Comments on: Why Not Let GM Go Bankrupt?

By: Drew

Drew — Mon, 17 Nov 2008 13:57:21 +0000

These companies make no logical defense of their senior leadership. Ford recently decided not to sell a car they designed with 65 MPG in the US for two reasons: 1) according to Ford, Americans won’t buy diesel cars, and 2) the manufacturing plants were all in Britain, which made both the labor and logistics costs of selling such a car in the States expensive. GM CEO Wagoner says he should remain the CEO through these tough times, even though during his time sales have tanked and stock prices and debt rating have hit rock bottom. Chrysler has been in and out of financial trouble for the last thirty years. Bankruptcy might do some good.

By: Dave

Dave — Mon, 17 Nov 2008 02:59:20 +0000

It seems like the unions and senior management are colluding. The executives loot from the top and the unions loot from the bottom. I could not support any bailout without both parties making significant concessions. Most of the incompetent management elite should be forced out without their golden parachutes. The UAW workers should be given a new contract on par with what the Asian carmakers pay their US employees. Any other proposition will only result in money getting poured down a rat hole and we’ll be back in the same place in a few years when this money is squandered and gone.

By: Bugs34

Bugs34 — Mon, 17 Nov 2008 00:56:54 +0000

GM sued my employer over a frivolous lawsuit. They went after a small fish because they are a shark. Now I’m supposed to help bail them out? Ridiculous. They should file bankruptcy and figure out their out business to plan to restructure just like my employer had to.

By: “Why bail out the car companies when they bailed out on us?” – Skirl | Dan Dickinson

Sun, 16 Nov 2008 22:50:52 +0000

[...] possible bailout of Detroit auto manufacturers — by Greg Mankiw, The Economist here and here, Baseline Scenario, Salon and Richard Florida here and here, to name just a few — and nearly everything [...]

By: B4F

B4F — Sun, 16 Nov 2008 16:14:32 +0000

So many comments that tie together….Its about overall competitiveness. What does it mean to “win” today in the Auto Industry?

It means building something people want without having to convince them they want it through gimmicks like “employee pricing” or “0%” etc etc. It means getting realistic about what matters in the product. Honestly, do we really need vehicles that have the most towing capacity in our driveways of suburbia?

Sadly, the big three have attempted to generate their biggest cut of margin on the least likely to be sustainable products.

Now we are standing on the precipice, looking over the edge, knowing that to retreat just means we have to walk to this place again in the future.
The only way forward is to cross that valley.

I am in the commodities business. I have felt the harsh radical swings of the market. I have been laid off, relocated, had benefits slashed. My colleagues and I have learned to be adaptable. We move to get the next job. We maintain our sharpeness in our industry to maintain a competitive edge. I have stimulated this economy through those changes by buying 5 new houses in new locations throughout the US over the last 15 years. I would not have bought 4 of them, if my first place of work hadn’t closed.

The “bailout” as no stings attached makes me ill. It makes me feel like giving up as a capitalist. When does my bailout come? (I dont want one, I am too determined to succeed on my own.)

I drive a company supplied vehicle on the job, that is American, and I hate it. Its a gluttonous pig with respect to efficiency. It has “gimmick technology” like an MP-3 player jack, Onstar (what the heck is the point of that??) and 3 power plugs….etc….wow GM…that must have really tapped the braintrust to come up with that….meanwhile, its just a dressed up 1960′s era v-8 under the hood slurping down the fuel. So innovative…Good thing Steve Job’s company invented something you could piggy back on. (by the way, when Apple was in the tank, what did they do? now look at them…..food for thought) Imagine if computer companies worked like this. We would have really fancy 5.25 floppy disk drives that would automatically put the disk in the drive for us. The end result is still the same. Its just a dressed up 5.25 disk drive.

I want, as an American, to truly WANT TO BUY an American auto, made by Americans. What a wonderfully proud and patriotic thing to do, but before I can do that, I need to trust Detroit.

As a consumer and a taxpayer, I need to believe that you are building something and employing people that aligns with societies needs and wants.

