GM Wants A Bailout? Here Are The Conditions

General Motors' lobbyists are trying to terrify the nation into keeping the company on life-support with another $25 billion bailout. Judging from the panicked noises emanating from Washington, they are succeeding. So it's time we started talking about the conditions that should be put on this latest handout to a chronically weak American company.

Thomas Friedman (NYT) and Paul Ingrassia (WSJ) have started the list. I've added to it:

* Stock goes to zero (shareholders lose everything)
* Existing debt-holders take a hit ($0.30-$0.40 on dollar?)
* Bailout money is dispensed in small amounts in return for senior convertible debt (converts into 100% ownership), pending the meeting of goals
* Management and board dumped without golden parachutes as soon as strong replacements can be found
* Union contracts torn up
* Company radically downsized
* Remaining employees offered new, fair employment terms (pay, benefits) which they can accept or decline at their choosing
* Company commits to designing and building cars people want.

Anything else we should add? Please add in the comments.

See Also: Don't Do It, Obama. Don't Bail Out Ford And GM

Follow Henry Blodget on Twitter: www.twitter.com/hblodget

Comments

[tomas0808]

I like it. If they showed even a modicum of comprehension I might be inclined to offer them something, but the UAW boss came out and said the spot they're in is no fault of theirs, he blames the economy. That kind of stupidity cannot be allowed to continue

[Shortyfuse]

Here is what has to happen for me to go along with it.
1. The car American Auto Industry has build AFFORDABLE, VERY LOW GAS USAGE, autos that are TOTALLY made in America.
2. The government has to be purged of the oil and gas ROBBER BARONS so that we will never be at the mercy of the oil cartels again.
I remember the last oil crisis we had when the man had a solar energy farm. He lost his shirt when the oil prices went down. That is why they are going down now, only to rise again as soon as all competition is squashed.
Can I repeat AFFORDABLE. I am not going to pay 15 to 20 thousand for a damn low gas mileage car. I can buy a lot of damn gas for that price.

[davefoc]

I might not be opposed to a bailout under those or similar conditions, but Obama has already blinked. The various stakeholder in the Detroit car industries need to know that the government is not committed to a bailout and Obama has signaled that he is.

If acceptable terms can't be agreed to the auto manufacturers need to know they will be allowed to fail. Obama seems to have taken this option off the table. That is a mistake.

And who says the government needs to bail out all three? Let each of them make their best pitch and the government helps one or two.

Ford might be the front runner for saving right now. It has a reasonable line up of models. It doesn't have a bunch of brands that need to be shut down and it's been doing well on the quality front. They might be in a situation where a little help could go a long way. On the other hand a GM bankruptcy might just be all the help they need to keep going. It might substantially increase their market share as they moved to pick up some of the sales given up by GM. And there might be some nice equipment bargains that pop up in a GM fire sale.

[MattInVA]

The only problem with that proposal is a GM bankruptcy will most likely kill all their shared suppliers. Ford will not be able to continue producing cars if GM dies.

[JBS]

It's interesting that "contracts are sacred" when it's us paying the corporations, but when it's corporations paying the workers you can just tear up the contracts.

Wrong answer.

[Shortyfuse]

Thank you JBS. The American worker has been out of the collective bargaining for way far to many years now. However the globalist have had Cato institute, the Heritage Foundation, The American Enterprise Institute, the Corporate media and the rest of the traitors that think it is a good idea to bring American, British, and European workers to their knees in the name of globalization.

[Rasaria]

Why is Henry not among the luminaries vying for a position on Obama's team? Though I am a Democrat, I think Pelosi and Reid are completely wrong on this one and Obama needs to reign them in sooner rather than later. We should have let Chrysler fail 30 years ago but didn't and look where we are now. It's time for a little tough economic love and if we are in this economic mess for the foreseeable future, better to suck it up now, cut our losses and position for the recovery rather than play these silly political games. We need clear economic thinkers to steer us out of this not political creatures.

