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NEW YORK (CNNMoney.com) -- A merger between U.S. automakers General Motors Corp. and Chrysler is likely on hold until after next week's presidential election, as the U.S. Treasury Department said it will not provide the automakers with aid, the Detroit Free Press reported Friday.

GM had asked the Bush administration and Congress for a loan of about $10 billion to help keep the struggling company operational. It said that it could possibly use the aid to fund a merger between it and Chrylser, which is owned by Cerberus Capital Management.

Many experts have said both companies would need to merge to stop their recent bleeding. GM (GM, Fortune 500) has only about $21 billion in cash and Chrysler has $11 billion, although most of that was borrowed.

More at link:
http://money.cnn.com/2008/10/31/news/companies/gm_chrysler/?postversion=2008103107
 

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If the loan guarantees don't go through, then the merger/swap is Checkmate! That means BOTH companies are Bankrupt within a few months. Also that hundreds of thousands will be unemployed. Do you now see why the Tax fights in the Presidential Elections are "smoke and mirrors." If you are not working, you don'tr have to worry about taxes, Period!
 

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Many experts have said both companies would need to merge to stop their recent bleeding. GM (GM, Fortune 500) has only about $21 billion in cash and Chrysler has $11 billion, although most of that was borrowed.

if most of that $11,000,000,000 in Chrysler is borrowed money, and GM wants to acquire Chrysler, don't they also acquire the debt? this is money that needs to be paid back, isn't it? On top of the billions they're asking for from the treasury. why does GM want to take on that much more debt?
so many questions.
 

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Many experts have said both companies would need to merge to stop their recent bleeding. GM (GM, Fortune 500) has only about $21 billion in cash and Chrysler has $11 billion, although most of that was borrowed.

if most of that $11,000,000,000 in Chrysler is borrowed money, and GM wants to acquire Chrysler, don't they also acquire the debt? this is money that needs to be paid back, isn't it? On top of the billions they're asking for from the treasury. why does GM want to take on that much more debt?
so many questions.
They were expecting a bailout of both themselves and Chrysler, with the combined cash, and perhaps a repayment moratorium, they would have a running chance to make it. Businesses continue on a different economy than people do, there were so many other ways to function, before the Credit Crash!

:drive:
 

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They were expecting a bailout of both themselves and Chrysler, with the combined cash, and perhaps a repayment moratorium, they would have a running chance to make it. Businesses continue on a different economy than people do, there were so many other ways to function, before the Credit Crash!

:drive:

I've been reading more about that kind of thing. Apparently a lot of businesses constantly borrow for daily expenses, even things like payroll. I've heard it called "leveraging". For example, some of the bigger investment banks would leverage their portfolios, so for each $1 they had in actual cash, they could and would borrow up to $30.
I'm not a very bright person, so my question is if businesses are constantly borrowing, and they have say 2-3 losing quarters, or years whatever the case may be, doesn't that deem them as unfit to conduct business? If you or I were to go to a bank and our credit history is deemed high risk, or bad...we couldn't get a loan, why then should companies?
 

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I've been reading more about that kind of thing. Apparently a lot of businesses constantly borrow for daily expenses, even things like payroll. I've heard it called "leveraging". For example, some of the bigger investment banks would leverage their portfolios, so for each $1 they had in actual cash, they could and would borrow up to $30.
I'm not a very bright person, so my question is if businesses are constantly borrowing, and they have say 2-3 losing quarters, or years whatever the case may be, doesn't that deem them as unfit to conduct business? If you or I were to go to a bank and our credit history is deemed high risk, or bad...we couldn't get a loan, why then should companies?
Yes it does! But since this has been a long-standing practice, business schools have taught many of their graduates along these lines. Today there is a new reality and that's why there is a big move in this country for new thinking. Politically, and business wise, it will not be business as usual--those that think so will fail miserably. The last 3-4 weeks we have witnessed a massive paradigm shift, and a lot of people have been caught with their pants down:eek:. In the coming months look for Federal prosecutions of some big names, the prisons will become Country Clubs for a number of Wall Street types.

