Democrats do occasionally, nay, frequently, have common sense, including Madam Speaker
She and Senate Majority Leader Harry Reid, D-Nev., said Congress would return to work in early December to vote on legislation if General Motors Corp., Ford Motor Co. and Chrysler LLC produce an acceptable plan.
I'm still working though what might be a viable way forward. Here's my framework if I were getting the combat pay as treasury secretary.
(1) Sit down with the UAW and map out a wage and benefit package that will pass muster for the long haul. This may be easier for an Obama administration econ guy early next year, for he can play the bad cop: "If we don't do this right, we'll be looking at losing the House in 2010 and, God forbid, getting stuck with President Palin in 2012. So, we really, really need to do this right."
(2) GM will get cleaned out and started over. Currently, GM has $110 million in assets and $170 in liabilities on the books. I'd offer the creditors $100 billion for the lot and start a GM 2.0 with a new labor contract (see #1) and a revamped balance sheet. We might be able to do it even cheaper than that, since GM debt has been trading at 20 cents on the dollar as of late.
(3) Where do I get that $100 billion for GM2.0?
$20 billion in convertible preferred from Uncle Sam.
$30 billion in common equity from private investors. Toyota might be interested in a controlling stake; they already have major ties to GM and have enough cash on hand to fork over $10 billion or so of that. The remaining $20B can come from an IPO of GM2.0.
$50 billion in long-term debt. We might offer to have Uncle Sam co-sign the debt in return for stock options.
(4) Ford is only $2 billion in the hole and might only need a modest infusion. Chrysler style loan guarantees might be all Ford needs; remember that the US made money on the Chrysler deal of the late 70s.
(5) I'd have to see the Chrysler financials in order to see where they're at. Since they went private last year, we don't have access to their numbers. I'm reminded of this bit from our Sullivan U faculty advance SACS and the City skit, where "Old Nick" (he of the horns and tail) is tempting some lady instructors into improving their teaching methods-
Miranda: Who are you?
Old Nick: Call me a teacher. Call me a preacher
Where learnin’ is burnin’ I’m the feature creature.
Don’t be passive, learning is massive.
If you teach it right it’s radioactive.
Problem solve, activate, maybe you collaborate.
Introduce experiential, that’ll make ‘em salivate.
Carrie: Salivate? You’re going to teach us to slobber?
Old Nick: Like Pavlov’s dog.
Charlotte: Who's Pablo? What kind of dog? A Chihuahua?
Old Nick: Forget the Cerberus, err, I mean dog, I’m here to help you learn.
For the time being, we'll need to forget the Cerberus..... Capital until they give some up-to-date financials on Chrysler.
It will be interesting to see if this actually gets through a lame-duck session of Congress, or gets left for the next Congress and either the very last days of the Bush administration or the early Obama administration.
Canadian help seems forthcoming, as it was part of the Throne Speech (the Canadian equivalent of the State of the Union address) yesterday. However, the US will have to be doing most of the financial heavy lifting on this one. It might not be as heavy as it might seem if we do it right.
However, doing it wrong might take out a good hunk of our economy. We need to get an economic FEMA in for this creative destruction, lest we take the heart out of our manufacturing sector.