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Wednesday, December 10, 2008

Maybe Dead...

Senator Shelby (R-AL) and 4 others have threatened to filibuster the bridge loan bill. There are 49 Republican senators, and 51 Democrat/Independents. But of the 51, 3 are off duty: Biden, Clinton, and Obama. It isn't clear if the Democrats have enough support to get cloture, so there is a good chance that the Southern Republicans will get their wish--Chapter 11 for GM and Chrysler.

Here's the video: CNBC

The Southern Republicans are determined to bust the UAW. Here is the outline of their plan. An excerpt (red text is my emphasis):

What We Should Be Doing: The American Automotive Reorganization and Recovery Plan

Hard Benchmarks:

On December 2, the Big Three presented to Congress their plans for restructuring. While the plans included laudable goals, too few details were provided ...

The Big Three must lock in the restructuring they have promised in a matter of weeks, not months or years. Congress should instead establish firm benchmarks and a tight timeline for restructuring. Such benchmarks will include for example requiring that by March 31, 2009 each company should reach agreement whereby:

•The companies’ creditors agree to a framework to reduce each company’s indebtedness by at least 1/3.

•The UAW holds to concessions already made and further:
o Concedes the elimination of Supplemental Unemployment Benefits;
o Concedes elimination of the Jobs Bank Program;
o Agrees to either reduce company retiree health care obligations or otherwise convert a portion of such obligations into equity; and
o Agrees to reduce wages and benefits to the levels paid by non-Big Three manufacturers.

A Process for Reaching Expedited Agreement, Instead of Nationalizing America’s Auto Companies

Because of the many legal and contractual hurdles to restructuring, the companies are urged to accomplish their restructuring through the use of a pre-packaged bankruptcy or another mechanism to bring all stakeholders to the table for an agreed-upon determination of their future. It is important that these stakeholders reach reasonable compromises amongst themselves. Creating a government bureaucracy or a “car czar” to arbitrarily pass judgment on the thousands of details involved with a restructuring is akin to nationalizing the auto companies.

Interim Financing: Insurance, Rather than a Taxpayer-Funded Bailout

The Big Three may need some form of interim financing as they finalize their restructuring. In normal economic times, if their restructuring plan is considered viable, such financing should be available in the private market. Because of the current credit crisis, limited assistance may be appropriate in the form of insurance, rather than a taxpayer-funded government bailout that replaces private investment. We propose that the government provide insurance, funded by the participants with a modest FDIC-like fee, which would cover up to 50 percent of the losses of new investment in the case of default, helping to unlock immediate private investment (not unlike debtor in possession financing). Such insurance would expire on March 31, 2009. This proposal ensures that taxpayers are protected and provides a powerful incentive for the Big Three to quickly implement their restructuring plans.
So they are basically saying, 1) break the UAW, and 2) soak the creditors, while offering a 50% insurance policy against default to try to attract private investment.

It's the "private investment" part that worries me.

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