Troubled automaker General Motor Corp. (GM)'s request for up to $10 billion to help finance a merger with Chrysler has been rejected by the Treasury Department, reported The New York Times. Officials of the department are believed to be hesitant to broaden the scope of the $700 billion financial rescue program to include industrial companies.
The Treasury Department has reportedly informed GM that the government now intends to turn its focus to speed up the $25 billion loan program for fuel-efficient vehicles. This program was approved by Congress in September and administered by the Energy Department.
Also, it is perceived that the officials do not want to make any decisions that may be at variance with the interests of the new presidential administration. While Democratic candidate Senator Barack Obama seems to be in agreement with increasing aid to ailing automakers, Senator John McCain has not said whether he would support assistance beyond $25 billion.
Private equity firm Cerberus Capital Management bought Chrysler last year for $7.4 billion and was not successful in changing the fortunes of the company. With GM and Chrysler coming together, thousands of jobs are expected to be slashed and money is to be found for buyouts and severance packages.
Potential lenders are reportedly not convinced of investing in the current choppy economic environment without government intervention. No deal between GM and Chrysler is expected until the government clarifies its role, if any.
Meanwhile, the United Auto Workers union appears to have a key role in the emergence of any deal, reported the Wall Street Journal. The union has recently retained a veteran auto-industry analyst to evaluate the deal and shape the union's strategy.
GM closed Friday's regular trade at $5.79, down $0.28 or 4.61%, on 18.14 million shares.
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June 12, 2026 17:14 ET Major central bank action was the focus this week in economic news. The European Central Bank became the first major central bank to move in response to the rising inflationary pressures in the backdrop of the conflict in the Middle East. In North America, the U.S. inflation and trade data as well as Canada’s central bank decision gained attention. The Chinese trade data was the main news in Asia.