Bankruptcy NOT Bailout

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1. Mark says:

   November 23, 2008 at 12:53 am

   Whose the moron? Bankruptcy – Chapter 7 – would be the end of GM. So, please if you don’t know the facts, please stop talking. But, I guess anyone can get access to YouTube.
2. Amit says:

   November 23, 2008 at 3:44 am

   there is also Chapter 11 which is what the speaker in the video is referring to: http://en.wikipedia.org/wiki/Chapter_11

   what intrigues me is why pro-bailout folks believe there should be three large automotive companies based in the US. Why can’t there be two large companies like our political parties? Or maybe 7 or 8 smaller car companies like our airlines. What is so magical about having the Big 3?
3. FrenchyTheSailor says:

   November 23, 2008 at 8:25 am

   What ever route the government decides one thing has to happen. The CEO’s and their boards need to be fired, without any golden parachutes. These guys have proven they are incompotent and shouldn’t be allowed any part of the decision making process.
4. Amit says:

   November 23, 2008 at 8:50 am

   Frenchy, would you at least be in favor of forcing the auto CEOs to jump out of their luxury private jets with parachutes made of gold? oh the irony.

   but seriously, who would do the firing and re-hiring of the new management? I think you have to sue the upper-management for fraud or negligence to achieve the justice you want.
5. Mark says:

   November 23, 2008 at 10:13 am

   The problem is that Chapter 11 requires a loan (and thus a creditor) to carry the bankrupt business through reorgnanization. Numerous economists have been blunt in their assessment that no creditor has the money, nor in this economy the will, to provide GM a loan sufficient to carry it through to the otherside. Moreover, Who would buy a car from an automaker in bankruptcy?

   Ergo, anyone with the knowledge, and access to logic, knows that if GM goes into bankruptcy it will be a Chapter 7 liquidation. I imagine that if this happens the vast majority (including all blue collar workers in the US) will lose their jobs. GM will continue to survive and thrive as a foreign automaker but it will give up its factories and marketshare in the US to foreign makers, and America will lose just that much more of its manufacturing base. Which leads to the real issue with the long term prospects for our nation. As Jim Crammer pointed out, our nation will not survive long on a bunch of service jobs – and at a minimum we can expect to lose many of the jobs in this country that made us a middle class nation.

   What I really want to know though is why was the Bush Administration so forceful in saving a bunch of banks on Wall Street – to the tune of $700,000,000,000, but won’t lift a finger to save millions of American jobs – and a significant part of America’s national security/ manufacturing capability for a small fraction of that cost?
6. Mark says:

   November 23, 2008 at 10:14 am

   Amit – you also asked about why can’t we have small companies, the answer is simple. The engineering costs to build todays cars are too expensive for a small company to undertake.
7. Joel McDonald says:

   November 23, 2008 at 11:06 am

   Isn’t the solution somewhere in the middle? A pre-negotiated bankruptcy with using a Federal Loan? Attached to that loan should be further stipulations on the structure, operation, and products of the company.
8. Amit says:

   November 23, 2008 at 11:09 am

   Mark – If GM was to go under and was forced to liquidate its assets for pennies on the dollar, then imagine the Janesville Assembly in Wisconsin, which builds the Chevorlet Suburban, being sold to a few entrepreneurs for let’s say $100M, which is a much easier loan to get when you have collateral (i.e. the factory itself) and is 0.4% of the $25B being asked for currently. The new owners will still serve a reduced market for large SUVs and they would keep many (but not all) of the employees from GM. Over time, the new owners may retool the factory more efficiently to better address domestic and international needs and eventually turn a profit. So while I agree with you that the start-up costs of a new car company is large, the liquidation of GM makes it possible.
   —-
   also, the Bush Administration set a terrible precedent with the banking bailout but two wrongs don’t make a right.
9. Alter of Freedom says:

