GM, Ford, Chrysler seek to tap Fed's short-term lending program
The move comes as the credit crisis has forced the automakers to curtail lending to consumers and dealers. The firms are also exploring other federal options.
Hard up for cash, the lending arms of all three U.S. automakers have asked for access to the Federal Reserve's new short-term lending program.
GMAC Financial Services, 49% owned by General Motors Corp., has applied for the program, called the Commercial Paper Funding Facility, said Gina Proia, spokeswoman for the lending unit. "We were approved to participate" on Monday, she said.
Ford Credit, a subsidiary of Ford Motor Co., also applied for the program, according to spokeswoman Brenda Hines. And Chrysler Financial, the lending arm of Chrysler, is asking for access to the backstop, according to a person familiar with its operations. Under the program, the Federal Reserve Bank of New York purchases 90-day short-term notes, giving the debt issuer access to cash in a tight market.
The news that all three had applied for the program is the first concrete step taken by the automakers in Washington to shore up their precarious cash positions. But all three companies said they are exploring other options with the Federal Reserve and the Treasury Department.
"Obviously the automakers are going through a particularly difficult time," White House spokeswoman Dana Perino said Tuesday. "The automakers have been in contact with us. We've been talking to them at various levels and at different departments, including Energy, Treasury and Commerce. And we're trying to work with the tools that Congress has provided us."
GMAC did not say how much it would be able to borrow under the short-term lending program. The only other company to announce its participation in the program, General Electric Co., said it had begun utilizing it Monday.
In recent months, all three American automakers have been forced to curtail lending to consumers and dealers as their access to cash has dried up in the credit crisis.
As a result, they have been forced to draw down existing credit lines and tap their cash stockpiles. Both GM and Ford were burning about $1 billion a month as of the second quarter, and it is expected that third- quarter results will show spending at an even faster clip.
As a privately held company, Chrysler does not release financial statements, but it is estimated that its cash burn is at least $300 million a month.
