What's Next for the Big 3

Well, let's take a look at the highlights of the bill that Congress is dangling for the US automakers. The main stipulation is that the Big Three must submit their plans for using the money and what they will do in the future. Here are the highlights, bulleted from Green Car Congress:

• The Secretary of Commerce is to establish a program to provide up to $25 billion in direct loans to automobile manufacturers and component suppliers whose failure would have a systemic adverse effect on the overall economy.

• Any costs of the loans would be covered by funds previously appropriated for auto industry retooling loans under Section 136 of the Energy Independence and Security Act of 2007 (P.L. 110-140).

• Loan repayments and proceeds from the sale of company stock will be used to replenish funding for Section 136.

• Loan recipients must detail how they would use the funds to ensure their long-term financial viability and improve their ability to produce energy-efficient, advanced technology vehicles. Requires cost control measures and performance goals and milestones.

• Establishes an Oversight Board comprising the Secretary of Commerce, Secretary of Energy, Secretary of Transportation, Secretary of Treasury, Secretary of Labor and the Administrator of the Environmental Protection Agency. The Board will review and provide advice, and recommend changes, as necessary, for meeting the goals and milestones under the Financial Viability Plan. The Board also has authority to review significant company transactions (e.g., asset sales or investments valued at more than $25 million) and to give direction to the company with respect to such transactions.

• The government gets an equity stake in firms that get loans.

• Prohibits firms who receive loans from paying dividends to common stockholders for the duration of the loan.

• The companies will be charged 5% interest for the first 5 years and then 9% interest after that.

• Requires companies that receive the loans to place limits on executive compensation, including prohibiting golden parachutes. In addition to all of the limits placed on EESA beneficiaries, prohibits bonuses to executives whose base pay exceeds $250,000 annually.

The so-called Detroit 3 have until December 2nd to return with their plans. If you are interested, this is formally called the Auto Industry Emergency Bridge Loan Act.

In other news, Nancy Pelosi said that Congress' tough stance against the automakers was "good news". Apparently, she thought their performance this week in front of the House and Senate was not nearly enough and this now gives them another opportunity to prove themselves. Whatever Nancy.