The big three are only asking for a pool of patient money, bridge loan, to be set aside and used as needed between now and 1-1-10. Each company still has cash, Ford seems to think they have enough to weather the storm, but just in case, it wants access to cash if the banks do not make it available. They need to secure their in-house finance companies, like GMAC, which got caught in the crisis investing in the highest rate of return at the time, which was housing.
They have already received 25 billion to set up shop for low mileage cars and are ready to compete with imports, but they're labor contracts, retirement, healthcare, and buyout contracts keep them out of the running.
Each company expect to payout up to 3 billion a quarter but they also expect to reduce their labor numbers, reduces costs, create more efficient vehicles and remove waste wood, so at the end of the next four quarters they expect that the economy will be on an up tic and they will be leaner and meaner. They also suspect that since folks aren't buying today they will eventually buy in the recovery phase, which will boost demand and raise the prices, or require no discounts temporally.
The argument for chapter 11 is to dump bad labor contracts, like the company must pay 80% + in salaries to workers even if the plants are closed. It will erase a lot of supplier debt as well. The courts have the power and skill to restructure all aspects of the business so no contract is or debt is safe. The downside to chapter 11 is that it takes a long time. Everyone associated with the companies have to be addressed, which in this business is thousands of companies around the world.
There is no option on the table to let them liquidate, Chapter 7, that's just been a descriptive fupar, they will continue no matter what the only thing on the table is how. The stigma of chapter 11 will cause a loss in confidence where they will loose market share in the short term, which is a 4-5 year cycle.
The loss to the government in taxes in the next five years alone is a justification for the bridge loan or even two. The losses to labor and subsequent housing and local economies are astronomical. Every town has a dealership (13,000) and associated businesses that will be hurt. Much of the work has already been done with the first 25 billion; it makes little sense in these economic times to create any more tension in the economy that already exists. If incentives were created to buy low fuel consuming cars as it was for SUV's, buy up and crush old cars, I suspect that the Big Three can reach profitability by 2012. Banks and the government will need to move together to create incentives for both cars and housing if they want to kick start the economy. The only thing that needs to be added is accountability. Oversight must return to the marketplace and the days of lopsided trade with China and others to exploit cheap labor needs to end. They have the capacity now to carrier themselves
