What are likely to be Congress's performance conditions for any rescue package for Big Three auto manufacturers General Motors, Ford, and Chrysler?

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.
  

The first rule of public relations is never get in a fight with anyone who buys ink by the barrel. And a major tenet of investing is don't take a stock position in conflict with Congressional policy, once Congress has committed to a program.

The wisdom behind the second adage, like the first, is obvious enough: Congress has the ability to suddenly and substantially change the investment landscape.

Case in point: Congress, which is currently hearing testimony on a performance-based rescue package for General Motors (NYSE: GM), Ford (NYSE: F), and Chrysler, could end up further funding reform by the Big Three by buying millions of the companies' vehicles for the U.S. government's auto fleet.

'Catching three fish with one cast'

Economist David H. Wang says the tactic has appeal in several areas -- economic, industrial, energy.

"It would help the three companies retain essential employees while transforming their operations, it would keep more industrial spin-off jobs in the U.S., and it would save energy by increasing U.S. government auto fleet efficiency," Wang said. "It would be like catching three fish with one cast and I think the new Obama administration would look very favorably on the energy efficiency aspect, both private and public sector dimensions."

Shares of GM fell 30 cents to $2.79, while Ford declined 16 cents $1.52 in Wednesday morning trading.

Lost in this weekend's news about the $700 billion bailout package for the banking industry was a $25 billion loan package for United States auto manufacturers. This package comes at a time when apparently Congress and the President believe that the American people will see $25 billion as a pittance compared to the $700 billion they're already planning to spend on mortgages. While there certainly is precedence for this move --- the government loaned $675 million to Chrysler in 1980--- this loan package is several orders of magnitude larger.

Ryan Pfenninger of MarketRiders is outraged at this loan package, claiming it is anti-competitive to startup companies like Tesla Motors who are investing their own money in alternative technologies like battery power. $25 billion is a lot of money. Detroit should not be able to argue for 30 years against improved fuel mileage and better technology, and then come back to the same government they persuaded into facilitating their failure, for a bailout.

He points out the immense irony in this loan to auto manufacturers. According to Ryan, General Motors (NYSE:GM), Ford (NYSE:F), and Chrysler are currently struggling significantly against Japanese and other foreign manufacturers who have spent the last many years improving fuel efficiency and developing hybrid and other alternative technologies. If Detroit had spent as much time, money, and effort in research and development as they did lobbying Congress to keep fuel mileage standards low, and made competitive non-gas guzzling vehicles, I would venture a guess these loans wouldn't be necessary.

Ryan believes that most people understand a mortgage bailout was necessary. But he's not so sure that if Detroit fails, this could cripple the United States economy. There are plenty of foreign auto manufacturers with operations in the United States -- Toyota (NYSE:TM), Honda (NYSE:HMC), and Nissan (NASDAQ:NSANY)-- who could easily pick up the slack. Their vehicles are outselling American automobiles. They are building plants in places like East Liberty, OH and Lincoln, AL, providing jobs for people displaced by the failure of Detroit.