When I went to sleep last night, it sounded like the Senate was very close to coming up with a bill that would extend a bailout package to the American auto industry. All they needed to get the deal done, was for the United Auto Workers Union to make the concession of putting their pay and benefits in line with those same workers from their foreign counterparts.
Right now, the average UAW worker for GM, Ford and Chrysler makes $73.21 in pay and benefits while the average worker for Honda, Nissan and Toyota make $44.17. Obviously that is a major concession to make, but that is the kind of sacrifice that needs to be made to allow GM, Chrysler and Ford to survive in the long run.
The fact that the UAW did not step up and do their part making this work proves that their really is no other option than bankruptcy right now.
Here is a fabulous column that talks about why the bankruptcy is the best option right now.
Bankruptcy laws are put in place for a reason. They are there to help failing companies get out of bad deals and contracts, and allow them to reorganize with government protection. Delta Airlines, MCI, Texaco and many other companies have filed for Chapter 11 and have undergone reorganization with great success.
I'm convinced to fix the auto industry we need to do more than just throw money at the problem. There is no doubt in my mind that if we give them money now without reorganization, we'll be doing the same thing 3 months from now, and again 3 months after that.
Subscribe to:
Post Comments (Atom)
2 comments:
I agree with the premise of your opinion.
However, People will not buy cars from Bankrupt companies because of future concerns like Warranty issues and needed parts....
People will however shop and fly with bankrupt companies because once you buy the merchandise or exit the plane, Your buisness / transaction has been completed.
Unfortunatley, the union played a giant game of chicken.....And Bush blinked.
Now, He is content in simply kicking the can down to Obama, who will gladly have the government take over any and all struggling business'.
Instead of protecting his legacy, Bush is making it easy for Obama by betraying his conservative / capitalist principles !!
Billy.
the money does not come without reorganization. effectively the bailout is the same thing as a bankruptcy filing but without the stigma--to keep demand stimulated from US consumers (Billy's right--no one will buy a car from a bankrupt OEM).
Read the bill. the car czar will effectively play the role of bankruptcy trustee. And don't think that the white house intervention will be any different--they will still have the same strings attached. What the bailout will do is prevent Gm and Chrysler from filing Ch 7 (full liquidation) immediately since they will get enough cash to keep running for the next 3 mos. Without a cash infusion, Ch 11 don't do much to help these guys in the short term since they must find a way to keep paying their suppliers--and they need cash to do that. So I think the only option w.o a bailout is Ch 7.
Chrysler probably won't get any money from the govt anyway since their very private holding company will NEVER agree to the terms of full financial disclosure of their firm (not just of Chrysler) and warrants giving the govt access to their full portfolio profits (not just the Chrysler side should it be turned around). So for Chrysler, they will file Ch 7 and go away regardless. The quiet vultures are waiting in the wings just...
Post a Comment