The Big Three auto bosses will present Congress with an actual plan today to not just throw $25 billion of taxpayer money down the bottomless bailout hole. (If reports are to be believed, these executives will also endure the punishment of actually having to use their own vehicles to drive from Detroit to a new round of hearings scheduled for later this week. Everyone loves a road trip, right?)
In the meantime, the good people at the New Republic have asked two business school professors who know the auto industry to lay out a vision for what a logical bailout might look like, without the help of the Chapter 11 bankruptcy process.
Under this scenario, the government would make available $25 billion in financing–similar to the “debtor-in-possession” financing that the private lending market would make available in a healthy economic environment. And, as in a normal bankruptcy, existing creditors would get heavily reduced payments (say, 30 or 40 cents on every dollar owed) along with equity. The creditors would take a hit, but they’d also have a chance to make back that money–and perhaps earn some more–if the companies rebound and stock prices rise.
But instead of letting a bankruptcy judge supervise this process, the government would appoint a special advisory committee to oversee the process. This committee would consist of knowledgeable, independent monitors–a mixture of former industry executives with experience working for Toyota or Honda; academics who study the industry; and experts in alternative engine technology or labor-management collaboration. . . . If a company missed its goals for, say, two quarters in a row, the committee would then provide only enough funds to prepare for liquidation or nationalization. . . . The companies would also owe the government a downsizing roadmap. How many workers will lose their jobs? What kind of help will they need? And what about the dealerships? The latter are a particular challenge. . . . The government could set one final set of goals, not so much to address a lingering failure but to advance an important social goal: fighting climate change. Each company seeking funds could commit itself to exceed, by at least twenty percent, the recently passed Corporate Average Fuel Economy requirement of 35 miles per gallon by 2020.
CARPOOL UPDATE: From Bloomberg: ” ‘He’s driving,’ a Ford spokesman, Mark Truby, wrote in an e-mail today about [Ford CEO Alan] Mulally’s plans for sessions set to start on Dec. 4. A General Motors Corp. spokesman, Tony Cervone, said ‘it is safe to assume’ CEO Rick Wagoner won’t use a company plane, while a Chrysler LLC spokeswoman, Katie Hepler, declined comment on Robert Nardelli’s travel plans.”