Kicking the Can
Submitted By Todd on December 19th at 2:50pm
giving to Detroit.
Under the terms of the plan, if the companies can’t demonstrate financial viability by March 31 the loans will be called and the money must be returned, the statement said. The government’s debt would have priority over any other debts.I'm trying to understand this. He gives them 17 billion, and if they're not financially viable come the end of March - ie, they're flat broke and unable to pay their bills, then they're required to give the money back? How will they do that?
The loans, as G.M. and Chrysler teeter on the brink of insolvency, essentially throws the companies a lifeline from the taxpayers that will keep them afloat until March 31. At that point, the new Obama administration will determine if the automakers are meeting the conditions of the loans and will continue to receive government aid or must repay the loans and face bankruptcy proceedings.The president modeled his bailout, in some ways, on what the Senate was looking for.
The loan deal also requires the companies to quickly reduce their debt obligations by two-thirds, mostly through debt-for-equity swaps, and to reach an agreement with the United Auto Workers union to cut wages and benefits so they are competitive with those of employees of foreign-based automakers working in the United States. The debt reduction and the cuts in wages were central components of proposal by Senator Bob Corker, Republican of Tennessee, who tried to salvage the bailout legislation.