President Bush just announced loans to the GM and Chrysler totaling $17.4 billion: $13.4 billion now and $4 billion in February, if they, according to Times, "undertak[e] sweeping reorganizations to show that they can return to profitability." The money will come from the TARP bailout.
Bush said he had to "shield the American people from a harsh economic blow at a vulnerable time... If we were to allow the free market to take its course now it would almost certainly lead to disorderly bankruptcy and liquidation for the automakers. These are not ordinary circumstances.” Here's video:
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Stocks are rising on the news. The Wall Street Journal notes:
The deal generally tracks key provisions of the bailout legislation that nearly passed Congress earlier this month. But it is relatively lenient in allowing the companies to show their viability. It defines viability as having a positive net present value -- a way of gauging the companies' worth, taking into account all their future obligations.
Notably, it provides significant flexibility to the companies in showing their viability. It sets out targets for the companies to hit in determining their financial health, such as reducing debt and current cash payments for future health care obligations.
