Editorial: Between the Lines: Pelosi/Reid Letter to Detroit

Ken Elias
by Ken Elias
editorial between the lines pelosi reid letter to detroit

So, the Motown millionaire’s beggars’ banquet blew town, retreating from Washington’s corridors of power to their Detroit lairs to lick their wounds. To say the CEOs of Chrysler, Ford and GM were unsuccessful in their televised attempts to “liberate” $25b from the Troubled Asset Recovery Program would be like saying the Detroit Lions are struggling to get to the Superbowl. In many ways, it was over before it started. The CEOs arrived woefully unprepared, and left with admonishments to return next month after, how do I put this delicately, getting their shit together. House Speaker Nancy Pelosi and Senate Leader Harry Reid switched into CYA mode. As part of their campaign, they’ve written a letter to Detoit, telling that what needs doing the second time ’round. Having secured a copy of this missive, TTAC contacted our own Ken Elias to read between the lines on your behalf. As the automakers run out of cash, it all comes down to this.

November 21, 2008

Dear Messrs Wagoner, Mulally, and Nardelli:

Ronnie G. – You have no standing at the table. Get lost. You should have killed the JOBS bank years ago. Yea, we love your union dollars but you’d vote for us anyways.

We recognize the importance of the domestic automobile industry and are committed to working with you to ensure its viability in the years to come. One in 10 American jobs is related to auto manufacturing; our national security depends on the industry’s technologies and manufacturing capacity; and our competitiveness in a global economy depends on its pursuit of excellence.

Boiler plate mostly, just shows that Congress does care…kind of.

As you know, Congress has provided President Bush, the Chairman of the Federal Reserve, and the Treasury Department the authority they need under the Emergency Economic Stabilization Act (EESA) as well as other authorities to provide short-term financial assistance to the auto companies.

If Bush was your friend, you might have convinced him. But he didn’t act, thank god. That would have been truly stupid to give your companies money with no strings. See below. You’ll have to stick with the Dems now, and we’re going to prove to the public that we aren’t just “tax and spend” liberals. There’s a new sheriff in town boys.

Unfortunately, the Bush Administration and the Federal Reserve have thus far declined to use their powers to improve our nation’s financial stability by assisting the auto industry. Notwithstanding existing authorities, this Congress is prepared to consider additional legislation that would give the assistance you seek, provided that you submit a credible restructuring plan that results in a viable industry, with quality jobs, and economic opportunity for the 21st century while protecting taxpayer investments.

Dems will take credit, not Bush. Just another chance for us to stab Bush. God I hate that man! We’ll blame him for not funding you guys…although it’s clear from this letter that you flunked the test we gave you in your first go around at the well. It took a lot of chutzpah to come in Gulfstream jets and ask for money.

In order for Congress to act in a timely manner, this plan must be presented to Congress by December 2nd, specifically to Senate Banking Committee Chairman Christopher Dodd and Financial Services Committee Chairman Barney Frank.

These Committees already grilled you. Think it’s gonna’ be any easier this time?

It is critical that you meet this deadline since we have announced we are prepared to come back into session the week of December 8 to consider legislation to assist your industry. We intend to give pertinent agencies within the executive branch, the Government Accountability Office, the Board of Governors of the Federal Reserve, as well as outside experts, the opportunity to comment on your work.

Yea, we’re going to get other people involved in reviewing your plans. Like folks who can read an income statement and balance sheet. And the big question is “who are these outside experts?” You don’t want to know since none of them will have ever been on your payrolls.

The plan must:

• Provide a forthright, documented assessment of the auto companies’ current operating cash position, short-term liquidity needs to continue operations as a going-concern, and how they will meet the financing needs associated with the plan to ensure the companies’ long-term viability as they retool for the future;

You’re going to give us a current cash balance as of November 30th and tell us in plain English how much cash you need to keep the lights on. That’s all the money you’re going to get. And I know that none of you can get additional financing for a turn around. So either get your lenders and everyone else who you owe money take a lot less cash, or else file for bankruptcy. Yea, that’s right. Even though I said that’s a last resort, well, it is.

provide varying estimates of the terms of the loan requested with varying assumptions including that of automobile sales at current rates, at slightly improved rates, and at worse rates;

Don’t show Congress a plan based on a wing and a prayer of some “normalized” sales rate. This economy isn’t turning around any time soon. And smart people, like TTAC, have told my aids that you can’t possibly become profitable at 11MM SAAR. So do what you need to do…no matter how much it hurts. Hey Bob Nardelli – I remember what you did to those workers at Home Depot, cutting their wages while enriching yourself. And you thought I forgot!

• Provide for specific measures designed to ensure transparency and accountability, including regular reporting to, and information-sharing with, any federal government oversight mechanisms established to safeguard taxpayer investments;

No more hiding for Cerberus. And since the taxpayers are the public, you’re going to have to show the world that you’re really not the smartest guys in the room. Heck, we’re squeezing you so tight that you might have to liquidate Chrysler.

protect taxpayers by granting the most senior status for any government loans provided, ensuring that taxpayers get paid back first;

The only way to do this is to get approval from your senior lenders. For them to allow this, they’ll want a plan that works too. But if you’re going to ask for subordination from your lenders, you might as well ask them for a debt for equity exchange. This is your opening for the cram down. Don’t blow it now.

