Auto Industry Bailout Congressional Hearings

December 7, 2008

The Honorable Charles B. Rangel
Chairman of the Ways and Means Committee
United States House of Representatives

Re: My letter 11/20/08 Auto Industry Bailout Plan, Financial Markets and Geopolitics
Subject: Auto Industry Congressional Hearings December 4 & 5, 2008

Dear Mr. Chairman:

I am here in Washington D.C. attending the hearings held by the Finance and Banking Committees of the Senate and House of Representatives. I was able to make contact with Alan Mulally, CEO of Ford, Robert Nardelli, CEO of Chrysler, and Robert Moss, General Counsel for General Motors.  Mrs. Julie Harris McCrey is working with Mr. Moss to set up a meeting with Richard Wagoner, CEO of General Motors Corporation. 

Following the hearings, I telephoned Mr. Jeffrey Brock, CFO for RTD Embedded Technologies, and requested that he provide a quick overview of General Motors Financial conditions. In about 45 minutes, Mr. Brock provided numbers that confirmed the dangers of dispersing any funds directly to General Motors and substantiated my policy concerns as expressed in my letter dated November 20, 2008. This letter is attached for review by Chairmen Barney Frank and Christopher Dodd.

GM sold 51% of GMAC in 2006 to a group led by Cerberus (the same group that owns 80% of Chrysler) therefore, GMAC’s balance sheet items are NOT consolidated on GM’s financials.

As per the 10-Q report filed with the SEC for the period ending September 30, 2008, one can quickly discover that GM had $16 billion in cash, $10 billion in receivables, $28 billion in payables, short term borrowing of $7 billion, and accrued liabilities of $34 billion.

From January to September cash and equivalents have eroded at a rate of $1 billion per month with $16 billion left. At that rate, General Motors will dip below their current monthly operating expense of $13 billion per month in January, 2009.

Close observation shows that the first 6 months of 2008 had an operating expense burn rate of $15 billion per month and was then reduced to $13 billion during the last 3 months ending September 30th.

General Motors Corporation is insolvent! Stockholders equity is showing a deficit of $60 billion. There is also a $43 billion hole in cash flow, which is probably climbing at an accelerated rate. This $43 billion is the minimum amount needed to assure some degree of solvency and is in sharp contrast to the $18 billion requested and could already be larger depending on performance during the last two months and the integrity of the $10 billion in accounts receivables.

Therefore, I urge the US Congress to force General Motors into bankruptcy without any further delay and protect if warranted the supply chain by considering direct payments to vendors only on a case by case basis!  If Congress does more than that, it would violate its own fiduciary responsibility.  We must again ask the following questions!  Are we doing the right thing for the long term? Do we want our life savings halved or worthless? Do we want unemployment to peak in the early or the later years of the new presidency? Do we want the US Dollar to lose its prominent status as a reserve currency? Do we want America to experience the trauma of run away inflation?

The thought of handing over $43 billion dollars to Mr. Richard Wagoner and indirectly to the Cerberus Group would be financial suicide and a political failure of catastrophic proportions.  Cerberus Group can withstand a loss of a $2 billion dollar investment.  This proposed bailout would benefit a group of 100 investors, not the 1.2 million jobs Congress thinks they are protecting.  Giving good money out to mismanaged corporations like GM and Chrysler would be disruptive to the financial markets and may slow down or jeopardize government contracts to viable industries.

More importantly, General Motors was less than forthcoming with Congress about the 51% ownership Cerberus Group holds in GMAC; thus seeking bank regulatory status would give a financial windfall to Cerberus at taxpayer expense.  Given the severity of the banking bailout this would be detrimental to the economy as well as the good will that 111th Congress should otherwise enjoy following the Inauguration of our new President.

Therefore, I further urge that all members of Congress refuse the bailout of Chrysler. Cerberus must bear the burden for the failure or survival of their virtually wholly owned subsidiary. 
It could be said that, Ford should be rewarded for their astute and foresighted management by providing the $9 billion stand-by bridge facility to cushion against the shock waives the automotive industry now must endure.

An additional $9 billion should be made available to “transplants” to facilitate manufacturing expansion of their superior fuel efficient automobiles in the United States. This would protect our geopolitical interests, provide new jobs, and prepare us to meet pent-up demands that will exist for new vehicles as Americans shed their fear and resume optimism for the 21st century.

America cannot allow further expansion of its monetary aggregate in a shrinking economy. We have already committed $3 trillion in investments, $3.1 trillion as insurers of last resort, and are committed to lend or invest $1.7 trillion. This is a total liability of $7.8 trillion and rising.

Very Truly Yours,

Robert J.S. Haris

Senior Vice President
Strategic Marketing and Planning
RTD Embedded Technologies, Inc.

cc: The Hon. Senator Christopher Dodd
      The Hon. Congressman Barney Frank
      The Hon. Senator Bob Corker
      The Hon. Congressman John Conyers