EXECUTIVE SUMMARY

Executive Summary

General Motors

Executive Summary

Overview of General Motors

Several branches of the US Government became involved in the GM measures. Beginning in 2008, both the Bush and Obama Administrations played a role, as did the 111th session of the US Congress. While a majority of the congressional actions at issue occurred in the 110th Congress, the 111th Congress also showed a high level of interest in the auto sector, and numerous hearings developed during this time. The terms of the loans required both General Motors and Chrysler to provide financial viability plans to demonstrate to the US Government that the companies were capable of achieving financial viability, and both companies submitted plans on February 17, 2009. To oversee the US federal financial aid, including the evaluation of the General Motors restructuring plan, and to make decisions about future assistance to the automakers, the credit agreements between Old GM and Treasury provided for a presidential designee.

Past Position of General Motors

In November 2008, General Motors sought additional loans to cope with the state of the American economy and a poor auto sales outlook for 2009. The year 2009 introduced significant changes to almost every facet of the General Motors: a bankruptcy and restructuring, the incorporation of the successor company under the watchful guidance of Treasury, hundreds of parts suppliers undergoing simultaneous bankruptcy proceedings, auto plants closed and many workers were bought out, and the US Government introduced the “Cash for Clunkers” program. GM Bankruptcy Decision, supra note The Ford Motor Company (Ford) achieved relative successes by strengthening its capital base and market share, foreign-owned automakers and OEMs increased their presence in the US auto industry, new environmental standards with respect to fuel economy and greenhouse gas standards passed in the US Congress, and cap-and-trade legislation made automakers re-evaluate and gamble on the future's economic game changers (Herman, 1988, 113).

As part of the energy bill, the benefits were restricted to auto plants that had been in operation for at least 20 years, thereby excluding most foreign carmakers. These requests were for funds in addition to the EISA federal funding, which would not be contingent on supporting facilities designed for production of higher fuel economy auto vehicles. The first Treasury loan to General Motors came in December 2008. At General Motors request, Treasury determined it would make “emergency secured financing” available to General Motors to sustain its operations while General Motors developed a new business plan. Treasury and General Motors entered into a term loan agreement on December 31, 2008 and stipulated that General Motors would receive up to $13.4 billion in financing on a senior secured basis. This credit facility provided General Motors immediate access to funds. On December 31, 2008, General Motors immediately withdrew $4 billion, and less than one month later, General Motors withdrew a further $5.4 billion. General Motors borrowed the remaining $4 billion on February 17, 2009. According to the Bankruptcy Court, Treasury's credit facility was offered to General Motors on “much better terms” than what otherwise could be ...