Detroit Automakers One Step Closer to Being Saved

Congress and the White House have come to an agreement on the proposed plan from the Detroit 3 for financial aid during these troubled times that the three automakers have been experiencing due to the current economic crisis. The current $15 billion bailout proposal already has most of its major points agreed upon and is now on its way to the Senate and House of Representatives.

The $15 billion plan will provide General Motors and Chrysler low-interest loans that should help the sustain the two until somewhere near March next year. Ford on the other hand will not be taking any loans until its financial situation worsens. The funds will most probably be drawn from a fund established earlier in the year by the Energy Department.

One of the conditions required in the financial aid proposal is that the President will appoint a person to oversee all the restructuring and management of the companies to ensure that all the plans submitted to Congress will indeed be followed and that the changes proposed will be made. The elected person will hold the power to give recommendations and direction during this critical period, and should these be ignored, the financial loans could be withheld or postponed. Bankruptcy could also be on the cards if so recommended, a move strongly in favor of by the Republicans.

Interestingly, the owners of Chrysler, private equity firm Cerberus Capital, were not required to be held accountable for the loans, should they be approved to Chrysler. This would mean that if Chrysler were to cease operations and fold, Cerberus would not have to repay the federal loans and that would be the last we will see of all that taxpayer money.

The bill will now have to pass through the Senate and House of Representatives before any of these federal loans can be approved. Even with their approval, possible lengthy legislative procedures might mean that it could take some time for GM and Chrysler to see any cash flow into their accounts.