Auto Industry Bailout
Generally I favor a potential bailout of the auto industry, with significant strings attached. Enclosed here is a letter I sent to our Washington State Senators, Maria Cantwell and Patty Murray, as well as to my State Representative, David Reichert.
Dear [Senator | Representative]:
Tomorrow you will be meeting in the Senate with leaders of the U.S. Automobile industry to debate the merit of a potential bailout of our auto industry. Please review the following idea and, if you feel it has merit, feel free to use these ideas in coming up with a bailout plan for Detroit.
1. U.S. Government take a position of preferred stock in each of the U.S. auto companies, including Chrysler, GM and Ford, with a 10% to 12% dividend.
2. Auto manufacturers must suspend all interest payments to bondholders until preferred shareholders are paid in full, plus interest.
3. The UAW must accept payments equal to total payment packages paid by other car companies including Honda and Toyota. Non-negotiable. (currently Honda pays $50 something per hour while Ford is paying $70′ something per hour, fully loaded cost for the average worker).
4. After two years, the preferred stock will be available for public trading on the exchange whereby the government may sell at a price greater than or equal to the price paid for each share, allowing speculators to reduce the taxpayers’ risk. Once a market is established, it may trade at a discount or premium.
5. Preferred shareholders, of course, are the last to lose money. Common stockholders and bondholders alike remain completely at risk of losing their investment.
If you would like to discuss my idea, please call me on — — —-. Good luck!
With kind regards,
-Kendall Kunz, Citizen
Kendall,
While I appreciate your post, I vehemently disagree. Just as we have with AIG, all we are doing is blythely giving away our money without strings. You don’t mention limiting things such as unwarranted spending (such as taking corporate jets to the house meetings at about a cost of 20K a pop…), executive bonuses, high salaries for the C group… and the list goes on. Why should we as taxpayers pay for the overindulgences of our bloated auto industry?
This was a trainwreck waiting for a place to happen. The industry has blocked virtually every attempt to limit the amount of greenhouse gas emmisions, raise the gas mileage of the cars, make cars and trucks safer, and the list goes on. Now, that the consumer is talking with their wallet and those companies are now suffering from their own shortsightedness we as a taxpayer should help them out?
If I were to stop working on the latest and greatest versions of the software implemented and kept making money implementing old technology, eventually, I will work myself into obsolecense. Does this mean that I should be able to ask the government to pay my old salary because of my own greed and shortsightedness?
I think that the automakers should be held far more accountable than the current and planned bailouts provide. Currently, they have over 25 billion to retool (again something that is due to lack of vision). Therefore, in addition to getting stock, each executive should forgo their bonuses completely (including those jet perks…), and their salary should be tied directly to the efficiency and profitability of the company. This would directly improve the stock, the company and if unsuccessful, we as taxpayers are not on the hook for the bailout.
Its a shame some directors often fail to realise base fundamentals of what is and isn’t reality (as one senator called it – arrogance). I’ve seen many directors exhibit this behaviour not just in the car industry.
Anyway, for many years the US car auto makers have been oblivious to the environment, engine efficiency, hybrid technology, market domination when asian and euro auto makers have made cars smaller, more efficient engines, greener and hybrid. Did you know there’s a car in Germany (BMW driving around on Hydrogen) and releases water but performs as good as normal gas cars.
I think those asking for extra money should also (as Warren Buffer stress) be prepared to put their own personal money into the company. Directors need to take more responsibility.
If a bailout happens or the business needs to get back into profit, they should downsize, shed lots of staff then restructure so it has a future.
At the end of the day companies come and go (and Kendal you above all should know that). The world will move on! and the stronger more dynamic companies that move with the times will survive.
If a lame horse is dead, you put it out of it’s misery!
Just another note to Add. For years the automakers have lobbied washington, flying in on their jets, paid 20m+ dollars and so forth. All this to lobby but keep their positions, the status quo. If you look hard Kendal you will see that these automakers (and the bosses that ran them) have now in a sense been the architects of their own doom?
The question is do you reward this? I don’t believe the American people should, but it seems the following should happen
1. Sack the bosses
2. Bring in real talent to take the automakers in a new direction
3. Introduce smaller/fuel efficient cars
4. Phase out reliance on gas and introduce new innovative fuel types (well one can hope)
Oh and most importantly force the executives/bosses to lose their 20m salaries and standardise on 200k or less like everyone else to supplement the investment
I think the American public would welcome all this!