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General Motor’s board is currently reviewing the rescue plan that will be released on Tuesday and will be considered by Congress next week. GM said on November 7th that it may not have sufficient cash to operate after December. A 10-12 page summary of the plan will be released to the public and a more detailed 80 page version will be sent to Congress. The plan is rumored to entail closing factories, eliminating half the US brands, delaying health care benefit payments, and converting some of the companies’ $43 billion debt into equity in the company.
November car sales will be released this week and early indications are that sales of US brands may be down again – possibly by as much as 35 percent over last year. Detroit automakers owe banks and bondholders more than $100 billion in debt and considerably more when their parts suppliers and dealers are included.
Where this all comes out is still up in the air. Senior Republicans continue to argue that a $25 billion “bridge loan” to Detroit will only prolong the agony. Congressional Democrats and the Obama team seem predisposed to mitigating the effects on the US economy that would stem from widespread bankruptcy of the automakers, their suppliers and dealers. Events, however, may be spinning out of control.