Monday, December 08, 2008

The Stars Start to Allign

UPDATE: below

Support is building in Congress for an automaker bailout. Rather than appropriate new money, the plan would re-purpose (my favorite Washington word) the already-approved $25 billion--loan guarantees for "green" production lines--to fund the reorganization auto execs presented to Congress last week.

It's nowhere near my proposed bailout conditions, the most important of which is "bankruptcy first." It wouldn't even satisfy the bankruptcy alternative proposed by Senator Bob Corker (R-Tenn.):
  • One, give existing bondholders 30 cents on the dollar to help reduce their overall debt load.

  • Two, bring wages immediately in-line with companies like Nissan and Volkswagen.

  • Three, GM owes $23 billion to the United Auto Worker’s VEBA (voluntary employees’ beneficiary association) account. The union must agree to take half of that payment in GM stock.

  • Four, the union must agree to do away with payments to workers who are still receiving almost full compensation up to four years after their jobs have ended.
Corker's intent is to import the benefits of a Chapter 11 reorganization without resort to bankruptcy. Some legal experts doubt it could work; blogger Combs Spouts Off is skeptical.

Stick with what we know--the Big-3 will agree to bankruptcy if it's a bailout condition.


Henry Payne in National Review:
With General Motors and Chrysler on the precipice of bankruptcy, House Speaker Nancy Pelosi and other green California legislators finally relented late Friday in allowing the use of $15 billion of an already-appropriated $25 billion in federal loans to Detroit automakers. The money -- only half of what automakers requested -- will provide short-term relief to keep Detroit’s two most vulnerable car companies out of Chapter 11 until the new Obama administration enters office next year.
(via The Corner, BizzyBlog)

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