Congressman Brad Sherman (D-CA), known for questioning auto CEOs on their arrival in Washington on luxury jet aircraft, stated:
“We need to save the U.S. auto industry, and a formal bankruptcy reorganization is not the way to go. Given that Republican Senators blocked Congressional action, the Administration’s plan is far better than inaction. However, the plan gives the taxpayers too few warrants, and may allow executives to receive multi-million dollar compensation packages.
Warrants are the device to share in the upside if the companies prosper in the future. The Congressional proposal provided taxpayers with warrants worth a minimum of 20% of the cash to be invested. I thought 20% was far too little given the risks taxpayers were being asked to take, particularly with regard to GM and Chrysler. At the November 19th hearing, I asked GM CEO Rick Wagoner whether taxpayers deserved far more warrants and suggested taxpayers deserved up to five times the 20% level. Wagoner responded:
‘… we respect that the government should get fair compensation and are very willing to discuss the kind of terms that you laid out.’
Yet the Bush administration settled for warrants worth only 20% of the amount we are investing. This is a generous Christmas gift to the shareholders and executives of the big three.
The deal seems to contain no effective limits on the total compensation of each executive. It allows multi-million dollar salaries to continue and seems to impose no limits on stock options. Stock options are warrants given to executives, and could be worth tens of millions if the companies recover.
While the deal prevents the big three from owning or leasing corporate jets, it allows them to charter luxury jets for executive travel. One of the companies told me explicitly that their CEO will never fly commercial.”