For the company,
Re work your business model. Determine the price point that consumers will come to market. Then look at your manufacturing engine and determine what you can build for that. You will likely have to make some fundamental changes in your systems, but you will ultimately emerge COMPETITIVE.

For the workers,
Attract talent. Provide COMPETITIVE wages and benefits. Provide good healthcare, but demand a healthy workplace. Provide jobs…..but not entitlements. Provide good wages for top brass that have to make agonizing decisions, but not excess.

For consumers,
Build something we want and need. make it efficient, make it fun, make it pratical, price it COMPETITIVELY. You can do it.

America wasn’t built on unbridled greed without respect of the consequences when failure comes.

This great nation is broke. We need to catch our breath and pay some bills. Detroit, you need to come with the rest of us on this. (so does the financial sector for that matter)
You,us, me etc, must be accountable…..every single one of you that is in this industry. The taxpayers (all of us) demand it.

By: Michael Cohen

Michael Cohen — Sat, 15 Nov 2008 03:41:17 +0000

The government should buy shares in GM at a firesong fire the management, and redesign the company from the bottom up. There are plenty of people both within and external to GM who might want to turn it into an alternative energy company. When it is fixed sell it to the workers (best, they are not responsible for there own benefits) or if necessary to investors. Socialism in a country likes ours works well short term i.e. ww ii but the soviets show not for ever.

By: TDomer

TDomer — Fri, 14 Nov 2008 22:38:32 +0000

My small company has been hurt over the past several years by sevaral of its customers going through Chapter 11 – such as Worldcom and Winn-Dixie. So I agree that there could and would be a ripple effect of GM’s suppliers being left out and getting pennies on the dollar for what could be 90 days worthe orders they have filled.

For the hundreds of auto parts suplliers in the chain, some of the $25B should be set aside to help THEM re-tool, etc.

All of GM and Ford management should be tossed out on their heads. Five years ago I had never in 25 years owned a non-Big-3 car. Now I have 2 Toyotas and a low-end Infiniti and am completely satisfied. The Big 3 waste a ton of money copying each others’ crappy designs. Ever compare a PT Cruiser with a Chevy HHR?

By: MAH

MAH — Fri, 14 Nov 2008 22:07:47 +0000

No one bailed out the steel industry when foreign competition unseated the US steel industry. I seem to recall massive layoffs, supply chain failures, etc. Instead of bailout the focus was on retraining workers, etc. So the regional issue doesn’t play – I am from Pittsburgh and it was pretty ugly but the lesson learned was that the union and the companies had equal responsibility for the situation. The city learned not to be reliant on one industry.

By: Brian’s Thoughts About Airplanes » Blog Archive » Flying Cars, Obama Problem, Dumars

Fri, 14 Nov 2008 21:51:19 +0000

[...] looking at you, GM. We should be letting you go bankrupt instead of bailing you [...]

By: Barster

Barster — Fri, 14 Nov 2008 19:14:43 +0000

Well said wGraves….I’ll leave it at that…well done!

By: wGraves

wGraves — Fri, 14 Nov 2008 17:18:52 +0000

GM is a pension fund which makes cars as a hobby. Dump all of the money you want to into it, and it won’t do any good. Can you say AMTRACK? Now, it would appear that Congress wants a new hobby too.

Healthy new car companies may come out of Tesla and its competitors. They’re run by entrepreneurs and mean and lean, oh, and full of gearheads. Eventually, they could even give Toyota a run for their money.

By: Gli Liphon

Gli Liphon — Fri, 14 Nov 2008 15:22:21 +0000

It seems like most of the sentiment here is the same with a few exceptions. Most notably to Jim Williams in regards to 3 million jobs lost: this isn’t an all or nothing situation. Bankruptcy does not equal 100% job loss. No matter what the outcome is here there will be hundreds of thousands of jobs lost because GM is not profitable. So it really comes down to letting GM (and by extension the UAW) decide how to reorganize or let someone else do it (whether that is a bankruptcy court or some government board similar to what the airlines used). Do you think GM can effectively reorganize without help? If you do, then I agree that a one time loan (stressing one time) will suffice. In my opinion I don’t think they can do it alone. GM and F have been working for the last few years to try and adjust their business models, but we are still at this point. Did the current worldwide situation exacerbate their problem? Yes. However, I would say they were headed to this no matter what outside factors may have accelerated the situation. I think a forced reconstruction is the best chance to save as many jobs as possible. Here’s a simple analogy that I think makes the point. If you have $1000 for payroll, would you rather have 10 employees at $100 or 100 employees at $10? Granted the disparity in the salary range is very large, but it makes the point that you can save jobs if you can adjust compensation. This is why I don’t think GM can do it on their own, they don’t have the ability (desire is irrelevant) to make the changes needed to become a successful company.

