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Sunday, November 02, 2008

Report: GM Turned down by Government

by Calculated Risk on 11/02/2008 09:20:00 PM

From the NY Times: U.S. Rejects G.M.’s Call for Help in a Merger

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 ... the Bush administration will now shift its focus to speeding up the $25 billion loan program for fuel-efficient vehicles approved by Congress in September and administered by the Energy Department.
While G.M. and Chrysler continue to talk, no deal is expected until the government clarifies its role, if any.
A possible GM-Chrysler merger probably only makes sense to GM with government help - and with tens of thousands of projected layoffs (some estimates are 200 thousand job losses including suppliers and other service providers), this deal probably isn't very appealing to lawmakers.

Without this deal, Chrysler will probably go bankrupt - and the jobs will be lost anyway - and some lenders will be stuck with Chrysler pier loans (more write downs for some banks).