Corp. and LLC still await federal loans approved earlier this month meant to keep the two auto makers from tumbling into bankruptcy, while General Motors Acceptance Corp. says it fell short of a fund-raising goal in its effort to become bank.
After Congress failed to reach an agreement on a rescue plan for GM and, which are both reeling from record-low sales during the economic downturn, President Bush authorized a total loan of $17.4 billion for the auto makers.
A second loan is expected next year if GM and Chrysler meet the government’s restructuring demands, but a portion of the first installment was expected before the end of the year when the auto makers say they may reach minimum cash levels to fund their operations.
GM is looking for $4 billion of an initial $9.4 billion loan, while Chrysler awaits $4 billion. Both remain optimistic the money will arrive shortly.
“GM continues to work with the federal government on the final stages of the loan agreement, and we remain confident a timely signing of the federal-loan agreement will occur prior to our needs,” the auto maker says in a statement to Ward’s today.
GM’s cross-town rival says in a similar statement: “Chrysler LLC is continuing its discussions with the Treasury Department and is working tirelessly to complete the loan requirements. The company looks forward to finalizing the agreement for financial assistance in the near future.”
The term sheet for the loan released by the Treasury indicates a closing date on the initial funding of Dec. 29. Treasury officials did not immediately return calls seeking comment, although spokeswoman Brooke McLaughlin told the Associated Press yesterday the office was “making good progress” on the loans.
Motor Co., which was not included in the first batch of loans, says it has enough cash to weather the downturn but has requested access to an emergency line of credit should the situation worsen.
Meanwhile, GMAC appears to have fallen short of its goal in a debt-for-equity swap, where bondholders trade in their notes for equity at a discount.
The finance firm says today $21.2 billion of its debt was offered in exchange for equity, which in addition to a government cash infusion of $6 billion, leaves the auto loans and home mortgage lender short of its $30 billion goal.
GMAC says it needs $30 billion to meet federal terms before becoming a bank and gaining access to funds from the $700 billion bailout of the financial industry. However, the Federal Reserve already has approved such status for GMAC earlier this week, likely cementing the lender’s transition regardless of its fund-raising outcome.
With access to bailout funds, GMAC would be able to loosen its tight auto-loan standards adopted in October that currently make it difficult for GM dealers to finance new-vehicle buyers. As its captive finance company, GMAC traditionally provides GM dealers with a bulk of their financing for car buyers and to purchase inventory.
GM presently owns a 49% minority stake in GMAC but will bring it down to 10% with the lender achieving bank status. Chrysler-parent Cerberus Capital Management LP owns 51% of GMAC.
– with Eric Mayne