Congress is considering a bailout for the “Big Three” U.S. auto makers. School of Management Dean Lou Lataif, a former Ford senior executive, says if the federal government chooses to become a lender of last resort, its loan could come with conditions:
– the government loan takes precedence over all other creditors;
– the loan would bear a fair interest rate which could yield the taxpayers a decent return on the risk taken;
– executive compensation and UAW wages and benefits would have to be modified until the companies return to profitability and the loan is fully repaid;
– each company would have to file a confidential ‘roadmap to profitability’ so that legislators could be satisfied that repayment of the government loan is likely when the pent-up demand for new vehicles returns in 2010 and beyond.
Lataif outlines his views further in Will the Big Three Fall.