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The alternative is $25 billion in irresponsible loans financed with money borrowed by a government that is more than $100 trillion in debt. No amnesty for GM/Ford/Chrysler! |
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Posted on 11/19/2008 6:24:53 AM PST by Graybeard58
The U.S. economy is in the toilet because Congress, led by Sen. Christopher Dodd and Rep. Barney Frank, browbeat lenders into giving mortgages to unqualified borrowers. To date, the government has allocated almost $4 trillion it doesn't have to try to repair the resulting economic damage.
Unchastened by the experience, Congress may lend the nation's Big Three automakers $25 billion to keep them afloat into 2009. Congress has become the bank of last resort for General Motors, Ford and Chrysler because they no longer can get private financing. For good reason. Combined, they have a negative net worth exceeding $60 billion, debts of at least $220 billion and unfunded liabilities of $100 billion. They are wholly unqualified borrowers, yet some in Congress consider them good credit risks.
The Big Three should seek bankruptcy protection instead. That doesn't mean they and their subcontractors and dealerships would go out of business tomorrow. Rather, under Chapter 11 of the Bankruptcy Code, the automakers would stay in business while they reorganize under the supervision of the court, just as airlines and other companies have done. Yes, some workers ultimately would lose their jobs and creditors would not be repaid in full, but a percentage of something is still better than 100 percent of nothing.
If the Big Three make it through the process, they would emerge more efficient and viable; that would be good for them and the economy. But even if the court forces liquidation, the companies' assets in all likelihood would be scooped up by other automakers, which would need to hire people to staff and retool their newly acquired plants.
The alternative is $25 billion in irresponsible loans financed with money borrowed by a government that is more than $100 trillion in debt. But the loans also would cost the Big Three some autonomy because Congress would insist on dictating how they operate. In essence, the loans would allow Congress to keep the automakers going long enough to finish the job of putting them out of business. Indeed, the companies are on the verge of extinction in part because of decades of congressional meddling, starting with labor laws that were instrumental in fashioning union contracts that saddled them with crippling labor and legacy costs and left them at an enormous competitive disadvantage.
Congress created Chapter 11 to rehabilitate failing businesses. GM, Ford and Chrysler are failing businesses. Rather than a bailout, Congress should give the automakers a way out, through bankruptcy protection.
Ping to a Republican-American Editorial.
If you want on or off this list, let me know.
That is my take on the situation too. They will have to go bankrupt to get out of their chains, then rise like a phoenix and build more affordable, efficient cars without the union ballast. There is no point in pumping money into them unless they can first become competitive. It would be just bailing the Titanic.
Agreed. But they will continue to the bitter end rather than ever admit they are wrong. Next year will be a nightmare of historic proportion. I am planning how to survive total collapse. I give it til the summer.
Superb! Almost sounds like Thomas Sowell.
Who would gain financially from bankruptcy and who would lose? Upon that dependeth the whole law and profits.
The problem is getting the union ballast to go quietly. Do you fire every one of them and hire a complete new workforce? What if the union decides to take the autmakers down with them like Eastern airlines? How do you keep disgruntled employees now working at half pay with no benefits from trashing the place at every opportunity? Bankruptcy sounds good on paper but it will be a nightmare to work through.
Thus sayeth ex-snook.....and well said too.
The only path to sucess is to rid the auto companies of the union parasite.
2nd quarter 09 at the latest.
L
I believe in bankruptcy the court would have the authority to force union concessions. Whether it would have the will is a different question. But it's hard to see the unions being reasonable in any other scenario.
I am a Tier1 supplier to Visteon (Ford) and a Tier2 to the other two. I just turned down a mold for Chrysler this week even though the PO would come through a Tier1 company who would be responsible for payment. It was a large job with a big initial outlay by me and there is no way I am going to buy all that material with my own money and then sit on a big bill for who knows how long to get paid, and I doubt I am alone in this.
The last big duct mold I built for GM the rubber company who issued the PO had to wait 14 months to get paid for the tooling, and I ended up forcing them to take a loan out to cover the bill thus losing a customer.
They wanted to just sign the check over to me when they got paid, this of course was announced AFTER I shipped the thing. I had to argue that it was THEIR name on the PO, not GM, and the terms were 30 days period. They felt it was only right that I had to wait just like they had to, and I didn’t see it that way at all. Hard feelings all around.
Being in business supplying tooling for the big three is now a risky thing, after four generations of trust it is hard to believe.
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The alternative is $25 billion in irresponsible loans financed with money borrowed by a government that is more than $100 trillion in debt. No amnesty for GM/Ford/Chrysler! |
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That is the heart of what they are calling their "liquidity crisis." The old, unPC name for this was "poor credit risk."
And yet the taxpayers still think that the Federal Government is a good credit risk!
The Big Three's problems are just microcosms of Big Government's problems.
The union has made major concessions, but most do not take effect until 2010, that is why the loan to the auto makers is needed now.
While what you said makes perfect business sense, the Democrats have a lot of vote buying debts to repay. A bailout will happen.
It strikes me now why all these large corporations are in the tank with the Democrats. They want national health care so they don’t have to have it as part of their benefits package. Next we’ll see an effort to revise retirements and get those out of an employer’s responsibility, too.
The democrats are going after the $10 per hour worker vote: a right to a house, a right to health care, and a right to a retirement.
Until the UAW is put out of business, there is no hope for the American Auto Industry.
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