Earth Equity News

Why Do GM and Chrysler Need Uncle Sam's Help. By David Kiley and David Welsh, BusinessWeek, October 28, 2008. "Taxpayers are already being asked to bail out Detroit. Do they also have to play investment banker for a GM-Chrysler merger -- as well as help out a private equity giant? GM since September has been talking to Chrysler's majority owner, Cerberus Capital Management, about acquiring Chrysler. GM management is convinced that acquiring Chrysler's $11 billion in cash, and then gutting the company of redundant jobs, will provide it with the revenue, cash flow, and cash reserves it needs to make it through 2009 and into 2010. Moody's Investor Service this week downgraded GM's debt, and reiterated what other rating agencies have said: that GM will run out of operating cash next year without new sources of capital. GM, which lost $18.8 billion in the first six months of the year and still hasn't reported its third-quarter losses, is looking for quick help from the government. Sources familiar with the negotiations between the carmaker and the White House say GM is seeking $10 billion in the form of loans, which it claims it needs to acquire Chrysler. In exchange, GM, according to industry sources, has dangled the possibility of the government taking an equity stake in the new enterprise, as well as specifics on protecting a number of future jobs."