:drive:
 

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I've been reading more about that kind of thing. Apparently a lot of businesses constantly borrow for daily expenses, even things like payroll. I've heard it called "leveraging". For example, some of the bigger investment banks would leverage their portfolios, so for each $1 they had in actual cash, they could and would borrow up to $30.
I'm not a very bright person, so my question is if businesses are constantly borrowing, and they have say 2-3 losing quarters, or years whatever the case may be, doesn't that deem them as unfit to conduct business? If you or I were to go to a bank and our credit history is deemed high risk, or bad...we couldn't get a loan, why then should companies?
Borrowing for daily expenses is done through an instrument known as commercial paper. It's onerous for financial managers to ensure that a company has cash on hand to pay for certain expenses. With any business, an ENORMOUS quantity of cash changes hands on a daily basis, and with certain expenditures, such as payroll, a business might not have enough cash on hand to pay it all out at once. So, a company like GE would go to JPM Chase, and take out $10,000,000 in commercial paper, which is an extremely short term note/loan, which they will pay back within a few days when their cash comes in. With AAA rates businesses, it's a near 100% guarantee they will not default on their obligation, so they can borrow at prime, and often, below prime.

GM certainly does qualify for a loan... at 20%+, due to their poor credit rating.

However, the government would incur ENORMOUS expenditures if GM and Chrysler fold, so it's cheaper for them to offer low-interest loans, than to let them fail and put the government on the hook for the fallout.

What worse... losing $50M in interest lost due to lending at lower than market rate, or losing $500B in lost tax revenue due to the company collapsing?
 

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There's nothing wrong with leveraging, IF you do your due diligence on your levered investments AND ensure you've backed up your leverage with quality assets.

Some banks failed in this regard.
 

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I don't see how a merger of two failing companies will result in one larger successful company. Deep rooted problems in both and sharing resources won't bring them out of the red in.
 

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I don't see this as a merger but as a gov't assisted acquisition. The only way GM can be stronger post a Chrysler acquisition is if it sells assets it doesn't need, closes others, and lays off staff that are redundant. Of course, that means saving Jeep and the minivans. The cars aren't that useful, except for the Challenger and 300, and GM doesn't need the trucks but could do with additional sales.

I don't think the US gov't will allow GM and Chrysler to both fail. It would make the Wall Street mess look like nothing as the long term implications of GM and Chrysler failing is massive.
 

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Went these goverment gives (auto-makers) gm a auto-loan, why would they need to merger with chrysler? There will be no need too merger. Now that article has missing information, these treasury said it will not give them the loan too merger but too build high-fuel-mileage car's. These article doen't say that. And is'nt that what gm want's, too get or have enought money, put into there r&d to build high-mileage car's?
 

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The Treasury should give the auto industry however much they need, as it was the Fed and Treasury's poor decisions that played a major role in the current credit crisis which is causing the automakers "credit" problems.

The auto industry is requesting a LOAN not a handout, a loan that will be paid back with interest which will give the issuer a profit, maybe the Treasury does not understand this process.

Having the auto industry go bankrupt will cost the Treasury and U.S. taxpayer multiple times over what any "bailout" would cost, and the industry is not asking for "free money" or a "hand out" they are requesting a loan which as I noted will be profitable and will only lose money if the automakers do go under and cannot repay the loan.
 

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What is said in public, and what is happening behind closed doors, can be two very different things.
I'm sure there's a lot of disinformation flowing about, probably to find who's leaking stories to the press.

The Treasury should give the auto industry however much they need, as it was the Fed and Treasury's poor decisions that played a major role in the current credit crisis which is causing the automakers "credit" problems.

The auto industry is requesting a LOAN not a handout, a loan that will be paid back with interest which will give the issuer a profit, maybe the Treasury does not understand this process.

