The New Republic has a good piece today by two academics who've studied the auto industry outlining what the optimal bailout deal would look like:
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. It would, naturally, have a director and full-time staff, plus the ability to work with outside consultants. Under the scenario we envision, the committee would set goals and require the companies to report on progress quarterly, as a condition for obtaining additional funds. 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. (Leftover money could go to retraining workers and softening the blow of downsizing on communities.)
Makes some sense. Meanwhile, after being stung by public criticism for taking their corporate jets to the last congressional hearing, the various auto CEOs will be driving in tomorrow. Which is stupid. The industry has lots of problems, but overuse of the corporate jet by busy CEOs is not one of them. This'll waste 18 hours or so at a time when the executives presumably have work they could, and should, be doing.
