Bush to make auto announcement @9:00

Discussion in 'Wall St. News' started by wareco, Dec 19, 2008.

  1. This just in: President Bush will make an announcement at 9 a.m. regarding the “administration’s efforts to assist the auto industry,” according to an administration official.

    Possible scenarios were emerging for helping the companies. People in the industry said one scenario involves altering the ownership stakes in GMAC, currently divided between GM and an investor group led by Chrysler LLC’s parent, Cerberus Capital Management LP. GM has a 49% stake in GMAC. An investor group led by Cerberus bought 51% of GMAC in 2006 for about $14 billion.

    Cerberus has expressed a willingness to give up its equity stake in Chrysler’s automotive operations to GM, in return for a bigger stake in GMAC. That — along with a cash sweetener for GM — could form the basis for a deal, some industry observers say, and also could lead to a merger of the finance arms.

    People directly involved in the matter say Cerberus is pushing to reignite talks about merging the finance arms of the auto makers and has received some government interest in such a deal.
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    http://blogs.wsj.com/autoshow/2008/12/19/white-house-auto-industry-announcement-set-for-9-am-friday/
     
  2. Black Friday!
     
  3. m22au

    m22au

    Fox Business News is now (8.47am ET) providing details of the bailout.

    Does anyone know where on a Whitehouse / Treasury web site where I can find this information?

    My initial thoughts are that

    (1) Positive NPV at 31 March requirement will be difficult to achieve

    (2) Govt will be given warrants over non-voting stock (not sure of details)

    (3) CNBC: reduce debt by two-thirds [debt for equity swap anyone?]

    mean that this is bearish for the stock.

    Obvious caveat is that the Obama administration could completely re-write the bailout on terms that are favorable for GM
     
  4. Daal

    Daal

    I feel like most people around here dont care about how they can make money from news. we should rename this site to Elite Journalist
     
  5. Positive NPV. On GM? Is this a fucking joke?
     
  6. m22au

    m22au

  7. m22au

    m22au

    I can only imagine that they would be able to meet this requirement by a massive debt for equity swap.

    Alternatively, and the more likely situation, is for Obama to re-write the bailout package on terms more favorable for GM



     
  8. chsbla

    chsbla

    Autos Bailout Fact Sheet

    The following is a release from the Bush administration detailing its bailout for the car industry:

    Fact Sheet: Financing Assistance to Facilitate the Restructuring of Automobile Manufacturers to Attain Financial Viability

    Purpose: The terms and conditions of the financing provided by the Treasury Department will facilitate restructuring of our domestic auto industry, prevent disorderly bankruptcies during a time of economic difficulty, and protect the taxpayer by ensuring that only financially viable firms receive financing.

    Amount: Auto manufacturers will be provided with $13.4 B in short-term financing from the TARP, with an additional $4 B available in February, contingent upon drawing down the second tranche of TARP funds.

    Viability Requirement: The firms must use these funds to become financially viable. Taxpayers will not be asked to provide financing for firms that do not become viable. If the firms have not attained viability by March 31, 2009, the loan will be called and all funds returned to the Treasury.

    Definition of Viability: A firm will only be deemed viable if it has a positive net present value, taking into account all current and future costs, and can fully repay the government loan.

    Binding Terms and Conditions: The binding terms and conditions established by the Treasury will mirror those that were voted favorably by a majority of both Houses of Congress, including:

    * Firms must provide warrants for non-voting stock.
    * Firms must accept limits on executive compensation and eliminate perks such as corporate jets.
    * Debt owed to the government would be senior to other debts, to the extent permitted by law.
    * Firms must allow the government to examine their books and records.
    * Firms must report and the government has the power to block any large transactions (> $100 M).
    * Firms must comply with applicable Federal fuel efficiency and emissions requirements.
    * Firms must not issue new dividends while they owe government debt.

    Targets: The terms and conditions established by Treasury will include additional targets that were the subject of Congressional negotiations but did not come to a vote, including:

    * Reduce debts by 2/3 via a debt for equity exchange.
    * Make one-half of VEBA payments in the form of stock.
    * Eliminate the jobs bank.
    * Work rules that are competitive with transplant auto manufacturers by 12/31/09.
    * Wages that are competitive with those of transplant auto manufacturers by 12/31/09.
     
  9. m22au

    m22au

  10. in 3Q Gm had a negative net worth of $60 billion. That didn't even include all the accounting tricks used to hige pension liabilities.

    It's stock is worth a couple billion. No where they are going to earn over $60 or $70 billion on debt-equity swaps in 4 months. Impossible!

    This is just a band-aid which will blow up on Obama's watch.
     
    #10     Dec 19, 2008