Having the auto industry go bankrupt will cost the Treasury and U.S. taxpayer multiple times over what any "bailout" would cost, and the industry is not asking for "free money" or a "hand out" they are requesting a loan which as I noted will be profitable and will only lose money if the automakers do go under and cannot repay the loan.
I think the mess GM, Ford, and Chrysler are in -- and the massive move by Toyota and Nissan to trucks and SUVs -- is indicative of federal government intervention in the marketplace. Was it not the US government that passed bills allowing various deductions for "farm equipment", including SUVs, that had a loophole big enough to allow for the spike in SUV sales? And can we blame any automaker for following the money?

The problem with the economy and many industries at the moment is too much government fiddling in the wrong area -- deregulation -- and not enough in others -- higher gas taxes, for example.

Had the US government not lowered taxes these past 8 years the economy and the US government would be better off. Had the prior US administration under Clinton not allowed those who could ill afford a mortgage the "right" to a mortgage, much of the financial meltdown would not be happening. And, had the US simply had a reasonable tax on gas to encourage fuel efficiency instead of some idiotic "engineering by edict" via CAFE, Americans would be demanding more fuel efficient cars, as has been repeatedly evidenced when the price spiked over the past year.

Now the Fed and US Gov't is bailing out the banks, and the mess they were partially responsible for. Similarly, they should provide funds to the Big Three as the demand for SUVs was a direct result of cheap gas and various deductions instituted for tax purposes. Besides, the money required to save the Big Three is paltry in comparison to what Wall Street requires. And, when you truly examine things, the Big Three are not that far off break even -- when you consider how much money they earn per month -- as opposed to the Wall Street bankers who've lost more money this fall than they earned in the previous 8 years... and we're still counting as some deravelling of hedge funds hasn't yet occurred but may yet occur.
 

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REread this folks, good points made here:


I'm sure there's a lot of disinformation flowing about, probably to find who's leaking stories to the press.



I think the mess GM, Ford, and Chrysler are in -- and the massive move by Toyota and Nissan to trucks and SUVs -- is indicative of federal government intervention in the marketplace. Was it not the US government that passed bills allowing various deductions for "farm equipment", including SUVs, that had a loophole big enough to allow for the spike in SUV sales? And can we blame any automaker for following the money?

The problem with the economy and many industries at the moment is too much government fiddling in the wrong area -- deregulation -- and not enough in others -- higher gas taxes, for example.

Had the US government not lowered taxes these past 8 years the economy and the US government would be better off. Had the prior US administration under Clinton not allowed those who could ill afford a mortgage the "right" to a mortgage, much of the financial meltdown would not be happening. And, had the US simply had a reasonable tax on gas to encourage fuel efficiency instead of some idiotic "engineering by edict" via CAFE, Americans would be demanding more fuel efficient cars, as has been repeatedly evidenced when the price spiked over the past year.

Now the Fed and US Gov't is bailing out the banks, and the mess they were partially responsible for. Similarly, they should provide funds to the Big Three as the demand for SUVs was a direct result of cheap gas and various deductions instituted for tax purposes. Besides, the money required to save the Big Three is paltry in comparison to what Wall Street requires. And, when you truly examine things, the Big Three are not that far off break even -- when you consider how much money they earn per month -- as opposed to the Wall Street bankers who've lost more money this fall than they earned in the previous 8 years... and we're still counting as some deravelling of hedge funds hasn't yet occurred but may yet occur.
 

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Automakers shouldn't be given a dime of our hard earned money. The notion that the govenrment would do this is asinine. GM and Chrysler will only burn through it and it will delay the inevitable which is bankrupty. That's the only option left and the only one that will allow them to rid themselves of their crushing burdens from dealers, labor and creditors. If they refuse to do what is necessary to resize themselves and jettison their top management then they shouldn't get a thing.

zete's idea that the Big Three going "all in" on trucks and SUVs the past nearly 20 years was the fault of the government is funny. It's nobody but Ford, GM and Chrysler's fault. Every other automaker in the world was intelligent enough to have a well diversified product portfolio that was strong in cars and they are not teetering on the brink now.

There's no excuse for these clowns and thank God the Treasury feels the same way.
 
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