Open Letter to our Senate

Senators Feinstein, Boxer & Colleagues:

Please vote "No" on the proposed Auto Industry bailout. This plan will be a disaster for our nation and taxpayers, and will only serve to prolong the destructive practices of the industry.

Rick Waggoner, GM CEO, testified yesterday that GM was losing $5 billion per month. If he received the entire bailout his firm would still run out of money in five months!

The industry needs restructuring, and the only credible path to achieve this is Chapter 11 reorganization. In this forum the companies can reject contracts that are not suited to the long term viability of the industry. This includes leases, supply contracts, and labor contracts, among others. It also gives the companies the opportunity to negotiate with lenders. Finally, it will not reward shareholders, as a bailout might (at least temporarily).

Please review this article in yesterday's NY Times - it is well thought out: http://www.nytimes.com/2008/11/18/business/economy/18sorkin.html?dlbk

I am not a big fan of Mitt Romney the politician, but as a corporate financier he knows a thing or two. Please review his op-ed piece that appeared today: http://www.nytimes.com/2008/11/19/opinion/19romney.html?hp

In lieu of a bailout, government should be ready to provide a "DIP" financing to these companies so that they can meet their operating obligations while in bankruptcy. This can be provided either in the form of a direct loan, or via a guarantee to banks providing these funds.

But funding without fundamental change will only prolong their disastrous strategy of gas guzzling and polluting cars, outdated models, over capacity, and over priced labor (on average $70/hour).

These companies need to be redirected to 50 MPG cars which pollute less and reduce our reliance on foreign oil (a national security issue). Currently hybrids cost over $8,000 more than their traditional counterparts. An effective corollary strategy would be an $8,000 tax credit for buyers of hybrids.

We need to be aware of the failure of other auto industry bailouts. Please review this article about the disastrous results of the bailout of the British industry:
http://www.nytimes.com/2008/11/18/business/economy/18car.html?em

Please vote "NO" on the proposed bailout.

Sincerely,

Michael Bloom