By: James Kwak

James Kwak — Fri, 14 Nov 2008 03:19:04 +0000

John Crossman: Thanks for your comment. I worry about the level of rancor; I guess it could be worse.

By: John Crossman

John Crossman — Fri, 14 Nov 2008 01:53:32 +0000

There are some interesting ideas floating here. And the rancor is much reduced from what I feel on other blogs.
There are two issues where I would like to add my 2 cents.
$25bn tax dollars. Wjd123 is thinking in the right direction (although I like playing in my Jeep Wrangler…but that is a side issue). If we as Americans are asked to stump up public money for companies that have been in and out of trouble for decades, I think we have a right to enforce some serious “strings”. The UAW, current shareholders and most of the top brass should be forced to stay on and sweat through serious concessions. And these non-innocents should take a place well behind the US taxpayer if this project succeeds and viable car companies come out the other end. No big payola for one good year in 2011 from some clever accounting tricks.
On the $700bn for Wall Street, I agree it was a disgrace. However, when the Treasury Secretary, Head of the Federal Reserve, the President and senior members of congress “yell ‘fire’ in a crowded theater”, what should we expect? The panic these “worthies” induced has exaggerated and intensified the global panic. That $700bn…think of it as a first installment. We’ll be bailing out the big financial institutions for several years.

By: Bill McDaniel

Bill McDaniel — Fri, 14 Nov 2008 00:51:35 +0000

The big GM spinoff, Delphi Automotive, went Chapter 11 in order to survive. The unions had no choice but to accept the reorganization plan, and salary and benefit cuts of 50% or more.
The only way that GM can survive is to LOWER ITS COSTS, PERIOD. And no doubt there is still some fat in the management ranks as well.
They also need to cut the number of brands and permutations to improve efficiency. It is so basic, and all they seem to do is talk about it. It is time to DO SOMETHING.
Retirees? Pensions? The automakers can’t afford it.
THEY ARE BROKE. It is time they acted like it!
Not one dime of taxpayer money for these clowns. They’d probably blow it all on advertising and “incentives” to move the metal piled up on lots all over the country.
Then, with any money left over, they’d introduce ‘new’ models that look just like the old models and start the annual cycle of “make them and they will buy” all over again. When nobody buys, they’d spend even more money all over again next year.
If it’s broke, fix it. No handouts! I agree with the guy who used the drug junkie analogy. No drugs to enable more bad behavior. Detroit has to go cold turkey.
Give a starving person a fish and he’ll live another day…. and then starve. TEACH a person to fish, and he may live a whole life, and even feed others.
Detroit forgot how to fish. Giving 25 billion fishes will only postpone the inevitable starvation. Total waste of OUR money.
Here’s an idea: starting with GM, padlock every factory. Auction off the ASSETS. Let 3, 5, or 10 new entities buy the factories and start making cars, or move the equipment to new plants in right to work states, many of which will gladly provide industrial revenue bond financing to get the factories and jobs.

GM and Ford together can be bought on the open market for about $5 billion. Heck, let’s have the feds pay $10 billion just to help the widows and orphans who held onto the stock. A federally-backed Auto Reconstruction Corp. can take over and redeploy the assets in an orderly manner. Let entrepreneurs prepare business plans and let the better plan get a mix of public and private financing to rebuild from the ashes. Meanwhile, we’ll all take much better care of our cars for a couple of years, breathlessly awaiting some REALLY NEW IDEAS in fuel efficient, reliable, and reasonably priced U.S.-made cars.

If this is not “practical”, then I say the MOST impractical thing to do is to just write checks to the big three. It’s hard to imagine anything worse than that.