   November 23, 2008 at 12:04 pm

   ASk your self why the likes of a Warren Buffet is not gobbling up these shares of the likes of GM and Ford? It because the models are broken. The writing was on wall years ago when the Toyota Way was released and demonstrated the complete disconnect of the model given the current realtionship with unions. Ask yourself if these workers are more loyal to the Union than they are the company writing their paychecks and that may ipen a window into a major part of the issue facing these companies. I am not anti-union by any means, but there is something to be said for the fact that GM is increasingly more profitable overseas with its divisions and products made there than here in the USA. I find it rather inronic that the same people who have used Detriot as the whipping boy of environmental policy are suddenly silent on the possibility of the collapse now of the US auto market or the potential bailout, other than to “require” if there is a bailout that guidelines be set on epa standards where government dictates the products the automakers can produce and not the market. Look, I drive one of those gas guzzling SUV’s and my wife a Grand Caravan not because we have some sort of disdain for the environmental movement, but because we have three children under the age of ten so try and put a family of five in a Prius. W have just begun to enter the phase of the larger format vehicles (SUV/Trucks) going hyrbrid to accomodate growing families where in the past it was the compact or subcompact that had the most focus of this hybrid market. The whole perception of the criticism on the autos I think has be a bit misplaced regarding hybrids as any business needs to work its way through the trappings of new technology and can’t simply just roll out 20 hybrid models at once, though a certain point could be made that GM line of products may be to wide and it should focus it more. One of the problems was brought about by “branding” in the 1980′s, remember when you could get the same car from Daimond Motor Works but either from a US company branded name of a Japanense version….Eagle Talon/PlymouthLaser/Eclipse (same car), for example. That was lunacy in reality but in the marketing world it made perfect sense in that the US did not want to surrender at the time its name brand loyalty of its consumers. You can go round and round about who is at fault, but in the end if folks like GMAC which GM has a 49% stake in could actually provide financing people would be buying at these levels but not everyone has a 750 credit score to get the credit right now BECAUSE of what happened on Wall Street. Sure GM and other have issues, just like Walmart did eight years ago and Home Depot today or to the extreme Circuit City…there is a capital need/availability crisis not a consumer rejection crisis of the brand or retailer. I am heading out today to look at a 2008/9 Dodge Durango Adventurer after the 1PM football game selling now 12,000 below what it was last Spring…to me thats a Black Friday deal and a half. if only people had the same mentality deals like that as they do waiting at Walmart at midnight for the doors to open on Friday after Turkey Day. Heck, more the half the crap that gets bought there that day will either be broken or not used less than a year after purchase, meanwhile a quality auto buy could certainly produce some value for many years to come especially since you can pick up a 2008/09 model for a car payment less than you have today for that car you bought three or four years ago….if you can get the financing that is.
10. Below The Beltway » Blog Archive » The Case Against A Bailout says:

    November 23, 2008 at 12:24 pm

    [...] Bearing Drift Related PostsVirginia Blog [...]
11. Lynn Fairchild Martin says:

    November 23, 2008 at 9:03 pm

    So many of us are still missing a very big picture in this “big 3″ failure. If they go belly-up, we’re not just talking about three companies, as a whole. We’re talking about every one of those people who work in those companies, from white collar to blue collar. We’re talking about office workers who are not covered by unions, and this is at a time when you have far too many office workers who are begging for jobs. We’re talking about all of the blue collar workers who actually work in the plants. We’re talking about the janitors and the cooks who work in their cafeterias. But from there, we’re also talking about all of the white and blue collar folks who work in all of the support companies – tire makers, paint makers, upholstery makers, and so on. Then, we’re talking about all of the salesmen and their mechanics who are working at all of the dealerships in this country. It goes on and on at every level of what it takes to produce those cars. This isn’t about three, car companies. This is about one of the industries that has been a major employer of American workers.

    We certainly shouldn’t have jumped to bail out Wall Street and its banks. It obviously didn’t do what was expected; and now, we’re still looking at a declining stock market and the credit that was supposed to go along with it. But, we cannot afford, as a country, to just watch three, major employers in this country just wither away and die. Especially with the way that the economy is going right now, how can we afford to just watch all of those thousands and thousands of auto workers, blue and white collar, and all of the support industries that are going to be directly affected flood into the unemployment sector? The implications are staggering. There has to be a solution other than bankruptcy.

    And yes, I do drive an American car. I drive a Chevy Malibu, after looking at the Honda Accord. And, know what? I love my car, and I’m proud of the fact that it’s from an American-based company. With all of the companies that are jumping borders these days, we need to keep what we can here.
12. Steven Osborne says:

    November 24, 2008 at 8:03 am

    These corporate CEOs are all for capitalism and conservatism when its making them money. Now, when times are tough they have abandoned us.

    Conservatism is about the individual not about a company.
13. Alter of Freedom says:

    November 24, 2008 at 8:56 am

    There is nothing conservative about business. Business or at least successful ones take risks in order to become successful. Some workout and others do not in reality. Banks would not financing to new concepts like Walmart decades ago, and yet expanding and taking the risk has no rewarded that company. There is nothing “conservative” about most growth stories in this economy. We all need to stop comparing banks and finanical institutions to retail or other aspects of the marketplace because they have completely different parameters.

    I do find it ironic that Reid and Pelosi in Congress criticize big business like the autos for a failure in management and yet they oversea the worst debt ladden budget on the planet and manage to keep the doors open. If the Congressaional example is the means by which business should be run in terms of budgets, lets just cash in all our chips now. People talk about the BIg 3 asking for money, everytime the government (Congress) raises taxes they are asking for your money as well—-seems to me Congress is about to do the exact same thing-ask taxpayers for an even greater bailout for the things they would prefer to do.
14. 2012Gimp says:

    July 20, 2010 at 12:22 pm

    hey, Love the Post, I have been following your blog for a while now, and I have to agree with alot of what you have to say. and I thank you for being supportive and willing to take the time to share your opinions