It's not just the auto and auto parts makers that want in on the TARP program! At last count, the mayors of Philadelphia, Phoenix, and Atlanta are also asking for money. Who's next? Well, the Detroit Lions are 0-10 (I kid you not)...they could use a little...something?
Kidding aside, this is a critical week for General Motors. The House Financial Services Committee will meet Wednesday to discuss a bailout plan.
For many on the Street, this is a Northern vs. Southern issue. Southerners have a large base of non-Detroit auto companies and factories, and their attitude is; why disadvantage those automakers just to help the Detroit Three, who have lost the war of ideas?
It's not as simple as that, of course, but that is a strong current running through the debate. Ideas being floated as part of the bailout include:
--early release of $25 billion in DOE loans
--new proposals that are not yet clear
How much money are we talking about? JP Morgan thinks a bailout of GM alone would cost a minimum of $30 billion. They recommend that Washington should give a near-term loan to cover 1-2 quarters, but additional money should be contingent on a cut in financial debt and reducing the UAW legacy liabilities.
Regardless of what happens, you can bet than any capital injection into GM will be: 1) very dilutive for equity shareholders, and 2) come with significant concessions from debt holders.
- UAW Pres Warns of Big 3 Chapter 7 Liquidation
- White House: Help Detroit, But Not With Rescue Fund
New from CNBC.com:
Questions? Comments? email@example.com