Automakers propose loan for equity swap

WASHINGTON, Oct. 28 (UPI) -- U.S. automaker General Motors and Cerberus Capital Management have asked the government for a $10 billion loan that includes an equity swap, a source said.

The $10 billion deal is to include the government taking ownership of $3 billion of preferred stock in the company formed by a merger of GM and Chrysler LLC, which Cerberus owns, CNBC reported Tuesday.

The Bush administration had been exploring three options for helping with the merger, The New York Times reported.

One option is to allow automakers to tap into the $700 billion bailout program designed for financial firms. Option 2 is to allow the companies to use part of the $25 billion in low-interest loans approved by Congress. The third option is to ask Congress for funds after the Nov. 4 election.

Sources have said GM needs between $5 billion and $10 billion to complete the transaction. As sales and the economy have both plummeted, GM is "hemorrhaging cash," the Times reported. The Detroit News reported Monday that GM would need $10 billion to cover a debt that would come due if Chrysler was sold.

The U.S. Treasury hasn't responded to the deal proposed by the two companies, CNBC said.