I send Bill Nelson, one of our Florida US Senators, emails about various issues. He is a Democrat, well-meaning and I have never read of any corrupt aspect of his service.
As readers have noticed from my posts, I'm ready to let the Big 3 go into Chapter 11. Sen. Nelson disagrees. Here is his response to my email:
Thank you for contacting me regarding the proposed bailout of the auto industry .
In my judgment, the Big Three automakers have arrived at this point through their own poor management. The fact that so many American manufacturing jobs are at risk is the only reason these companies deserve any taxpayer assistance. In order to avoid digging ourselves into a deeper economic hole, we must take action. But we cannot simply have another bailout. Any assistance from the government must come in the form of a loan with significant strings attached to force these companies to restructure the way they do business.
First, we must insist that the Big Three increase their average fuel economy to 50 miles per gallon by 2020. Automakers must also increase production of flex-fuel, electric, and plug-in hybrid vehicles. Foreign car companies have been building fuel-efficient cars for years, and now in this era of volatile gas prices, the American manufacturers find themselves at a disadvantage.
We also must ensure that no taxpayer money goes to reward the people who got us in this situation in the first place. Shareholders in these companies should not receive dividends until the companies return to financial health. We must place limits on executive compensation and eliminate golden parachutes. Finally, we must insist that these companies replace their senior management. We need new leadership and fresh ideas to get us out of this mess.
I appreciate the time you've taken to contact me about this important issue. I am committed to keeping America on the leading edge of manufacturing and technological innovation. Please do not hesitate to share your views with me in the future.
Intervention by Congress, then, is the answer, and not the market-place. What a sorry pass we have come to in this country when the national political system chooses the winners and losers among US corporations.
One of the remarkably naive statements Sen. Nelson makes is "Shareholders in these companies should not receive dividends until the companies return to financial health." Only healthy companies pay dividends. They do not pay dividends unless there are earnings and profits. That is dictated by the market and by law. If the companies went in to Chapter 11, we can be assured that shareholders will be treated appropriately. The appropriate treatment will probably be that, when the smoke clears, the present shareholders will own little or nothing of the emerging companies, and they certainly will not receive dividends in the meanwhile.