November 17, 2008

What's so wrong about letting GM, Ford and Chrysler go into Chapter 11?


"Bankrupt" doesn't mean "cease to exist". Especially a pre-packaged bankruptcy.

And they know this.

I think it's the unions. If the car companies go into Chapter 11, they get to rip up their ridiculous union contracts and start over. You know, hire competent workers. Pay them a competitive salary.

Ooohh! We can't do that! It would be the end of the world! Give us $25 billion more, and even though we've screwed the pooch for 30 years, this time we know what we're doing!

Not.

Chapter 11 for the auto companies. Clear out the shareholders. Reorganize. Get lean and competitive. And then compete.

And above all, get rid of Bob Nardelli and Rick Wagoner. Monkeys I tell you. Monkeys who enriched themselves and then want the taxpayer to bail them out.

Showdown looming in Congress over automaker rescue

Sens. Richard Shelby of Alabama and Jon Kyl of Arizona said it would be a mistake to use any of the Wall Street rescue money to prop up the automakers because a bailout would only postpone the industry's demise.

"Companies fail everyday and others take their place. I think this is a road we should not go down," said Shelby, the senior Republican on the Senate Banking, Housing and Urban Affairs Committee. "They're not building the right products," he said. "They've got good workers but I don't believe they've got good management. They don't innovate. They're a dinosaur in a sense."

Added Kyl, the Senate's second-ranking Republican: "Just giving them $25 billion doesn't change anything. It just puts off for six months or so the day of reckoning."

26 comments:

Matt said...

The consensus seems to be that they won't make it through Chapter 11 because there is no, or not enough, DIP financing available. The other option is Chapter 7 liquidation.

Chris said...

I'm glad you brought up the prepack bankruptcy. Every single story or discussion I have seen/read in the MSM about the potential auto bailout has not addressed the prepack. The trouble is that a prepack would involve getting the UAW to agree to terms before engaging. But I figure that if GM was in a pickle, UAW would be the last place they negotiate, and they tell the UAW that either they agree to terms or they file Chapter 11 and who knows what could happen.

Randy said...

Once again, interesting how everyone is focusing on US auto makers, while in the background no one is buying Eurotatrd overpriced low quality tin cans anymore.

By the time Mercedes, BMW, VW etc. come crying for a bailout; Europe will be broke.


BTW Europe is already broke.

Anonymous said...

George Bush should enlisted to save GM.

Look how he has helped America.

DIE GM.

Anonymous said...

Hilarious watching Carl 'Benjamin Franklin' Levin (R-Michigan) whine, cry and beg for Government Free money for rotten and dying GM on Meet the Press. Funny, very, very funny.

Pathetic, desperate old party hack, reminds me of John Herbert Hoover McCain.

With friends like Benjamin Franklin selling their case, I would suspect GM will no longer exist very soon.

Who would buy a GM car or truck today?

Maybe GM can turn to making toys for the Chinese that are sold in America?

Remember when Made in USA meant something good?

DIE GM

Vote McCain-Palin '08

Anonymous said...

that is all it will do, postpone the day of reckoning. it would be better to get it over with now.

Anonymous said...

So let me make sure I understand you Senator.

Giving the profitable JP Morgan $25 billion all by itself is "stimulus." Because they need the money after paying out lots of bad loans and bonuses to themselves, which isn't their fault at all!

But LENDING the three largest industrial corporations $25 billion between all three of them, replete with conditions and restrictions, is "bad." And their troubles are entirely their own making and have nothing to do with wrecked lending and a 30% industry wide sales drop.

With such logic, I am stunned your intelligent and competent party was voted out on it's ass. Though it is amusing to watch the GOP get one last screwup in before the new government takes charge.

borkafatty aka the pig said...

anonymous idiot November 17, 2008 3:19 PM said:

Carl Levin (R-Michigan)

Carl Levin is a DEMOCRAT. He is also one of the most senior members of Congress. He is and has been part of the problem for a long long time. Sadly, he is in no danger of ever losing his seat because the sheeple of Michigan are mostly retarded. There used to be some smart people there but they all left with the jobs, making Levin's seat even more safe.

Joe said...

I agree with you in principle but here's the rub. The worthless banksters are getting trillions in bail money. They are a total blight on humanity.

Why not give a manufacturing group money too. At least they still produce something. Just maybe they will wake up and produce a car that fits the times.

Joe M.

Anonymous said...

