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Motor Authority - blog Tag: bailout

  • Ford: Government loans to Chrysler, GM saved the industry

    Ford: Government loans to Chrysler, GM saved the industry June 15th, 2009 ByAlex Kaufmann Alex Kaufmann, Author, June 15th, 2009 Alex Kaufmann 1 Comment

    Ford: Government loans to Chrysler, GM saved the industry It's easy to look at the bailouts and bankruptcies of General Motors and Chrysler as a big-government bonanza. Some even see tints of socialism in the loans and subsequent government ownership stakes. But as Ford points out today, there was more at stake than just two companies.

    The entire industry, and in some ways, the entire U.S. economy, was riding on the survival of GM and Chrysler, says Ford Motor Co executive chairman Bill Ford, Jr. "It would have been so catastrophic to have a supply-base meltdown because it would have brought down all the auto manufacturers and frankly some other industries as well," Ford told CNBC TV according to... It's easy to look at the bailouts and bankruptcies of General Motors and Chrysler as a big-government bonanza. Some even see tints of socialism in the loans and subsequent government ownership stakes. But as Ford points out today, there was more at stake than just two companies. The entire industry, and in some ways, the entire U.S. economy, was riding on the survival of GM and Chrysler, says Ford Motor Co executive chairman Bill Ford, Jr. "It would have been so catastrophic to have a supply-base meltdown because it would have brought down all the auto manufacturers and frankly some other industries as well," Ford told CNBC TV according to an Automotive News report. A cascading chain of bankruptcies was one of the primary fears of an unassisted GM or Chrysler bankruptcy. Because so many companies rely on GM and Chrysler to purchase their parts, and because there's no easy replacement outlet for those parts, there's no way for the supplier base to survive without them. Ford cautions that the fix remains in a state of flux, however, and that further action, including direct supplier support, should be taken. Read More

  • Volvo may receive lifeline from Belgian government

    Volvo may receive lifeline from Belgian government May 27th, 2009 ByJeremy Weber Jeremy Weber, Author, May 27th, 2009 Jeremy Weber 0 Comments

    Volvo may receive lifeline from Belgian government Despite Volvo being a Swedish company, the trouble-stricken carmaker may have to look to the Belgian government for financial aid to help keep it on its feet. Volvo currently operates a plant in the Flanders region of Belgium, and the Flemish Premier Kris Peeters has been in talks with Volvo CEO Stephen Odell in regards to securing loan guarantees for the carmaker to the tune of €300 million ($418 million).

    Belgian media outlets are reporting that Volvo and the Flemish Premier are hoping to work out a deal by June 7, just days before the region’s elections. Should the loan guarantees go ahead, there will be restrictions on where... Despite Volvo being a Swedish company, the trouble-stricken carmaker may have to look to the Belgian government for financial aid to help keep it on its feet. Volvo currently operates a plant in the Flanders region of Belgium, and the Flemish Premier Kris Peeters has been in talks with Volvo CEO Stephen Odell in regards to securing loan guarantees for the carmaker to the tune of €300 million ($418 million). Belgian media outlets are reporting that Volvo and the Flemish Premier are hoping to work out a deal by June 7, just days before the region’s elections. Should the loan guarantees go ahead, there will be restrictions on where the cash can be used, with the Flemish government stating to Automotive News that the guarantees would not apply for any "factories anywhere other than in Flanders." Securing a future for its auto workers appears to be the Flemish government's top priority at this point, and in this vein it will be examining a business plan from Volvo, as well as wanting to figure out a deal that takes into account a possible sale of Volvo. Peeters stated that he would require "firm commitments" and assurances about "Volvo's long-term future" before he could agree to any loans. Talks with the Swedish government are failing to progress following a strategic review from Ford that left Volvo in an uncertain position. The European Investment Bank has already given the ailing company a loan of €200 million ($279 million), but it requires significantly more funding to help it stay in shape. As for the likely sale of Volvo, there are reportedly five bidders interested in the company and a decision on a final buyer may be announced as early as next month. Read More

  • GM receives additional $4 billion in Treasury loans

    GM receives additional $4 billion in Treasury loans May 23rd, 2009 ByRalph Hanson Ralph Hanson, Author, May 23rd, 2009 Ralph Hanson 1 Comment

    GM receives additional $4 billion in Treasury loans General Motors received an additional $4 billion in loans from the U.S. Treasury late on Friday, while also reaching a cost-cutting agreement with the Canadian Auto Workers union ahead of a rumored Chapter 11 bankruptcy filing expected next week.

