I read this earlier and agree with it nearly 100%. I still have a lot of friends at GM that will be affected by a bankruptcy, but it has to happen. A bailout will only throw good money after bad and not alter the outcome one whit.
One of the comments to the article really hits the nail on the head – most people forget – myself included – that ‘chapter 11’ does not mean the company goes away. Chapter 11 means reorganization and protection. It is tempting to wish that the press would stop using the word ‘bankruptcy’ along with ‘chapter 11.’
I wish they would tie exec salaries with these bailouts to our federal workers, until they can support themselves again. You are the CEO? Great, you get the same as the President. Vice President? Awesome, here’s your pay. And go right down the line. My guess is that if we had implemented such a salary constraint, only those in real need would eat at the trough. And all would be working hard to get back to business on their own.
Thanks, Kendall, for posting this incisive analysis that pulls no punches. Like the bloated federal government or the notoriously ineffective public educational system, people have been valiantly trying to bring about much needed reform at the big American car makers for a long, long time, but sadly with virtually no real success. Too many vested interests stood in the way for real reform to have a chance.
Remember the creation of the Saturn line? It was initially hoped that it could revolutionize GM, but it got domesticated pretty rapidly, didn’t it?
If GM, Ford, and Chrysler aren’t to go the way of US steel companies, i.e., driven out of business by overseas competitors, truly radical change is necessary. And yes, sadly, that may very well require chapter 11 proceedings.
It’s the familiar problem of the difficulty of putting potent new wine into old, rigid wineskins (Mark 2:22). And the so-called “mainline” Protestant denominations are in the same predicament.
Chapter 11 is no cure all. Probably about ten percent of companies that file an 11 actually come out the other end successfully. Massive capital would be needed to retool the industry and unless that is available in the market place, don’t expect that there will be a surviving American auto industry. That is just the tip of the iceberg. All of the peripheral manufacturing jobs that would also be destroyed would make the auto company failures seem like small potatoes. We bailed out Chrysler once before and the gov’t actually made money. I don’t know that it could be done again with the same results but it bears more study than “just say no” because government intervention is a bad thing.
it could be a defining moment in the Obama Administration. I know it’s early but this could set the tone that he is not in bed with the Congressional Dems. He apparently is trying to learn from Clinton’s chuminess with the Dems in 1993-94 that cost his party control of the House (and Senate?) in 1994.
Bankruptcy does not mean that all of the manufacturing capacity goes away, even if GM, Ford, and Chrysler do not emerge as going concerns that own the assets. Part of the problem is that demand is down. Others will come in and buy the manufacturing assets for pennies on the dollar, hire lower cost workers, and likely revamp the distribution system to a make to order rather than a make to inventory.
Most parts suppliers will survive. If the demand is there, someone will build the cars to meet the demand. The economics of building and distributing cars will change, because it has to.
Wal-Mart changed the economics of the retail and grocery trade, and as a result goods are less expensive, but we no longer have Montgomery Ward who could not make the necessary adjustments. The free market works, if we will let it. It is not painless, but the pain is here anyway.
Despite being a staunch free market capitalist – I am afraid that the US cannot afford to let our auto industry collapse as part of this ludicrious financial crisis. Yes the Big Three have made big mistakes stupid ones – my grandfather and father were foreign car dealers and I still follow the industry. But the government helped bring this financial crisis on – some lesser cars companies existed solely because they serviced people with bad credit – Peugot and Hyundai prior to 2000 to name two. GM and Ford were on the way to recovery prior to the crisis and are coming out with quality vehicles (ie Cadilac CTS, Chevy Malibu, the GMC Acadia/ Buick Enclave/Saturn Outlook, Ford Fusion and Focus to name a few). They had also reached a much better deal with the Unions to cut costs. It would be trajic to let them and a big chunk of our manufacturing base go during a weird market period.
As I said previously elsewhere, the American auto industry is alive and well, and thriving with Honda, Nissan, Toyota, Subaru, and BMW that have moved their plants here and without union interference – the Big 3 plus the UAW still don’t get it.
I read this earlier and agree with it nearly 100%. I still have a lot of friends at GM that will be affected by a bankruptcy, but it has to happen. A bailout will only throw good money after bad and not alter the outcome one whit.
