Most of the news coverage and rhetoric about the government’s help of General Motors misses the point.
Take the “news” over the weekend as reported by Reuters and The New York Times. “The Treasury Department has turned down a request by General Motors for up to $10 billion to help finance the automaker’s possible merger with Chrysler, according to people close to the discussions.”
The idea that the White House would green-light $10 billion to help GM complete an acquisition of Chrysler was never in play.
Weeks ago, sources close to Rep. John Dingell (D-MI) and Senator Carl Levin (D-MI) said that a direct assistance for a merger of the two companies was a dog that was not going too hunt in the White House or in most of Congress.
When I caught up with Levin last week at a campaign stop, he made it clear that he was not seeking or pushing for assistance for GM to create a merger. If he isn’t pushing for it, then such a plan was not much in play. What Levin and Dingell have been pushing for is the speeded up release of funds from the Department of Energy, which is writing rules and conditions by which the automakers can apply for $25 billion in loans to off-set tech investments they have been making since January of 2008 and through next year to bring more fuel efficient vehicles to the marketplace. The lawmakers are also pushing for GMAC, Ford Credit and Chrysler Credit to be able to borrow from the Fedetral Reserve’s discount window like a bank in order to make more credit available to borrowers.
As Levin said: “These measures are not meant to assist GM in an acquisition of Chrysler, but if it has the effect of doing that, that’s another matter.”
Levin said one idea on the table, and presumably being boosted by him is allowing the automakers and suppliers to apply for loan money to cover retro-active investments—perhaps allowing GM and Ford to recoup money long since spent on hybrids and electrics. That would have the effect of a cash infusion to the companies that could help GM cover the costs associated with taking over Chrysler.
Under an expedited program with DOE, GM and Chrysler could apply for the loans separately, but pre-agree to pool the money to help a merger deal go through.
“The point is to get the automakers cash in the most politically acceptable way,” one Capitol Hill source told me. “And a direct payout to help a merger happen was a non-starter.”