Bush Announces Auto Loans as Detroit Courts Readied for Bankruptcy Filing
President Bush has announced $13.4 billion in emergency loans to Chrysler and General Motors from the Wall Street bailout fund.
The loan comes with conditions requiring a “sweeping reorganization” of the automakers, the New York Times reports. The deal requires automakers to reach an agreement with the United Automobile Workers to cut workers’ pay and benefits and to reduce their debt obligations through debt-for-equity swaps, the newspaper says. Executive pay would also be limited, and corporate jets would have to be eliminated.
After making the loans, the Treasury Department will have committed all of the bailout funds it can access without additional congressional authorization, reports CNNMoney.com. Once additional funds are released, the automakers could borrow another $4 billion.
Before the announcement, Detroit bankruptcy judges made it known that they are prepared for any auto bankruptcy filing with an announcement about special handling plans, the Detroit News reports.
A special order by the U.S. Bankruptcy Court for the Eastern District of Michigan allows special handling of any “very large, complex case of national significance.” The order allows special selection of the judge overseeing the case and sharing of the work.
Large bankruptcies are usually filed in New York or Delaware.
