WASHINGTON — The $13.4 billion that will be paid out to Chrysler and General Motors over the next month is a small down payment, CUNA Chief Economist Bill Hampel said.
In reaction to President Bush's announcement this morning to administer a $17.4 billion total loan package to the two automakers, Hampel said, "In an economy that requires a mass financial stimulus next year, this is basically a small down payment."
The $13.4 billion in loans will be available immediately to Chrysler and GM and the rest of the funds will come next year if the two companies are financially viable by then.
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"They were forced to do it to not make an already deepening hole in the economy worse," Hampel added. "If they didn't keep them from collapsing they would have to spend a whole lot more in order to deal with the impact it would have on the economy."
The two companies will be required to return the funds if they do not prove to be financially viable by March 31.
"The government needs to start spending a lot of money and you hope that they will spend it on good things," Hampel said. "As a result of this deal GM and Chrysler will be forced to do significant restructuring."
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