The momentum to merge General Motors and Chrysler is being given a strong push by the government (oh, no, socialism…industrial policy). I’m not saying I think the merger is a great idea but since both companies are leaking billions of dollars and may run out of cash in a year or less, it is what it is. Today’s Wall Street Journal has this:

GM and Chrysler’s majority owner, Cerberus Capital Management LP, have been negotiating a complex deal in which GM would end up owning its smaller Detroit rival, but the parties have struggled to line up financing. The combined entity would need about $10 billion in new equity to cover the cost of laying off workers, closing plants and integrating the two companies, say people involved in the talks.

The government loan, which may total around $5 billion, would come from the $25 billion in low-interest loans approved by Congress and being administered by the Energy Department. The funds are aimed at helping Detroit retool plants to meet new fuel-efficiency standards. It isn’t clear how quickly the money could be made available or whether it would come with strings.

Although the loans are supposed to speed the availability of fuel-saving technologies, the money could help steady GM’s finances and make it easier for the struggling auto giant and Cerberus to persuade investors to back a merger. Any transaction would involve both Chrysler and GMAC LLC, which loans money for car purchases and other purposes. Cerberus owns 51% of GMAC and GM owns the rest.

   All three auto companies now have very poor credit ratings and the future does not hold great hope for a recovery that is quick enough. If the morons who run the companies had invested in fuel efficient models way back, then, we might have not come to this juncture.

   By the way, if the government gives that money, where is the clause in the deal that takes away any CEO stock options or requires some sort of CEO give-back in compensation since they have failed miserably? Hah!