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From Yahoo! News:

http://news.yahoo.com/s/nm/20081028/bs_nm/us_chrysler_gm_6

GM, Chrysler request $10 billion in aid: sources

By Jui Chakravorty Das and Kevin Krolicki

NEW YORK/DETROIT (Reuters) – General Motors Corp and Cerberus Capital Management have asked the U.S. government for roughly $10 billion in an unprecedented rescue package to support a merger between GM and Chrysler LLC, two sources with direct knowledge of the talks said on Monday.

The government funding would include roughly $3 billion in exchange for preferred stock in the merged automaker, according to one of the sources, who was not authorized to discuss the matter publicly.

The U.S. Treasury Department is considering a request for direct aid to facilitate the merger and a decision could come this week, sources familiar with the still-developing government response said earlier on Monday.

An injection of $3 billion in equity to support a GM acquisition of Chrysler would be roughly equivalent to the current, depressed value of the top U.S. automaker.

It would also give U.S. taxpayers a large stake in the turnaround of a struggling auto industry that employs over 350,000 American workers and is credited with supporting employment for another 4.5 million in related fields.

Analysts see GM, Chrysler and rival Ford Motor Co having been driven to the brink of failure by a combination of management missteps, slowing global growth and problems in credit markets.

In addition to its equity stake, the U.S. government is also being asked to provide support for the GM-Chrysler merger by taking over some $3 billion in pension obligations under the terms of a proposal now before the government for review, the first source said.

The final component of the proposed support package would be a credit line that could include U.S. government purchases of commercial paper issued by GM to relieve short-term pressure on liquidity, the person said.

A combined GM-Chrysler would control roughly a third of the U.S. auto market by sales and would face immediate pressure to cut costs stemming from excess capacity in almost every facet of its business. Those would include a stable of 11 brands, roughly 10,000 dealers and some 97,000 union-represented factory workers, analysts have said.

But one of the conditions of the merger would be that GM-Chrysler would spare as many jobs as possible in order to win broad political support for the government funding needed to complete the deal, people familiar with the merger discussions said.

GM could not be immediately reached for comment. Cerberus and Chrysler had no comment.

The roughly $10 billion to support the GM merger with Chrysler would be in addition to whatever funds would be allocated to the automaker under an already approved $25 billion program to provide low-interest loans to the industry for retooling to make more fuel-efficient cars.

(Additional reporting by David Bailey)
 

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Why is this a good idea when GM can't manage the brands it has now? Plus, as an added bonus, we get to pay for it?

Wonderful. U.S. = U.S.S.R
 

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Why is this a good idea when GM can't manage the brands it has now? Plus, as an added bonus, we get to pay for it?

Wonderful. U.S. = U.S.S.R
Yay. We buy the banks and now we buy our automakers as well? Lets buy the oil refineries and socialize medicine while we're at it.

So we pay $3 Billion in pensions for the people that would perish from this deal and people who have already been cut/left?

Icarumba. I hope we get a good return for our investment and when the economy rebounds in 5-10 years, I'm sure we will be looking pretty, but I think the point being made about GM's incompetency to manage the brands they have now, let alone Chrysler's, is the sole point of contention for me as well. This seems silly, but what can we do? GM needs to cut the fat and not add more useless weight. As far as I see it, the only components of Chrysler that are viable are Jeep, the 300, Minivan Division, and Truck Division. Everything else is basically garbage. In that scheme we could more easily integrate Chrysler into GM.

*Chevrolet and Saturn each get a minivan.
*Jeep replaces Hummer
*GMC Dies, Dodge makes Trucks (no cars)
*Buick Receives a 300 Model
*Pontiac Receives a Charger redux (if they want it)
*Saab is sold
*Cadillac remains unchanged

Chevy, P-S-B, Dodge-Jeep, Cadillac

That's manageable. I think it would be very easy to retool Chrysler dealerships this way as well. People think we should dump Saturn, but I personally like Saturn. I like the market segment and I think the relative success of the Vue has shown me that people will buy into the brand through improvements in generational products (Vue #1 to Vue #2) and its appeal to the import segment should be further developed. Pontiac is another story....

I think going forward GM should decide what it wants to do with Pontiac by either investing money into the brand, making it AWD (ala Subaru) and creating affordable performance. If it does not have the money to invest in Saturn and Pontiac equally I think GM needs to consider redeploying Pontiac through Dodge products. Pontiac is such an iconic brand that I'd hate to see it perish, but if they don't want to invest the dollars into the brand and continue their failed strategy of rebadging Chevys, then they should just cut the brand entirely.

I honestly believe an AWD Pontiac would be the kick the brand would need to take a step forward. A RWD Pontiac is a fanboy's fantasy and not very practical. An AWD Pontiac is far more practical.

But we shall see.
 

