The automakers, and their dealers, can take a temporary sigh of relief as a federal bailout plan for the automakers has reportedly been reached. Under the bailout, GM and Chrysler will receive $15 billion, and will be forced to restructure under the watchful eye of government oversight.
The bailout plan effectively would enable GM and Chrysler to avert bankruptcy, at least until March, through short-term loans. Although initially part of the bailout, Ford Motor Company is no longer requesting the immediate help of short term loans, and instead is looking for a $9 billion line of credit to act as a life raft in case finances dramatically worsen.
Money for the bailout will be coming from a fund created by the Energy Department in September that was to be used to help Detroit manufacture more fuel efficient cars.
To ensure the automakers will restructure and will move effectively toward profitability, there will also be a presidentially appointed “car czar.” The government will also become the biggest shareholder to oversee operations and to known whether to withhold future loans should there be a lack of progress. In addition, the car czar would be able to recommend bankruptcy if this person doesn’t see the automakers taking the steps necessary to become profitable. Detroit Chevrolet dealers are remaining optimistic, hoping to see GM more nimble following a restructuring.
The bailout has been a bitterly disputed debate within Congress, with Republicans and Democrats having very different ideas. Many Republicans feared that a bailout would be draining on the economy as a whole, and instead wanted to see market forces determine the fate of the automakers. But since the industry is so vital to the economy, it’s crucial to see the industry stabilized, and prevent thousands from losing their jobs. Manufacturing jobs at the Big Three have already suffered this year. But Los Angeles Ford dealers also see the problems continuing farther down the chain at retail outlets, especially with the National Automobile Dealers Association predicting that thousands of dealerships will close their doors for good in 2009
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