I think that everyone can agree that they needed to bail out some commercial banks, because if they had not, the entire ATM ,doing business ,writing checks to pay your bills ,etc etc machine ,would of crashed .A certain amount of Banks are like a utility company ,you can't cut off the electricity either .

It becomes more questionable that Investment Banks were saved ,as in Goldman Sachs.

Car Companies could be saved to
keep jobs ,but if requirements are not made to be viable ,than it's wasted money of course . The government will get a bill for the retirement benefits in the form of the insurance that is underfunded on retirement benefits ,so the government gets socked with the underfunding of that insurance .
The government has let Corporations get away with underfunding that insurance,as it let Banks get away with underfunding the FDIC Insurance .
Worldwide ,the demand for cars has
gone down . Worldwide the demand to invest in the stock markets has gone down . Worldwide the demand to invest in loan making on any level has gone down . Worldwide retail demand for products has gone down . This is a fact that cannot be changed by bail-outs .

The prior economy World-wide was based in large part on a whole lot of debt to get products from housing to cars to dresses and shoes and bar-b-ques .

To contract and based a economy on real incomes is the great pain that can not be avoided .

It's far more productive to spend money in areas that will be viable
in this economic contraction . Keith listed a bunch of ideas in another post of goals that would be needed .

You can't save businesses that are not viable anymore .

After the above being said ,there could be a future value to keeping the car companies alive ,but that would only be for the purpose of
keeping all manufacturing plants
ready to go into use .
So some form of BK for the car companies and a re-structuring for low level functioning (which would require some major job lay-offs )would be in order .
Maybe the Government could make a mandate that anybody that buys the 'New American Car" ,after they produce it of course ,gets a tax write off . Why not ? Its about time we promote the purchasing of American made products. No doubt the car companies could produce better cars . Also,we need these plants in case we get attacked and need to make jeeps and war machine type vehicles (hate to bring up that point,and hope it never happens ).

JaneZ said...

Once again, interesting how everyone is focusing on US auto makers, while in the background no one is buying Eurotatrd overpriced low quality tin cans anymore.

By the time Mercedes, BMW, VW etc. come crying for a bailout; Europe will be broke.
------------------------------
but Mom.... All the other kids are doing it, and they are way worse than me.

Anonymous said...

This is what The Messiah has to say on the matter:
"Obama, who yesterday resigned his Illinois Senate seat, effective today, said the government needs to provide assistance to the automobile industry. Such aid -- in the form of a 'bridge loan,' he suggested -- must be provided on condition that management, labor, suppliers and lenders come up with a plan to make the industry 'sustainable,' he said.

'For the auto industry to completely collapse would be a disaster in this kind of environment -- not just for individual families but the repercussions across the economy would be dire,' Obama said. If that were to happen now, he said, 'you could see the spigot completely shut off so that it would not potentially permit GM to get back on its feet.'"

...so get behind it, numbnuts.

Anonymous said...

Gm and other automakers keep saying that banks won't loan to businesses in this environment even to profitable ones right now so the gov. has to do it. What makes anyone think banks are going to be making lots of new car loans to the average citizens. They won't giving gm or others cash to build cars is crazy since there is no buyers for them anyway.

George L said...

this is what many annalist have been saying.that we have replaced chapter 11 with bailouts...

chslaxcoach said...

Diane Rehm had three auto industry shills on this morning.

Some guy called in and said why aren't we bailing out the poor casinos? They have roughly the same number of jobs and they are getting hammered by the financial crisis.

One of the shills started in with, "You have to understand. Each one of these autoworkers is part of a community ..." Diane Rehm cut him off before he could say anything more insane.

Peahippo said...

A fiscal conservative would find nothing wrong about these auto companies going Chap. 11, since they are inefficient and uncompetitive. A real company can cope with a rough period by being diverse and by having savings from the good times. A false company operates with zero margin for error or downturns. Obviously false companies should just die off.

yu been skooled said...

The question shows you are still swimming with the small-time amateurs.

Just ponder for a moment a US who has lost their automobile manufacturing infrastructure. And yes when you take out GM/Ford/Chrysler, you take out the entire infrastructure, nuts, bolts, bearings, axles, steel...etc.

Ponder a US who has lost all that (harken back to your Detroit video) and then is forced to engage in serious warfare.

Going down the bankruptcy path provides no guarantee of continued existence. That is why it is not an option. It is a national security issue.

Your simple, one-dimensional, home-economics approach proves you are an amateur.

The politicians will put on a good show about how they fought hard for the taxpayer, and you bought the theater hook, line and sinker.

