Filibuster Faster Please Or Alternately, Why The Feds Can’t Teach The Big 3 How To Make Cars.

by John Hawkins | December 9, 2008 9:20 am

Good news, everybody! Not only does it look like a bailout is on the way for the Big 3, our federal government, which has wasted more money than any other organization in the history of the planet, has decided to get intimately involved to make sure our money isn’t wasted. Gosh, what could possibly go wrong[1]?

Congress and the White House inched toward a financial rescue of the Big Three auto makers, negotiating legislation that would give the U.S. government a substantial ownership stake in the industry and a central role in its restructuring.

Under terms of the draft legislation, which continued to evolve Monday evening, the government would receive warrants for stock equivalent to at least 20% of the loans any company receives. The company also would have to agree to limits on executive compensation and dividend payments, much like those contained in the government’s $700 billion rescue of the financial industry.

In the case of General Motors Corp., such a move could give the government a large stake in the company and may hurt existing shareholders. GM is seeking about $10 billion in short-term loans and has a market capitalization of about $3 billion. The legislation didn’t specify what kind of stock the government would take, leaving open the option it could be preferred, common, voting or nonvoting.

Assuming congressional Democrats and the White House come to agreement on the plan, the car industry would be the latest to submit to strict government scrutiny in return for a bailout, joining most prominently the banking sector.

The auto industry would undergo a restructuring process akin to bankruptcy reorganization, only with fewer rigors and with the government, not a judge, in control, and with many associated political complications.

The program would be overseen by an official, tapped by President George W. Bush, whom congressional aides and lawmakers describe as an “auto czar.” This person would act as a kind of trustee with authority to bring together labor, management, creditors and parts suppliers to negotiate a restructuring plan. He or she also would be able to review any transaction or contract valued at more than $25 million.

…One danger for auto makers is exposing the industry to congressional meddling as it attempts to build a new business model. The legislation, among other things, would bar the companies from participating in legal challenges to state laws designed to impose limits on greenhouse-gas emissions. The White House opposes that provision, congressional aides said.

The big three would have to analyze whether excess production capacity could be used to make trains and buses for public transit authorities. Also, in a slap, the legislation would require companies to sell or cancel lease agreements for private jets. The Detroit chief executives raised the ire of lawmakers in November by arriving in Washington on their own planes.

Putting aside the fact that the government is setting itself up as an overseer of an industry it knows absolutely nothing about, their priorities foretell that this will be a disaster.

They want the Big 3 to drop lawsuits, to look into making public transportation no one wants, to sell private jets, and they’ve also discussed limiting corporate pay. If you’ll notice, absolutely none of these changes have anything to do with making the companies more viable over the long term. As a matter of fact, losing these lawsuits and keeping top executives from coming on board because of low pay could actually make the Big 3 significantly less likely to survive.

Additionally, although we’re discussing the government buying into the Big 3, what we don’t hear is anyone discussing when the Feds are getting out. Hasn’t the federal government proven again and again that it’s too incompetent to be involved in private industry? Didn’t the taxpayers just get soaked to the tune of trillions because the government was connected to companies that they believed were “too big to fail?” Now, they’re buying into banks, into the Big 3, and into God knows what else. What happens when those companies are ready to fail again? Does the government stake mean we’re on the hook for billions more?

What Congress is suggesting today is an absolute disaster and it does not deserve the support of conservatives or the Republican Party. The GOP should protect the taxpayers, not the unions, and filibuster this bailout.

  1. what could possibly go wrong:

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