GM, Chrysler get billions more to stay alive ahead of deadlines

DETROIT -- In a report released Tuesday, the special inspector general for the Troubled Asset Relief Program revealed that the U.S. government is lending GM up to $5 billion more to make it through June 1. And Chrysler, facing a May 1 deadline, could get up to $500 million more in the next few days.

The government had said it would provide working capital, but hadn't released how much.

Chrysler's deadline is rapidly approaching. The government has said Chrysler needs to cut its debt from $6.9 billion to $1 billion. But bondholders are only willing to cut outstanding debt to $4.5 billion, according to a proposal by the bondholder steering committee obtained by USA TODAY. The bondholders also want to take a 40% stake in the company. The counteroffer angered Rep. Gary Peters, D-Mich., who has been calling on the bondholders to make sacrifices to help keep Chrysler afloat.

"This is not a serious counteroffer," Peters said in a statement. "These debt holders were offered fair market value for their debt, and the banks have responded by asking for a windfall."

Bondholders include banks such as Citigroup and JPMorgan, as well as pension funds and investment groups.

Although progress on debt restructuring seems slow — GM said last week that it's not making much headway with its bondholders, either — the government needs to stick with its deadlines, says David Cole, chairman of the Center for Automotive Research.

"It's got to be serious, where it's not just viewed as another bluff," he says. "The government has to play a very heavy hand in this."

Tuesday's TARP report also gave more details on the warranty-guarantee program announced by President Obama in March. That program is intended to help boost consumer confidence by ensuring that warranties on cars bought from GM and Chrysler will be honored and that vehicles under warranty will be fixed if either company files for bankruptcy protection.