General Motors : A Private Company Receiving Government Money?

by | Sep 27, 2008 | Asset Management, Stock Market Comments

Lost in the bailout mess comes this bit of interesting news for the automakers.

The Wall Street bailout has taken most of the headlines, so you may have missed this: a bill set to be passed by Congress includes $25 billion in loans for General Motors, Ford and Chrysler, as well as several of their suppliers.  And keep in mind, these are loans — loans that will be repaid.  But this is money that is available now at low interest rates, and they’ll have five years before they need to start repaying.

This is a pretty interesting development.  Chrysler was taken private last year (by Cerberus Capital Management), so this essentially becomes government loans to a private company.  And, because Chrysler is now privately held, they no longer report sales figures or earnings.  But it’s estimated that Chrysler is taking a bigger hit than Ford and General Motors.  These companies are so far behind the curve, it’s hard to see how they will catch up.  General Motors CEO Rick Wagoner believes the automakers should be able to put its portion of the loan package toward new technology.

One area that may holds significant promise are the extended-range electric vehicles (you know, electric cars).  These are cars that are produced with lithium ion automotive battery packs.  And when it comes to recharging the battery, it will be designed to use a common household plug.  The first car engineered in this fashion is the Chevy Volt, which will likely be available starting in 2010.