I’m convinced. George Bush just spent $4 billion (of your money) to kill Chrysler.
In his speech announcing the auto relief, Bush claimed he didn’t want to leave the auto crisis to his successor:
… there’s too great a risk that bankruptcy now would lead to a disorderly liquidation of American auto companies. My economic advisors believe that such a collapse would deal an unacceptably painful blow to hardworking Americans far beyond the auto industry. It would worsen a weak job market and exacerbate the financial crisis. It could send our suffering economy into a deeper and longer recession. And it would leave the next President to confront the demise of a major American industry in his first days of office.
He implied he had provided enough to GM and Chrysler to give them three full months to stave off bankruptcy.
First, they will give automakers three months to put in place plans to restructure into viable companies — which we believe they are capable of doing.
Yet he also described giving them enough money to enter bankruptcy in orderly fashion.
Second, if restructuring cannot be accomplished outside of bankruptcy, the loans will provide time for companies to make the legal and financial preparations necessary for an orderly Chapter 11 process that offers a better prospect of long-term success — and gives consumers confidence that they can continue to buy American cars.
But he didn’t give Chrysler enough to stave off bankruptcy.
Bush gave Chrysler $4 billion, all on December 29. Just one payment. Unlike GM, Bush is not giving Chrysler a second and third chunk of money after the new year (GM will get $4 billion on December 29, $5.4 billion on January 16, and $4 billion on February 17).
That already suggests that Bush doesn’t imagine Chrysler will be around after the New Year. Furthermore, that $4 billion is $3 billion less than Chrysler said it needed to remain viable (and to pay its suppliers).
Now, it’s possible that Bush gave those amounts anticipating that GM would eat up Chrysler. After all, Bush actually gave GM more than what it asked for. GM had asked for $4 billion in December, another $4 billion in January, and $2 billion in February (with the possibility of coming back for another $8 billion later next year). Read more