GM/Chrysler: Tax Dollars to Fund Layoffs?

Report: Keeping GM and Chrysler afloat may mean a merger, layoffs, and taxpayer dollars.

By SHARE

It's a strange world. The next place the government might spend our tax dollars: funding layoffs in Detroit. The Clusterstock blog helpfully finds this gem in a recent Wall Street Journal story about merger talks between General Motors and Chrysler. Both companies are "locked out of the credit markets and burning cash rapidly," which adds considerable pressure to the merger prospect and to the potential "assist from the federal government."

That assist would help the companies reorganize, including implementing layoffs and plant closings, but would most likely head off much deeper payroll cuts. From the WSJ:

The auto makers and Michigan political delegations have proposed at least three plans in recent weeks to unlock federal cash for a merged GM-Chrysler, including seeking an equity investment from the government or unlocking funds from its Troubled Asset Relief Program, or TARP.

GM and Chrysler estimate that a combined entity would need $10 billion in new equity to lay off workers, close plants, integrate the two companies and provide liquidity, according to several people involved in the talks or briefed on them.

Keeping these two companies afloat is vital to the health of the auto industry. The WSJ reports that parts suppliers and local dealers would be left hurting, while the government's pension-guarantee program would get "swamped."