Q: Does this money save GM from filing for bankruptcy?
A: For now it does. GM will receive a total of $9.4 billion this month and next month, and another $4 billion from the second half of a $700 billion financial-sector bailout plan Bush signed this fall — as long as Congress allows that half to be released. GM executives said the loans would allow it to pay bills at the end of the month and into January.
Q: What does this mean for Chrysler? Will its parent company, Cerberus, be able to keep the automaker in business?
A: It means Chrysler will be able to pay its bills and probably will make it until March, but its future is murky beyond that. If sales don’t come back, Chrysler’s financial problems will persist.
Q: What about Ford?
A: Ford says it doesn’t need immediate funds and is working to avoid using federal aid. But Ford is watching developments closely.
Q: What does this mean for the thousands of auto suppliers across the country?
A: Anything that makes automakers more stable is good news for suppliers, which rely on the car companies to do business. Many suppliers would have gone under if GM or Chrysler were unable to pay them on time next month.
Q: Will the bailout help dealers?
A: Dealers have been pushing for such a loan, as the collapse of a U.S. automaker would scare off customers. Who wants to buy a car from a bankrupt company, worrying it won’t be around in a few years when they need service covered by their warranty? If one of the car companies went under, many dealers would shut their doors.
Q: Will United Auto Workers members lose jobs or take pay cuts as part of the bailout deal?
A: Yes. GM and Chrysler must pare down in an effort to become profitable. Claire McClinton, a GM metal center worker in Flint, Mich., said challenges lie ahead for employees. “We’re not hopeful about the future. We as workers still have work to do in terms of fighting to maintain our standard of living.”
Bush’s bailout plan sets “targets” for Chrysler and GM to reduce labor costs and change work rules so they are competitive with foreign automakers that operate U.S. factories, such as Toyota Motor Corp., by the end of 2009.
It also seeks elimination of the “jobs bank,” in which UAW workers get about 95 percent of their pay for up to two years after being laid off. It also says the union should accept stock as half the companies’ payments into a trust fund that will take over retiree health care expenses in 2010.
Q: What happens to stockholders? Will shares rise because the companies have been pulled from the brink?
A: Stockholders probably will take the biggest hit. A couple of bailout provisions will force GM to issue more shares, diluting the value of their stock, according to Efraim Levy, a senior auto industry analyst with Standard & Poor’s.
One is a requirement that the government gets the right to purchase shares in the company. The other is a provision saying that when GM pays into a union-administered trust fund that will cover retirees’ health care, the proportion of the payment taking the form of company stock will increase.
