So, the government forces GM Chairman Wagoner to resign, ostensibly because they found GM's latest "plan" and loan requests unacceptable. What is REALLY going on here is the government knows that the only way GM can become viable is to file a Chapter 11, and Wagoner could not and would not do it. One might think that at SOME point, all the parties (unions, bondholders, banks, suppliers, management) would make sufficient concessions to prevent this bus from going over the cliff.
Unfortunately, it can't happen that way. A Chapter 11 reorganization will bring the hammer down on ALL the parties, painfully. However, the entire process is designed to do this as FAIRLY as possible, with all the parties participating. The reason a proceeding is necessary is that NONE of the parties can agree to the depth of concession necessary, even as it clearly IS necessary. A union head could not agree to a massive restructuring of health and retirement benefits, it's just not was he was elected to do. It's practically a breach of his fiduciary responsibility to do such a thing. Similarly, the Board Chairman can't propose to the shareholders that they agree to file a Chapter 11 and wipe out their equity. He'd be breaching his responsibilities if he did such a thing.
The Obama administration has looked at it, and has surely concluded that not only are the key players not able to voluntarily make the drastic cuts that are the only hope, they have also concluded that on the present path, the company CANNOT make it. Any Republicans who think Obama wants to "nationalize" the auto industry, or have the government take it over, are not paying attention. I don't know if GM will survive a Chapter 11 reorganization, but it will be worth the effort. It will be worthwhile for the government to back the effort. It will make way more sense than throwing money at GM without accountability, and without a REAL re-structuring.
Am I the only one who thinks that the "gap" between GM and the foreign competitors has narrowed? I wanted to be open minded and patriotic a few years ago, so I tried a Saturn Vue as our family car. I have never regretted it. When the lease is up, I hope to get another one. I want to be part of GM's emergence from the Chapter 11 I know is coming.
I think when the whole country actually sees how the Chapter 11 reorganization works, and they see that the pain is being spread fairly, and openly, Americans will buy American in droves. If GM survives, I expect they will emerge with a competitive edge, and they will use it to get on the cutting edge of the newest in automobile technology. These ideas are driving Obama toward the right move, orchestrating GM into Chapter 11 reorganization. Hmmm, competitive edge, capitalism, sounds almost Republican. Pay attention Republicans, you might learn something!
1 comment:
Insightful and well written. I agree 100% with you that Chapter 11is the way to go. I know a number of retired GM executives who have incredible retirement plans:full medical plus $500 a month for extra "medical" things;stock options at retirement, tremendous car buyin options, and huge pension checks to round it out. A friend's mother, 92 years old, is a retired worker for GM and former union member. She has full medical and prescrptions through the union; she has never been on Medicare; her plan is far superior! There will have be to be monumental union /GM negotiations after reorganization. (will be the longest and most bitterly argued negotiation ever ] Time for the hired help not to be making $30.00 an hour plus fringe. Executives need salary reductions, and the retiree executives need their pensions cut in half. Everyone has to kick in and become a team player.If the production line stops, GM is a goner; a vicious cycle over the years with the union.I hope you are correct in what you have written. I like your thinking. Like you, I hope the Republicans are paying attention
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