According to an article in the Dallas Morning News, President Obama refused further long-term federal bailouts for General Motors and Chrysler, two automakers struggling to avoid bankruptcy. The Obama administration is demanding that the nearly bankrupt automakers win more concessions from unions and creditors before more taxpayer funded loans are granted.
The article said:
GM failed to make good on promises made in exchange for $13.4 billion in government loans. Chrysler, meanwhile, has survived on $4 billion in federal aid during this economic downturn and the worst decline in auto sales in 27 years. In progress reports filed with the government in February, GM asked for $16.6 billion more and Chrysler wanted $5 billion more.
GM owes roughly $28 billion to bondholders. Chrysler owes about $7 billion in first- and second-term debt, mainly to banks. GM owes about $20 billion to its retiree health care trust, while Chrysler owes $10.6 billion.
The President is granting General Motors 60 more days to produce a “reorganization plan” that is acceptable to the administration. And Chrysler is being given an additional 30 days to iron out a possible merger with an Italian automaker. These nearly bankrupt automakers have been given several opportunities to make good on their promises to become viable, are they really going to change that much within 30 or 60 more days? What exactly are we saving now by helping these automakers avoid bankruptcy? Already the auto industry has shed over 400,000 jobs during the past year. But with a bankruptcy it will be the workers who lose the most in the long-term as far as job losses and reduced wages. On the other hand, a well orchestrated bankruptcy may be just what these automakers need.