    This is in addition to the $19.4 billion already loaned to GM by the government since the start of the year, yet the struggling carmaker predicts the total amount loaned to increased to $27 billion after the June 1 restructuring deadline.

    On top of that, GM has also reached tentative agreements with unions in Canada and the U.S., which will see hourly wage rates reduced and retiree healthcare... General Motors received an additional $4 billion in loans from the U.S. Treasury late on Friday, while also reaching a cost-cutting agreement with the Canadian Auto Workers union ahead of a rumored Chapter 11 bankruptcy filing expected next week. This is in addition to the $19.4 billion already loaned to GM by the government since the start of the year, yet the struggling carmaker predicts the total amount loaned to increased to $27 billion after the June 1 restructuring deadline. On top of that, GM has also reached tentative agreements with unions in Canada and the U.S., which will see hourly wage rates reduced and retiree healthcare trust funds paid with stock rather than cash. Despite the billions in loans and union concessions, GM is still expected to enter bankruptcy. One major sticking point, however, is the money owed to bondholders. According to Automotive News, GM said it will be forced into bankruptcy if it fails to get bondholders to agree to forgive some $24 billion in debts - roughly 90% of the money they are owed. President Obama’s administration had offered bondholders a 10% stake in a restructured GM but this was rejected. A spokesman for a committee representing GM bondholders said institutional investors solidly oppose that offer as insufficient. Read More

  • Jaguar and Land Rover bailout talks close to breakdown

    Jaguar and Land Rover bailout talks close to breakdown May 7th, 2009 ByKenneth Hall Kenneth Hall, Author, May 7th, 2009 Kenneth Hall 4 Comments

    Jaguar and Land Rover bailout talks close to breakdown Although most of the news of late tends to focus on GM and Chrysler, these Detroit-based carmakers are not the only companies trying to gain vital government support in order to stay propped up in the current economic climate. While there's no doubt the global financial crisis has affected the U.S. more than it has Europe, Britain’s Jaguar and Land Rover are also seeking government loans to help them remain viable.

    However, unlike their U.S. counterparts, the talks between Jaguar and Land Rover and the British government are winding down, with no bailout deal in sight yet. Although the loans are fairly small compared to those dished... Although most of the news of late tends to focus on GM and Chrysler, these Detroit-based carmakers are not the only companies trying to gain vital government support in order to stay propped up in the current economic climate. While there's no doubt the global financial crisis has affected the U.S. more than it has Europe, Britain’s Jaguar and Land Rover are also seeking government loans to help them remain viable. However, unlike their U.S. counterparts, the talks between Jaguar and Land Rover and the British government are winding down, with no bailout deal in sight yet. Although the loans are fairly small compared to those dished out to Detroit, at the end of the day Jaguar and Land Rover was still hoping to win a hefty $265 million. While the British government was willing to part with the money to help Jaguar and Land Rover maintain their British operations, the companies’ Indian owner Tata stated that the government's demands were too onerous to consider taking the loan, reports the Associated Press. Reportedly, these demands included giving the British government first choice in who would be the company's chairman, as well as other rights that may interfere with how Tata wishes to run the company. In justifying their demands, the British government stated that it was willing to help Jaguar and Land Rover, but that certain terms had to be adhered to in order to protect taxpayers' money. It’s now expected that Tata will turn down this deal and possibly seek financial support elsewhere. Incidentally, Jaguar and Land Rover have already received assistance from the British government. The companies have already received significant help with its hybrid and electric technology research from Britain's Technology Strategy Board. No solid projects have emerged from that funding, though the companies are working on both diesel-hybrid technology that is thought to be aimed primarily at Land Rover’s lineup, and a luxury sedan implementation for Jaguar. Read More

  • Bondholders consider increased debt-for-equity-swap as GM bankruptcy looms

    Bondholders consider increased debt-for-equity-swap as GM bankruptcy looms April 15th, 2009 ByRalph Hanson Ralph Hanson, Author, April 15th, 2009 Ralph Hanson 3 Comments

    Bondholders consider increased debt-for-equity-swap as GM bankruptcy looms GM's decline over the course of this year wasn't enough to convince bondholders and the UAW to grant any concessions, but recent reports that the carmaker was in precautionary preparations for filing a Chapter 11 may have galvanized action on the part of the bondholders.

