When the CEOs of the Big Three appeared before Congress late last year, one of the biggest concerns voiced about the Detroit bailout was the possible scenario of a slippery slope. While the automakers were seeking somewhere in the neighborhood of $25 billion, many analysts warned the final number could be closer to $125 billion. However, so-called experts aren’t always correct, and it looks as though the White House’s $17.4 billion allotment will be enough to see General Motors and Chrysler through this rough stretch.
In an interview with Automotive News, UAW president Ron Gettelfinger revealed that GM and Chrysler may not need funding beyond the $17.4 billion already earmarked for the automakers. “If we can get by without more money, that’s what we want to do,” Gettelfinger told Automotive News.
Although GM was originally seeking $18 billion in order to survive until 2010, that plan included the automaker’s 49 percent stake in GMAC. However, since the White House approved the $17.4 bailout package — $13.4 billion of which is earmarked for GM – GMAC has achieved bank holding status, greatly reducing GM’s stake in the financing company. Additionally, GMAC has secured $6 billion in low interest loans itself, bringing GM’s total funding beyond the $18 billion it was originally seeking.
That being said, GM and Chrysler are not completely out of the woods yet. If new car sales fall below 12 million units in 2009, GM and Chrysler would likely have to ask for further funding to stave off bankruptcy. “The downside was 10.5 million, which is where most people are,†a source close to the situation told Automotive News. “What happens if that downside gets worse? That’s anybody’s guess.”
With new car sales expected to total between 12.5 million and 13 million units in 2009, it sounds as if the White House’s life raft will be just enough to carry the Detroit Three into 2010.
