Auto Bailout Cliffhanger: Obama's $5.5 Billion Lifeline

(MoneyWatch)  As General Motors and Chrysler dangle from a fraying rope in a cliffhanger reminiscent of The Perils of Pauline, the Obama Administration is throwing them a life preserver in the form of $5.5 billion in last-ditch aid.

The bulk of the money, $5 billion, will go to GM to keep it out of bankruptcy through May. Chrysler's $500 million is life support for the rest of the month as it struggles to reach agreement on a merger with Fiat. If Chrysler can close the loop with Fiat (Obama's auto task force is meeting on that very question this week) then it stands to get up to $6 billion from the Treasury Department's corporate rescue fund.

Bankruptcy fever is still running high. General Motors has finally lined up some credible small cars, such as the global Chevrolet Cruze (above), but will it be able to get them to market? Chrysler is still having trouble reaching a crucial deal with its Canadian unions. This week, some workers publicly burned letters from Tom LaSorda, the Canada-born vice chairman of the company, threatening that Chrysler would leave Canada without concessions.

GM, meanwhile, is signalling its serious intent by starting the process of laying off 1,600 white-collar workers April 20. But the impression of austerity was marred by the revelation--on the same day--that the company had spent $2.8 million on lobbyists in the first quarter of 2009.

The two automakers have so far taken in $17.4 billion in government loans, but now they are back on the brink, hanging on by their fingernails.