The Bush administration announced Friday morning that it will offer GM and Chrysler access to $13.4 billion in loans in December and January, followed by another $4 billion when the second half of the $700 billion TARP fund is accessed next year.
The three-year loans could be called back if the automakers cannot prove their viability by March 31. "Viability" means the companies have a positive net present value, which does not immediately require profitability, but would require them to reach that point relatively soon. The loans would also require limits on executive compensation and other perks, and the automakers would have to provide warrants for non-voting stocks.
The announcement comes after several days of bad news for GM and Chrysler. The Bush administration had announced this week that they had not taken an "orderly bankruptcy" off the table as an option for the two automakers, and Chrysler announced yesterday that it will close all plants in North America for 30 days starting Friday, December 19.