U.S. Moves to Free Up Loan for GM: Report

The funding could help pave the way for a merger of General Motors with its rival Chrysler, according to a report.
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The Bush administration is working to release to

General Motors

(GM) - Get Report

a portion of the loans Congress approved for the auto industry, the

Wall Street Journal

reports, a move that could help ease the way for a possible merger with

Chrysler

.

GM and Chrysler's majority owner, Cerberus Capital, have been negotiating a deal in which GM would end up owning Chrysler, but the parties have struggled to line up financing. The combined company would need about $10 billion in new equity to cover the cost of integration, to lay off workers and to shut plants, the

Journal

reports, citing 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.

On Monday, Moody's lowered its ratings on GM and Chrysler. The rating agency said its outlook for GM is negative and that it may cut Chrysler's rating again. Ford Motor is rated B3, six levels into "junk," or non-investment grade, territory. Its rating is on review for possible downgrade, Moody's said.

Meanwhile,

Reuters

reports GM and Cerberus have asked the U.S. government for roughly $10 billion in a rescue package to support a merger. The government funding would include roughly $3 billion in exchange for preferred stock in the merged automaker, according to a source.

This article was written by a staff member of TheStreet.com.