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Coming from the guy owning two imports...
And that has to do with what? I don't blindly buy one brand, I choose the vehicle that works the best for my family.

I'm frickin sick of the Gov't bailing out stupid corporations who can't manage themselves. Is this a capitalist society or are we a socialist one? Looks more socialist every day to me.
 

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*Chevrolet and Saturn each get a minivan.
*Jeep replaces Hummer
*GMC Dies, Dodge makes Trucks (no cars)
*Buick Receives a 300 Model
*Pontiac Receives a Charger redux (if they want it)
*Saab is sold
*Cadillac remains unchanged
I like your plan, but we have to be realistic... this is GM. It will be more like this:

*Chevrolet and Saturn and Buick and Pontiac and Chrysler and Dodge each get a minivan and theta crossover and lambda crossover and delta compact and epsilon midsize
*Jeep and Hummer both stay as-is, with Hummer getting a Wrangler with a different badge
*GMC stays, Dodge makes trucks (the same trucks as GMC and Chevrolet)
*Chrysler and Dodge stay
*Buick Receives a 300 Model, similar to the Chrysler version
*Pontiac Receives a Charger redux to replace the G8, slightly different nose than the Dodge
*Saab hangs around
*Cadillac remains unchanged
 

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$10B to save how many jobs in the auto sector (ensuring GM and Chrysler don't fold, head into Chapter 11) vs. the $700B and how many jobs that will save?

Personally, the entire economy is an utter wasteland. The $10B has a chance of saving jobs and resulting in a strong domestic auto industry. The $700B only cushions the banks, but maybe enough so they don't go totally stupid and shut down credit.

We truly live in interesting times.

I do somewhat doubt that the US will suddenly become the USSA (United Socialist States of America) due to this. Look through history at all the bailouts, etc. the feds have done. If the US should become the USSA simply because of corporate bailouts it would have done so a long time ago.

My biggest surprise is that all they need is $10B for this deal.
 

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:Club:

For the record, GM was offered private financing... with a 20% coupon ;)
If I remember correctly, that's 20% a year! Woah.
 

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If I remember correctly, that's 20% a year! Woah.
Well, yes. It would probably have been a bond issue... 20% coupon, paid out 10% semi-annually. Junky junk junk, but you'd get preferential treatment to holders of GM common.
 

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Why is this a good idea when GM can't manage the brands it has now? Plus, as an added bonus, we get to pay for it?

Wonderful. U.S. = U.S.S.R
Yes for all those who rail against the intervention of government in business and in our daily lives the US does appear to be more and more a country run by the FEDS. It's a horrifying thought for the fiscal conservatives.

But....there are three key issues to keep in mind...

  1. It's the companies themselves that are volunteering to be taken over. 'Please help us, we've scewed this up so badly that we can't run things anymore by ourselves.' This isn't like the FEDS came in like stormtroopers and just took over. This is more like a poor family came to the parish soup kitchen and asked for dinner and a warm bed for the kids.
  2. It's the Republicans that are in office who initiated this changeover in US business. It's they who are keying this conversion from go-it-alone capitalism to corporate-socialism. Remember in all future discussions when it was and who it was that began us down this slippery slope.
  3. Never again will anyone be able to say, the US Gov't never helps its own industries like the Japanese or Chinese or European do.
 

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Wow, who offered the financing ... Master Card?
No... at least a couple of banks offered market-rate financing.

GM's credit rating is DEEP in junk... therefore, any additional debt they take on will be saddled with ABSURD interest rates.

Ford negotiated their $23b mega-loan, and was able to get a discount off their crumby market rate before the credit crisis hit.
 

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WHY ARE WE KEEPING ANY LX CARS?!?!?!?!

Why do people think that the Charger should replace the G8? Why should ANY LX car replace ANY Zeta car!!! It shouldnt. LX is a heap of junk. Not flexible like Zeta, designed to hold Chrysler engines with Benz trannies, mega high belt line, etc etc. There are a million flaws for this car. We have a factory in Canada ready to build half a million Zeta cars at the drop of a hat, but was put on the back burner because of CAFE nonsense.

I suggest that ALL Chrysler platforms outside of minivan, Jeep, and some of Dodge's trucks should be scrapped and sold to China as they are that worthless.
Before all the Chrysler fanboys quote me, understand that NOTHING Chrysler currently makes isnt outclassed in lightyears by GM programs. I just wanted to make sure that we are clear on that. Either in chassis dynamics, inteiror quality or powertrain, nothing.

GM keeps the goodies and sells the excess capacity, but they have to sign a contract that they are part of GM if they want to produce and sell in the US. Time to pull the same stuff China is doing to us. Therefor we can control some aspect of thier sales and success in America.
GM folds Chrysler vehicles onto GM platforms. GM expands into China and Europe with Dodge and Chrysler. Chrysler and Dodge expand overseas, and GM profits big time.
 
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