[cnn-photo-caption image=http://i2.cdn.turner.com/cnn/2008/POLITICS/12/19/auto.bailout/art.bush.auto.cnn.jpg caption="President Bush said Friday that automakers must show they can be profitable businesses by March 31."]
CNN Financial News Producer
President Bush this morning announced a rescue plan for General Motors and Chrysler. The two automakers will get $13.4 billion in short-term financing almost immediately and an additional $4 billion will be potentially made available in February.
The money will come from the $700 billion fund set aside to bailout Wall Street firms and banks in October. The loans are three-year loans - but the money will have to be repaid immediately if the firms do not show themselves to be viable by March 31. The automakers must meet a number of conditions, including accepting limits on executive compensation and eliminating perks such as corporate jets. They must also allow the government to examine their books and the government will have the power to block any large transactions. Ford is not part of this bailout.
Chrysler will shut down all vehicle production in the United States starting after the last shift today for at least a month. General Motors is idling 30% of its North American manufacturing capacity during the first quarter of 2009. And Ford is adding a week to its normal two-week seasonal shutdown at a number of its plants. Temporary plant shutdowns give automakers the chance to stop making cars and sell off the ones that are still sitting around. But in Chrysler's case, the benefit comes from the money it saves on day-to-day costs.
Stocks on Wall Street opened higher as investors look over the details of the auto bailout and prepared for market volatility caused by what’s known as quadruple witching. “Quadruple witching,” which occurs four times a year, is the simultaneous expiration of market index futures, market index options, stock options and stock futures. As investors rush to unwind their positions, stocks have the potential to be extremely volatile.
Nearly 3 months after the founder of its parent company was arrested on fraud charges, Polaroid filed for bankruptcy. The 70-year-old company that invented “instant film” photography said it made the filing to “facilitate” its financial restructuring. Federal prosecutors have accused Tom Petters, founder of the Petters Group which has owned Polaroid since 2005, of leading a more than $2 billion fraud at the company.
It seems like everyone these days wants a piece of the $700B dollar bailout bill. And if you ride your bike to work, you’re entitled to one. Buried within the bailout legislation is a $20 per month tax break for bicycle commuters. Biking to work got a lot more popular this summer when gas prices surged. Now that gas is relatively cheap again and the weather is turning colder, it’s hard to say whether the trend will continue. But even if you do bike to work, getting your hands on the money might not be easy. Very few companies are ready to implement the biking benefit, even though it goes into effect on January 1st. That’s today’s Energy Fix.
Cash-strapped consumers got some welcome news Thursday when regulators voted to rein in controversial credit card practices. But they'll have to wait another year and a half to get relief as the new rules won't take effect until July 1, 2010. The new regulations mark an end to double-cycle billing, which averages out the balance from two previous bills.
That means that consumers who carry a balance will no longer get hit with retroactive interest on their previous month's bill. And credit card companies will no longer be able to raise the interest rates on pre-existing credit card balances unless a payment is over 30 days late. Consumers will also be given a reasonable amount of time to make payments, and payments will be applied to higher-rate balances first, to reduce interest penalties and fees.
Gas prices rose 0.3 cents to $1.673 a gallon. The current national average is now $2.441 below the record high price of $4.114 that AAA reported on July 17, 2008. 2 states have regular unleaded gas prices of $2 and higher. 48 states and the District of Columbia have regular unleaded gas prices below $2. The highest gas prices are in Alaska ($2.648). The cheapest gas prices are in Utah ($1.486).
And oil prices are hovering around $35 a barrel. Oil has dropped 25% this week, hitting the lowest point since April 2004.
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