First, it should be noted that many Americans oppose any auto maker rescue/bailout, and the stance contains a legitimate point: that underperforming private companies shouldn't be rewarded for operational errors.
Still, a stronger argument holds that a cessation of U.S. auto company operations would severely hurt an already weak U.S. economy - - with an unacceptable increase in unemployment, particularly in the Midwest U.S., and other negative economic ramifications. Hence, Congress is very likely to pass and either President Bush/President-elect Obama will sign a performance-based rescue package.
The plan's performance metrics are likely to include:
- a credible, coherent plan for auto manufacturer viability and profitability;
- wage, benefit, and payment sacrifices by all stake holders: management, unionized employees, suppliers, dealers, contractors, shareholders, and creditors, etc.;
- the elimination of executive and management bonuses, if certain metrics are not me;
- a next-generation vehicle platform that reduces U.S. dependence on oil and that radically increases fuel efficiency/miles per gallon;
- debt-to-equity options, perhaps in the form of convertible bonds, that give the U.S. government the option of purchasing shares, should federal oversight officials choose to do so, to enable the government to share in any automaker's success;
- senior debt status for any U.S. government loans;
- full General Accounting Office access to auto maker financial records and business plans for the duration of the rescue package.
And other conditions. Congress may also add a condition requiring the Big Three 'to remain committed to a trained, diverse U.S. work force' that would require the auto makers to keep as many jobs in the U.S. and to retrain workers as technological change or as business conditions warrant.
In exchange, the Big Three will likely receive $25-30 billion in additional loans, possibly with an option to access $10-15 billion more, contingent on attaining certain metrics.
Shares of General Motors (NYSE: GM) rose 20 cents to $3.26, while Ford (NYSE: F) gained 13 cents to $1.56 in Monday afternoon trading
Auto Sector/Economic Analysis: Although the above list is not meant to be all-inclusive, satisfying most of the above requirements should meet Speaker Nancy Pelosi's, D-California, threshold for what constitutes a viable plan. Further, although the rescue will probably face the threat of a filibuster in the Senate, the view from here argues that those Senators who would filibuster probably will ultimately support the rescue, in exchange for a Congressional approval of certain legislation (most likely a pet project or two).
Closing Bell: Economic Catapult for Thanksgiving & Black Friday (WMT, TGT, GRMN, GOOG, MSFT)
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Reader Comments (Page 1 of 1)
11-24-2008 @ 4:04PM
Janusz said...
Why Big Three? Why not Small One?
11-24-2008 @ 4:38PM
Chris said...
Unfortunately, this is all backwards...
The Big Three have to show their products to *consumers* who will then show them them money....voluntarily.
That's how everyone in the marketplace has to do it.
Government does not have the market signals to plan any type of manufacturing.
Everyone in the marketplace struggles to figure out what consumer want (and will want in the future)...Car companies should not be exempt from this most efficent path to production.
11-24-2008 @ 4:57PM
Gino said...
So the government wats to put the car makers out of business so they can give AIG more money to go on elaborate parties spending over $400,000.00 on their first the first one and I have yet to see how much was spent on their meeting at a real expensive hotel.
Kind of makes you wonder how much of a kickback they are getting back to line their own pockets.
Can anybody say CIVIL WAR?
11-24-2008 @ 9:26PM
Frank said...
CAN ANYBODY SAY [SOCIALISM] RE USA GOVERNMENT?
11-24-2008 @ 6:34PM
Al Schrader said...
My relatives invented the Schrader tire valve, but I wont be in the caravan. I just don't want to make an ass out of myself.
Toyota can't build the 60 MPG Priuses fast enough. But, worse I told the big three this was going to happen a year ago.
They laughed at me. I invented a new dry sump engine design that gets 80 MPG. I told them they could have it for free. They laughed at me. Al
11-25-2008 @ 5:23AM
Torrent said...
As a person who will only buy American, I want to see them stay alive, so I support Pelosi's demand for a plan.
But mainly I want them to come back and kick some asian ass.
11-25-2008 @ 7:12AM
whodunit said...
What I would like to know is why the same demands are not being placed on the financial sector, this complete sector is the main culprit for the current crisis that we are experiencing. From the greed of the lending institutions to the greed of the rating agencies. This has led to the false assumption that they could create something from nothing and now we are pouring billions into their industry to support their errors. We are doing this with no rhyme, reason or set guidelines other than friends of friends. Yet when our manufacturing sector is affected by this crisis demands are made to justify why they wish for help. I agree that demands for improvement should be made. I just feel that all of the players should have the same rules and not the favoritism of those distributing my tax dollars like there is no tomorrow.
11-25-2008 @ 3:36PM
Pat said...
Nope ! These Plan Points don't go far enough !
If We the People Finance this, we need a Watchdog that is a Bull Dog, able to slice thru all the mumbo jumbo !
Folks these guys have spent a lifetime creating Power Point Dog & Pony Shows !
They will put one over the politicians all day since ultimately these DC types are for sale !