[relphl]

I think a summit conference is the only thing that will work; get all interested parties together, declare the purpose of the meeting — to figure out how to produce high-quality efficient vehicles profitably — and make it clear: no buy- in/bailout until they come up with a way to run their business this way. They're asking for help in running their business, and it makes absolutely no sense to throw money at the current operations.

[larry278]

How about another condition--till GM meets all 10 conditions, GM's ads will admit that GM is the mark of mediocrity & bankruptcy.

[KillTheMessenger]

No conditions and no bailout. LET THEM DIE. Honda and Toyota can pick up the pieces.

[MattInVA]

What do you mean "pick up the pieces?" And how is Toyota going to do this when they actually lost money in the US last quarter?

[KeithCraker]

If replacements aren't found and the top execs are kept, put them on government salary-equivalent wages until such time GM is on its feet again, nothing more - no perks, no bonuses. And 30 mpg is a mandatory minimum - 35-40 would be even better.

[jerrypl]

Let us add some more: give the workers an investment ownership stake in the company, once their current contracts are suspended or torn up. Demand elimination of brand models. Why not merge the car companies if they want bail-outs. How many redundant car and truck models do we need? Demand that a certain percentage of the line-up be hybrid electric. Give lifetime non-transferrable warranties on all vehicles sold. Tell them--take it or leave it.

http://eye-on-washington.blogspot.com

[brklynivn]

It is absolutely mind boggling. Look at Ford's lineup in Europe and compare it to what they offer here in the US, and the same goes for GM. They do make and sell the cars and trucks we want. They just don't do it here in the US. This management incompetence to the highest degree. They have to get rid of their corporate bureaucracy before any money could even possibly help. They have been talking about this since 1993, there was a documentary about this on PBS's Frontline. Gm has already poured over 90 billion of it's own money and nothing has come of it.

[KillTheMessenger]

For Europe is, essentially, a different company. They operate within a different legal framework for "what a car is".

[PacificGatePost]

NO LOANS – BUT DON’T KILL THE HEARTLAND

It depends on HOW a bailout is structured, but one should be attempted.

BAILOUTS ARE COMPLEX BEASTS, but Try something outside the box like this to save the U.S. Auto Industry - - -

http://pacificgatepost.blogspot.com/2008/11/solution-for-detroit-gm-friends.html

Toyota and Honda also depend on the same suppliers who feed GM and FORD. No need to let “Detroit” disappear.

There is also much creative talent hidden inside the U.S. Big 3 that has been smothered by mismanagement and the UAW.

[cautionbug]

"Cars people want" should be rephrased to "Efficient, alternative-fuel cars MOST PEOPLE CAN AFFORD".

One of the major failings of Toyota and Honda are the pricing of their hybrid cars far above what people who would gain the most to buy one can afford to pay for one. If domestic makers put out a Prius-like hybrid at $12K, i'd buy one in a heartbeat. And the money i save in gas would help me pay off my credit debt, and that's good for the economy, too!

[MattInVA]

Toyota is already losing money at the current price of the Prius. At least right now, you're asking the impossible.

[tunes]

By reasonable benefits, do you mean eliminating pensions? Very few employees in the private sector have pensions anymore. If the big 3 can provide pensions and still compete, great, more power to them. But if they can't compete using an outdated business model, then they shouldn't seek taxpayer help. Asking taxpayers to help the Big 3 continue to pay for benefits that the majority of taxpayers do not themselves enjoy just seems unfair.

[HockeyMom]

I would really hate to see GM go under, but like a bad child they continue to do what pleases them. They have not been responsive to consumers needs in the past 50 years.

Remember fighting the "Nadar" button, which just happen to cost under $5.00 and saved countless lives? (It hooked the front seat in position so when stopping the person in the back seat didn't fly forward and push the front seat people into the windshield.)

There are so many other examples.