One of the comments to the article really hits the nail on the head – most people forget – myself included – that ‘chapter 11’ does not mean the company goes away. Chapter 11 means reorganization and protection. It is tempting to wish that the press would stop using the word ‘bankruptcy’ along with ‘chapter 11.’
I wish they would tie exec salaries with these bailouts to our federal workers, until they can support themselves again. You are the CEO? Great, you get the same as the President. Vice President? Awesome, here’s your pay. And go right down the line. My guess is that if we had implemented such a salary constraint, only those in real need would eat at the trough. And all would be working hard to get back to business on their own.
Thanks, Kendall, for posting this incisive analysis that pulls no punches. Like the bloated federal government or the notoriously ineffective public educational system, people have been valiantly trying to bring about much needed reform at the big American car makers for a long, long time, but sadly with virtually no real success. Too many vested interests stood in the way for real reform to have a chance.
Remember the creation of the Saturn line? It was initially hoped that it could revolutionize GM, but it got domesticated pretty rapidly, didn’t it?
If GM, Ford, and Chrysler aren’t to go the way of US steel companies, i.e., driven out of business by overseas competitors, truly radical change is necessary. And yes, sadly, that may very well require chapter 11 proceedings.
It’s the familiar problem of the difficulty of putting potent new wine into old, rigid wineskins (Mark 2:22). And the so-called “mainline” Protestant denominations are in the same predicament.
David Handy+
Chapter 11 is no cure all. Probably about ten percent of companies that file an 11 actually come out the other end successfully. Massive capital would be needed to retool the industry and unless that is available in the market place, don’t expect that there will be a surviving American auto industry. That is just the tip of the iceberg. All of the peripheral manufacturing jobs that would also be destroyed would make the auto company failures seem like small potatoes. We bailed out Chrysler once before and the gov’t actually made money. I don’t know that it could be done again with the same results but it bears more study than “just say no” because government intervention is a bad thing.
“It is tempting to wish that the press would stop using the word ‘bankruptcy’ along with ‘chapter 11.’”
Like this: “…filed for protection from creditors under Chapter 11 of the U.S. mumblemumblenevermind Code”?
it could be a defining moment in the Obama Administration. I know it’s early but this could set the tone that he is not in bed with the Congressional Dems. He apparently is trying to learn from Clinton’s chuminess with the Dems in 1993-94 that cost his party control of the House (and Senate?) in 1994.
Bankruptcy does not mean that all of the manufacturing capacity goes away, even if GM, Ford, and Chrysler do not emerge as going concerns that own the assets. Part of the problem is that demand is down. Others will come in and buy the manufacturing assets for pennies on the dollar, hire lower cost workers, and likely revamp the distribution system to a make to order rather than a make to inventory.
Most parts suppliers will survive. If the demand is there, someone will build the cars to meet the demand. The economics of building and distributing cars will change, because it has to.
Wal-Mart changed the economics of the retail and grocery trade, and as a result goods are less expensive, but we no longer have Montgomery Ward who could not make the necessary adjustments. The free market works, if we will let it. It is not painless, but the pain is here anyway.
Despite being a staunch free market capitalist – I am afraid that the US cannot afford to let our auto industry collapse as part of this ludicrious financial crisis. Yes the Big Three have made big mistakes stupid ones – my grandfather and father were foreign car dealers and I still follow the industry. But the government helped bring this financial crisis on – some lesser cars companies existed solely because they serviced people with bad credit – Peugot and Hyundai prior to 2000 to name two. GM and Ford were on the way to recovery prior to the crisis and are coming out with quality vehicles (ie Cadilac CTS, Chevy Malibu, the GMC Acadia/ Buick Enclave/Saturn Outlook, Ford Fusion and Focus to name a few). They had also reached a much better deal with the Unions to cut costs. It would be trajic to let them and a big chunk of our manufacturing base go during a weird market period.
As I said previously elsewhere, the American auto industry is alive and well, and thriving with Honda, Nissan, Toyota, Subaru, and BMW that have moved their plants here and without union interference – the Big 3 plus the UAW still don’t get it.
Too much common sense. Bad article.
I agree with the article. GM is not salvageable in its current condition and facts have to be faced.