In a GM Merger, Half of Chrysler's Plants Could Close

Photo Illustration: Arthur Eves/BW; Image: Getty Images

The U.S. government is poised to keep any of Detroit's automakers from going bankrupt, and lawmakers and the companies are looking for every avenue for Uncle Sam to provide the companies with fresh capital (BusinessWeek.com, 10/28/08). The moves, expected to help General Motors (GM) pull off its acquisition of Chrysler, may require passing new legislation during next month's lame-duck session of Congress.

Michigan's senior U.S. Senator Carl Levin told BusinessWeek on Thursday, Oct. 30, that one new and surprising avenue being discussed to keep the companies solvent is passing an amendment to last month's continuing budget resolution bill signed by President Bush, which also included a $25 billion loan package for auto companies to retool assembly plants to make more fuel-efficient vehicles. The amendment, said Levin, could seek to offset billions the automakers have already spent to develop hybrid, electric, and smaller cars to market in the next few years, rather than restricting the loans to offset investments in 2008 and 2009. Such a move would be an almost instant cash infusion for GM, Chrysler, and Ford (F).

The scramble is on for the quickest source of funds. When GM Chief Executive G. Richard Wagoner Jr. met with government officials this past week, he found a hospitable reception. But GM sources say no conclusion was reached on an aid package.

Moving the Money Fast

That's why Levin and other politicians in states whose economies rely on the auto industry are trying to hurry things along. Levin said efforts by his office and the rest of the Michigan delegation, backed by several governors and lawmakers in other states with auto and auto-parts factories, center on either getting the $25 billion to the automakers faster than is called for in the bill, or getting them help along with banks and insurance companies in the Emergency Economic Stabilization Act (EESA) passed earlier this month. "Tapping into the Economic Stability Act has an advantage in that [the Treasury Dept.] and the Federal Reserve have the flexibility, but the advantage of the continuing resolution is that it is targeted at the auto industry," said Levin, who is polling far ahead of his Republican opponent in Tuesday's election.

The Michigan senator said passing new legislation next month would be "complicated." But, he added, "My job is to keep as many options on the table as possible."

If money isn't secured by the end of Congress' lame-duck session in November, the Chrysler deal could be in jeopardy, sources close to the negotiations say. Meantime, lawmakers are trying to find a way to give the automaker a hand without setting a precedent that the government is ready to bail out every struggling company in the nation.

And it's not just the U.S. government that's weighing rescuing its automakers. On Oct. 29, representatives from the European Union announced it would back a request for $50 billion in low-interest loans for its struggling auto sector (BusinessWeek.com, 10/30/08). Such a package, if enacted, could give a competitive advantage to European carmakers—adding pressure for Congress to come up with a U.S. solution.