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Friday, November 21, 2008

Detroit Bailout Terms from Reid and Pelosi

It makes sense that Detroit and the big three need to change their business plan if Washington is going to bail them out. Today Senate President Harry Reid and Speaker of the House served up the terms for any bailout loan. It would not make sense to just hand out a blank check to the big three without preconditions.

It also makes perfect sense that the Congress can not let these three key corporations fail when they are so heavily interwoven in the American manufacturing economy. Given the fact that many companies all across America rely on the big three as their main customers, the Congress can not kick the stool out from under them and let them hang in the bankruptcy courts. If they did collapse in bankruptcy it would be a rush on the courts to file bankruptcy by thousands of companies all across America when they are forced to eat the big three’s simple business mistakes.

Over at the Washington Post they have this at The Ticker on the terms of the Reid and Pelosi terms…

Congressional leaders gave automakers a list of promises that must be made in writing by Dec. 2 so Congress can come back for a second lame-duck session on Dec. 8 to consider the loans.

Here is what Congress needs from Detroit before it will release any loans:

-- A "forthright, documented assessment" of the Big Three's cash position, short-term liquidity needs and plans to meet their financing needs.

-- Estimates of how much money Detroit needs based on auto sales at current, better and worse levels.

-- "Transparency and accountability," including balance-sheet reporting to the government.

-- A promise to pay the government loans back before loans the Big Three has secured from private lenders.

-- The provision of sweeteners to taxpayers in the form of warrants or other mechanisms.

-- A promise to bar the payment of dividends to shareholders and "excessive compensation, including bonuses and golden parachutes." (Note the lack of a concrete figures on bonus and salary limits; this will provide automakers with some wiggle room to retain key executives.)

-- Proposals to continue paying health care and pension obligations.

-- A demonstration that the Big Three will be able to hit fuel-efficiency standards set for by Congress last year and "and become a long-term global leader in the production of energy-efficient advanced technology vehicles." (Again, wiggle room.)

-- An agreement that the government loans will be immediately callable if Congress's requirements are not met.

Washington Post and The Ticker

Congress is going to give this loan to the big three and the terms will be met. Congress does not have a choice when the tentacles of the business the auto industry is in reaches so far and deep into our economy. If you think it will not pass then you don’t have a clue as to how far and wide these three businesses reach.

Keep the pressure on and save good paying American jobs! Call your Senator and Congressional member. Email them, write letters, and just be a pain in the butt to save your neighbors jobs.

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