Troubled Financing Stalls GM/Chrysler Deal

October 21, 2008
2009 Dodge Challenger

2009 Dodge Challenger

Eleven billion dollars--that's the cash reserve held by Chrysler that makes it such an appealing acquisition to GM, who's burning through $1 billion a month these days. But as Automotive News reported yesterday, "Chrysler has $9 billion in debt that, under a change of control, would have to be paid off if it cannot be refinanced." Further, GM's attempts to finance this deal haven't been met with much vigor out in the market, leading some to believe that yet more government assistance would be needed to make this deal a go.

With recent multi-billion-dollar bailouts, "a dangerous possibility of a recession" according to the Wall Street Journal's David Wessel today on NPR, and now another rumored economic stimulus package supported by one of the presidential candidates, is the GM/Chrysler deal even on the feds' radar screen at present?

Were GM to acquire Chrysler, the immediate results would be expensive. Try $4 to $5 billion, according to Automotive News. That money would be used for payoffs due to approximately 30,000 to 40,000 job cuts as well as for closure of the majority of Chrysler's 14 assembly plants.

Who is the most important player in the proposed deal, and whose needs should be considered first and foremost as the talks continue? Can our government (we the people) afford to shell out any more assistance to these floundering giants? Can we afford not to be involved when tens of thousands of our neighbor's futures and well-beings are at stake?

The Brits, always able to turn a fun phrase even in troubling times, would call this whole thing a sticky wicket. I wonder what hilariously inappropriate comment Ricky Gervais would have to say about it all.--Colin Mathews

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