The debate was over last month, the auto makers will get some form of huge support, and will not go into bankruptcy.

Lost Cause said...

Someone will rush into the marketplace and provide a decent electric car, and other high milage decent cars. What's so bad about that?

happyliberal said...

Yeah, that's the ticket. Start paying auto workers minimum wage. Should work wonders.

A little disappointed in you for this one.

hirni said...

According to Paulson's logic - the IDEAL GM-bailout plan would be to give the $25bn to Goldman and JPM - so that they can buy up all of GM's unsold new SUVs and swap them at the FED for T-bonds.

Stupid is as stupid does said...

It seems to me that if GM could not survive bankruptcy because they could not get DIP financing, why not have the government create a SPV (special purpose vehicle) just like has been done by many companies, put the $25Billion in this SPV and then make a DIP loan from this SPV to GM. This would solve both problems. They could get DIP financing, the bad business plan would be abolished under Chapter 11, they could still operate, and we could move forward. What amazes me is that I and many of you are thinking of much better solutions than the morons still in charge of this country. It is beyond me how most of the good ideas that have come about through this whole mess (and have not been acted on, thus putting us and the world in deeper) have come from normal citizens, economists, large investors etc, but NOT the people that can actually enact these policies.

Thank god that on Jan 20 this great national nightmare known as the Bush presidency will be over and dead. Bush - gone, Paulson - gone, Chris Cox - gone, Cheney - Gone. Now the question is just how badly can they screw things up in the next 2 months.....that is scary enough though.

Anonymous said...

"Lost Cause said...
Someone will rush into the marketplace and provide a decent electric car, and other high milage decent cars. What's so bad about that?"

Nothing is bad about that. Here's some New Technology straight from Detroit (Dearborn)'s Best Minds:

http://www.theonion.com/content/news/ford_reintroduces_model_t_line

Old Henry, where are you now that we NEED you.... Help US.

DIE GM

Anonymous said...

What if GM goes BK and the unions buy the company for 10 cents on the dollar. Don't you think the UAW is posturing to scare off other potential buyer? They can always turn around and say they didn't meant it.

I am not sure it would be a viable corp but at least quality would go up and the loser products would desappear.

Anonymous said...

I can't understand your hate of Unions. Unions helped get the US out of the Great Depression by giving common people more money to purchase with.
If they default, the government backed pensions will fall on us, as US taxpayers. I agree the trouble is LACK of government oversight as is with EVERY industry out there right now. It has been proven that when a business runs unchecked, the people at the top get greedy. Union members are also greedy as it is a human trait to seek "more". US automakers are and have been disadvantaged by imports for decades. Turn the tables and see if Japan would allow us to build cars in their country to avoid higher taxation.

Here is the number 1 fix to the US troubles...........

Institute an import tariff that is waived if the importing country imposes a minimum wage (per industry sector) and proves their countries employees are being paid it.

We are being expected to lower ourselves and our wages because someone in China will build the same gadget for $.25 a hour. If Americans build the products for $10.00 a hour, tax the imports so their LABOR costs are equal to ours. Take the taxes collected and roll them into a national health plan that will lower the costs on OUR business and make them more able to compete global-style.

We all know overseas countries will not increase the pay of their employees due to greed.
I know this sounds isolationist and it is but it would stop the job bleeding we have had. People here assume American products are inferior because that is the bill of goods they have been sold.

Gerry said...

Ever see an SUV take a speed bump at two miles an hour? I mean really.
Or the one with the rolly rims that negate the off road intent of an SUV?

Actually I can see why the Big Three are in trouble. It is such a capital intensive business.
Natch that they would be caught with their pants down by the credit crunch.

But prudent management would have seen this coming. What goes up must come down. Why weren't they ready for this?
We were.

I say float them for shares after they file for bankruptcy.

Tangent:
I remember the dot com boom because I worked in a hotel. Financial management companies started having meetings ten times the size of their norm.
The bust came and they disappeared for a while.
But then everybody started selling real estate.
And they started having dot com type meetings.
I got out of there three years ago to train for a job that creates real things.
If you want to know how the economy is doing go to your average brand name hotel and ask the banquet manager how business is doing.
Best bubble-ometer that I know.

chslaxcoach said...

Keith,

Be careful, lest this Onion piece starts to apply to you.

http://tinyurl.com/6g4kdg

But, yes, I think an apology would be great, especially if he can follow up with quality plans for the future, like bringing all our troops home from around the world.