The U.S. Treasury has refused financial assistance to General Motors, demonstrating that the auto industry will not be afforded the financial backing that the government has extended towards the banking industry. GM, which hopes to merge with Chrysler in the near future, requested up to $10 billion from the government in hopes pulling off the deal, but was denied, according to the Times.
GM chairman Rick Wagoner had pressed Treasury secretary Henry Paulson to extend the $700 billion buyout to the automotive industry as well as to the financial firms currently covered. It is expected that more than two thousand public financial companies will apply for, and receive, some portion of the money designed to resuscitate the industry.
In rejecting GM’s claim, the Treasury is prioritizing the health of the financial industry over the similarly ailing auto makers. Auto industry sales figures dropped by about 25 percent in September, with the decline only expected to continue in the foreseeable future.
Chrysler, which was purchased by private equity firm Cerberus last year, has suffered immensely from the credit crisis and will likely go under if it is not bought out. While the company currently hires around 120,000 workers, this number has been in constant decline as Chrysler has had to make cuts throughout their business. A merger with GM would most certainly result in a further wave of layoffs.
“These are truly unimaginable times for our industry,” Chrysler’s chief executive, Robert L. Nardelli, wrote in a letter to workers last month. “We continue to be in the most difficult economic period most of us can remember. The combination of troubled financial markets, difficult credit, volatile commodity prices, the housing crisis and declining consumer confidence continues to weigh on the economy. Never before have auto industry sales contracted at such a fast rate.”