Initiating what seems like a game of chicken with Congress, General Motors (NYSE: GM) has announced that it intends to draw down the remaining $3.5 billion on its revolving $4.5 billion credit line to boost its liquidity. While tapping the funds will provide the company with necessary capital for short-term needs, it also ensures that the carmaker has few if any places to turn to once that well runs dry. In other words, it might just be CEO Richard Wagoner's way of telling Congress: Give me money or give me death!
Along with Ford (NYSE: F) and Chrysler, the automaker has been pressing its case hard for a $25 billion bailout from taxpayers, and in light of the bailouts for other ailing businesses, it might have a point: Why not us, too?
For a moment, the Lehman Brothers (NYSE: LEH) twist in the wind seemed to dramatically diminish the probability that automakers would get a handout. Taxpayers' purse strings were drawing tight. I'm sure Wagoner and Ford CEO Alan Mulally were feeling bleak.
That display of backbone lasted all of about a day, when the government decided it wanted to be in the insurance business and seized American International Group (NYSE: AIG), in effect nationalizing the insurer. Of course, that created the impression that the sky was falling, and the markets all turned south in a hurry, leading to the equally dramatic pronouncements heading into the weekend that a major bailout was in the works. You could almost hear the automakers' engines purring.
GM will use the money from its credit facility to retire some $750 million in debt coming due in October, as well as to assist parts supplier Delphi with its $1.2 billion reorganization. Right before the credit markets turned topsy-turvy, GM had agreed to help Delphi get its act together and emerge from bankruptcy protection. Both may now engage in a drag race to the finish line of solvency.
Back in June, GM had said that drawing down its credit line might send the wrong message to investors. Now that it is tapping every last bit of credit left to its name, it may also be trying to send Congress a not-so-subtle message: When you're done handing out the big bucks to banks, don't forget the pittance the automakers are asking for. General Motors might also have just set itself on a collision course with oblivion.
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