Business and Capital Market Analysis !!!

By Lori Montgomery, Washington Post Staff Writer
Sunday, November 9, 2008

GM could face bankruptcy, endangering the livelihoods of about 100,000 North American autoworkers and hundreds of thousands of others whose jobs depend on the industry.

In a letter to Treasury Secretary Henry M. Paulson Jr., House Speaker Nancy Pelosi (D-Calif.) and Senate Majority Leader Harry M. Reid (D-Nev.) asked Paulson to "review the feasibility . . . of providing temporary assistance to the automobile industry during the current financial crisis."

The letter notes that Congress granted Paulson broad discretion to use the bailout money to "restore financial market stability. A healthy automobile manufacturing sector is essential to the restoration of financial market security," the letter continues, as well as to "the overall health of our economy, and the livelihood of the automobile sector's workforce."

A plan is in the works at the Treasury to use bailout money to take ownership stakes in a wide array of companies beyond the banking sector. But Treasury officials have indicated that participants in its recapitalization program must be financial firms subject to federal regulation. That means GMAC, GM's auto financing arm, may be eligible for quick help, but GM itself may not.

The Treasury has so far declined to assist the automakers, which have been devastated by the twin shocks of a collapsing credit market and the sharpest drop in auto sales in more than two decades.

In the meantime, however, the automakers have gotten little but sympathy. Congress recently voted to fund a $25 billion low-interest loan package intended to help the car companies retool their factories to produce fuel-efficient vehicles that meet tough new emissions standards. But that money has been hung up by red tape. Obama and other Democrats have discussed providing another $25 billion in loans, bringing the total federal aid to $50 billion. But unless the Bush administration agrees to work on an economic stimulus package when Congress returns to Washington later this month, that money would have to wait until at least January.

Analysts fear the firms may not be able to hold on that long. GM and Ford posted big losses Friday as they continued to pay out more in salaries and other expenses than they are taking in from sales.


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