals, the Obama administration has said it won't lend any more money, and without more cash, Chrysler almost certainly would be auctioned off in pieces under court supervision.

    As talks continue, Chrysler and the Treasury Department are preparing paperwork for bankruptcy filings, one as a reorganization in Chapter 11 with government funding and the other as a liquidation if no government money is available, both people said.

    Both spoke on condition of anonymity because the fast-moving negotiations are private.

    The Canadian Auto Workers union said Friday it is close to a cost-cutting deal with Chrysler, and one of the people said the company also is nearing an agreement with the United Auto Workers in the U.S.

    Under that deal, the union would take equity in the company for part of the $10.1 billion Chrysler must pay into a union-run trust that will take over retiree health care costs starting next year. Due to the size of the investment, the UAW could become the automaker's biggest shareholder.

    Talks with Fiat to take a 20 percent stake in Chrysler in exchange for its small-car technology have gone well, but any alliance is contingent on the other deals, one of the people said Friday.

    The only area in which Chrysler is far from reaching agreement is with banks and hedge funds that hold $6.9 billion in Chrysler debt. On Friday, a steering committee comprising the lenders delivered a new counteroffer to the Treasury Department, according to two people familiar with the matter who declined to be named because the negotiations are private. The terms of the latest offer were not immediately available.

    Chrysler's creditors are negotiating with the Treasury over a possible debt-for-equity exchange involving a stake in a Chrysler-Fiat alliance. Most recently, the Treasury had asked the debtholders to forgive $5.4 billion and take a 5 percent stake in the alliance, while the lenders had been seeking nearly a 40 percent stake to forgive just $2.5 billion.

    Members of the Obama administration's auto task force, which is watching over the negotiations, have told lawmakers that one stakeholder won't be allowed to scuttle the Chrysler deal, but the task force also will not extend the Thursday deadline, said one of the people briefed on the matter.

    On Capitol Hill, lawmakers still held out hope for avoiding bankruptcy but conceded it was becoming more likely.

    "My hope is that it's not a liquidation," Sen. Chris Dodd, chairman of the Banking Committee, said Friday morning on the "Early Show" on CBS, "but what they call a debtor-in-possession, sort of Chapter 11 filing, which would allow for the reorganization of these companies."

    One possibility is that a bankruptcy would allow the company to rid itself of unwanted liabilities. That would allow Fiat to pick the operations it wants to retain, according to bankruptcy experts.

    "As we move forward in this process, we believe it's important to keep all options open," Chrysler said in a statement. "Chrysler will continue to work through the end of the month, based on the direction given by the Presidential Auto Task Force, to secure the support of the necessary stakeholders and reach a successful conclusion that the Administration and U.S. Treasury deems appropriate."

    Messages seeking comment were left with the UAW and the Treasury Department.

    Sen. Debbie Stabenow, D-Mich., said late Thursday she continued to oppose bankruptcy for Chrysler.

    "With Chrysler, we want to see Chrysler/Fiat come together. We want to see GM be able to make it on their own," Stabenow said on "The Ed Show" on MSNBC.

    She added that banks that have received government aid should "be willing to stand up."

    "I wrote another letter today to them, saying they need to step up and do their part to make sure these companies can be strong," she said.