• Assure that taxpayers benefit as corporate conditions improve and shareholder value increases through the provision of warrants or other mechanisms;

Dilution to current shareholders for sure.

• Bar the payment of dividends and excessive executive compensation, including bonuses and golden parachutes by companies receiving taxpayer assistance;

Limit CEO compensation at $1MM/year. And Rick you should probably quit now, your arrogance in front of the committees was just too much to bear. Asking a Senator if he could guarantee when the economy would come back…what balls! I’m giving you a chance to take that parachute today. Just go away. Nardelli, you agreed to a dollar salary, so just do it. I feel bad for Mulally, he made a deal to leave Boeing, and he’s probably worth the money having inherited a mess he’s been asked to clean up. But the public will insist on a salary cap – so do it.

include proposals to address the payment of health care and pension obligations;

That’s right, the UAW needs a cram down too on the VEBA. Learn to live with the same benefits everyone else gets (except us of course). And we want those pension obligations funded out of current operating cash flow – don’t show us a plan where taxpayer dollars fund those obligations.

• Demonstrate the auto companies’ ability to achieve the fuel efficiency requirements set forth in the Energy Independence and Security Act of 2007, and become a long-term global leader in the production of energy-efficient advanced technology vehicles; and

The Greens are holding you accountable to your promises. I’m also telling you that the funding mechanism will be out of the Energy Department funds we already appropriated – which means a limit of $25 billion total to be put out by the government. The Republicans won’t challenge us too much as there’s no new money involved. And if that’s not enough dough for GM or Chrysler to have a go forward plan, then you need to figure something else out.

require that government loans be immediately callable if long-term plan benchmarks are not met.

It means the government can force a bk any time it wants. Get over it.

The auto companies’ shareholders, business partners, and prospective benefactors—the American people—deserve to see a plan that is accountable to taxpayers and that is viable for the long-term. In return for their additional burden, taxpayers also deserve to see top automobile executives making significant sacrifices and major changes to their way of doing business.

Yo’ Rick W. Wake up…that means you. Change your business in a big way now.

The auto companies’ shareholders, business partners, and prospective benefactors—the American people—deserve to see a plan that is accountable to taxpayers and that is viable for the long-term. In return for their additional burden, taxpayers also deserve to see top automobile executives making significant sacrifices and major changes to their way of doing business.

Get it now? Sacrifices. Major changes in how you do business – like restructure now. This will force the cramdown at GM and it might just liquidate Chrysler. It’s what needs to happen, and most of the public will think we did the right thing and not blow their money. Ford – you sure you can really make it as you’re capitalized today? You better have a good case.

We look forward to working with you to ensure a viable American automobile manufacturing sector for decades to come. If we are successful, we can ensure a brighter future for the automobile industry, our nation, and our planet.

Now having read this letter, if you can’t see Obama’s hands in this, then you’re really stupid. Don’t think the Messiah will treat you any better – because THIS IS HIS PLAN!

Thank you for your prompt attention to this matter.

Prompt means by December 2nd, don’t stall. I really don’t want to call Congress back but I’m willing to do it IF I see you made some really big changes – and got your creditors and the UAW to contribute. Capiche?


Nancy Pelosi Harry Reid

Speaker of the House Senate Majority Leader

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2 of 14 comments
  • Michael Karesh Michael Karesh on Nov 22, 2008

    Excellent piece, Ken. I must say I'm really looking forward to these plans.

  • Joeaverage Joeaverage on Nov 23, 2008

    I don't see any reason America won't have an auto industry if Detroit fails. There are many smaller companies that were rising last summer while fuel prices were high. Without Detroit to compete with they'll probably move ahead quickly. Would be interesting to see what other import manufacturers would choose to do business here if the big 2.8 were gone. For the record I don't want Detroit to disappear - just want them to change their game so they can excel.

  • Tassos Despite the incomplete results, this article was the most useful, by far, of all TTAC articles for the entire Q3
  • Jkross22 Pedestrian.... trapped.... in San Francisco. Man, there's a lot of truth in this article.
  • Arthur Dailey What the heck is an 'influencer'?And who would buy or do something because somebody on a social media site told them to or recommended/flogged something?Maybe I am just too old and cynical to understand those who actually are 'influenced'? But then I also never trusted or was 'influenced' by celebrity endorsements or product placements.However I did know and coach a teenager who became extremely wealthy because he set up a Youtube channel where people paid to watch him and his friends play video games.
  • Dukeisduke $8,000 for this rustbucket? It's a '73, not a '74 ("Registered and titled as a 1973…it looks like a ‘74 to me"), and anyway, mid to late '60s Alfa Berlinas are much more desirable.Even if you kept it in a garage and didn't drive it in the rain, it wouldn't stop rusting, it might just progress more slowly. This looks more like a parts car than something you'd drive. It needs rear main seals all over the car, so that oil leaks can slow down the rust, like all the oil on the underbody.
  • Analoggrotto Only the truly influential , affluent, educated and elite drive TESLAs. This is a fake influencer.