    Allowing GM to go to bankruptcy court would leave bondholders in the dark as to the company's future outcome. Furthermore, the previous reluctance to engage GM's demands from bondholders may be starting to wane as bankruptcy becomes the most probable outcome of GM's future. In fact, one bondholder with a large stake in the company is even reviewing which bankruptcy courts... GM's decline over the course of this year wasn't enough to convince bondholders and the UAW to grant any concessions, but recent reports that the carmaker was in precautionary preparations for filing a Chapter 11 may have galvanized action on the part of the bondholders. Allowing GM to go to bankruptcy court would leave bondholders in the dark as to the company's future outcome. Furthermore, the previous reluctance to engage GM's demands from bondholders may be starting to wane as bankruptcy becomes the most probable outcome of GM's future. In fact, one bondholder with a large stake in the company is even reviewing which bankruptcy courts would be most likely to benefit bondholders, ruling out Michigan courts due to their proximity to the issue and the potential for emotional flare-ups from the public, reports Automotive News. At the same time, the U.S. government is seeking other avenues to avoid such a situation, including the possibility of swapping over $13 billion in GM debt for additional equity in the company. This would help improve GM's balance sheet, but the company still has almost $50 billion in debt held by its bondholders and the UAW alone. If bondholders refuse to budge, then GM's ability to meet the Presidential task force's June 1 deadline will be severely restricted, but GM's current demands from bondholders may be too onerous for them to accept. Should a bankruptcy filing go ahead, it remains uncertain as to what position bondholders and the UAW would take. Currently, experts are predicting that if GM were to enter bankruptcy court and be split into a profitable half and an unprofitable half via an asset sale, then the company may have a chance of re-emerging - scathed, but still alive - as a viable carmaker. Read More

  • Suppliers only allocated $3.5 billion in aid, not $5 billion

    Suppliers only allocated $3.5 billion in aid, not $5 billion April 7th, 2009 ByJames Martinez James Martinez, Author, April 7th, 2009 James Martinez 0 Comments

    Suppliers only allocated $3.5 billion in aid, not $5 billion In the first major sign that the U.S. government was keen on helping out the entire domestic auto industry and not just the Detroit 3 carmakers, the U.S. Treasury approved a $5 billion aid package last month for automotive parts suppliers. The aid is to come in the form of guarantees for receivables, or money owed to suppliers for parts already delivered, however, suppliers will only be able to access $3.5 billion because Ford won't take its allocation of the funds.

    Ford revealed last month that it had enough cash for suppliers and thus had no reason to participate in the latest bailout. General Motors, on the other hand, will have to pay... In the first major sign that the U.S. government was keen on helping out the entire domestic auto industry and not just the Detroit 3 carmakers, the U.S. Treasury approved a $5 billion aid package last month for automotive parts suppliers. The aid is to come in the form of guarantees for receivables, or money owed to suppliers for parts already delivered, however, suppliers will only be able to access $3.5 billion because Ford won't take its allocation of the funds. Ford revealed last month that it had enough cash for suppliers and thus had no reason to participate in the latest bailout. General Motors, on the other hand, will have to pay $100 million into the supplier bailout program so its suppliers can access its share of the federal funds, amounting to $2 billion, Automotive News reports. Supplier firms are doing it just as tough as the Detroit 3, especially with all the production cutbacks and shrunken margins brought about by years of cost reductions. North American vehicle production fell 55% for the year ending March 7th, and with more production cuts almost certain to come this year this latest announcement should offer some comfort. To access the aid, supplier firms will have to sell their receivables to the government for a small fee as part of a practice known as factoring. Unfortunately, the $3.5 billion amount is somewhat short of the $18.5 billion requested by a contingent of supplier firms late last year. Read More

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