Here’s the President on the Michael Smerconish radio show today:
THE PRESIDENT: The auto interventions weren’t started by me — they were started by a conservative Republican administration. The only thing that we did was rather than just write GM and Chrysler a blank check, we said, you know what, if you’re going to get any more taxpayer money, you’ve got to be accountable.
I’m going to cut-and-paste here from a post I wrote on June 7th.
Structure of the December loans to GM and Chrysler
In the last few days of December, Treasury loaned $24.9 B from TARP to GM, Chrysler, and their financing companies.
According to the terms of the loan (see pages 5-6 of the GM term sheet), by February 17th GM and Chrysler would have to submit restructuring plans to the President’s designee (and they did).
Each plan had to “achieve and sustain the long-term viability, international competitiveness and energy efficiency of the Company and its subsidiaries.” Each plan also had to “include specific actions intended” to achieve five goals. These goals came from the legislation we (the Bush team) negotiated with Rep. Frank, Rep. Pelosi, and Sen. Dodd:
- repay the loan and any other government financing;
- comply with fuel efficiency and emissions requirements and commence domestic manufacturing of advanced technology vehicles;
- achieve a positive net present value, using reasonable assumptions and taking into account all existing and projected future costs, including repayment of the Loan Amount and any other financing extended by the Government;
- rationalize costs, capitalization, and capacity with respect to the manufacturing workforce, suppliers and dealerships; and
- have a product mix and cost structure that is competitive in the U.S.
The Bush-era loans also set non-binding targets for the companies. There was no penalty if the companies developing plans missed these targets, but if they did, they had to explain why they thought they could still be viable. We took the targets from Senator Corker’s floor amendment earlier in the month:
- reduce your outstanding unsecured public debt by at least 2/3 through conversion into equity;
- reduce total compensation paid to U.S. workers so that by 12/31/09 the average per hour per person amount is competitive with workers in the transplant factories;
- eliminate the jobs bank;
- develop work rules that are competitive with the transplants by 12/31/09; and
- convert at least half of GM’s obliged payments to the VEBA to equity.
If, by March 31, the firm did not have a viability plan approved by the President’s designee, then the loan would be automatically called. Presumably the firm would then run out of cash within a few weeks and would enter a Chapter 11 process. We gave the President’s designee the authority to extend this process for 30 days.
That’s not “writ[ing] GM and Chrysler a blank check.”