GM: The Case Against a Bailout

Business Week ^ | Nov 18, 2008 | Jack and Suzy Welch

[fightinJAG]

Should the government bail out the U.S. auto industry to keep the players from going into bankruptcy?—Bill VanderMolen, Pittsfield Township, Mich.

How about this instead: The boards of Chrysler and General Motors (GM) put their companies into bankruptcy with the clear intent of reorganization and merger. As radical as that sounds, it's the best road we can see to a viable future for the industry.

And yes, the U.S. car industry does belong in the future. Free-market proponents have a point about the industry's "natural demise." Despite huge progress in American quality and design, well-run German, Japanese, and Korean companies have taken about half the U.S. market, and the competition—which will include China and India—is only getting tougher. But like many others, we believe that for the sake of jobs, national defense, and self-respect, America needs to keep its "true" domestic auto industry alive.

A government handout, however, isn't the way to make that happen. Washington would impose conditions and promise strict oversight, but it simply can't push through the kind of transformative change the industry needs. There would be too much political opposition, and regardless, the bailout sums being bandied about—$25 billion of taxpayer dollars, for starters—would only keep the Big Three heaving along, basically as they are. It's a life-support solution, not a cure.

[Oldexpat]

The biggest change the B3 need is to move their factories to Right to Work states. Leave the Unions and Michigan and Ohio behind.

[MAD-AS-HELL]

giving money to the big 3 is like patching one crack in a DAM while there are 100’s of other cracks that won’t be patched. It’s futile until the company gets rid of their dead weight in the form of horrible union deals and piss poor management.

[Dudoight]

Jack Welch? Well, I certainly agree with ‘no bail out’!

[PackerBronco]

Here's a suggestion:

Instead of giving money directly to the automakers give it indirectly via rebate checks given to consumers who are willing to buy the product. Now the question is: how much would it take you to buy a car which you believe to be inferior to a similar product from say, Toyota and Honda? $2000? $5000?

And if the price of the rebate check is too high, what does that tell you about the wisdom of bailing out a company that cannot practically give away its product?

[Sig Sauer P220]

If the unions aren’t stopped, the big 3 will be coming back for $25 billion every 3 months. Unfortunately the unions own the democrats, and there are no longer enough Republicans to stop this fiasco.

[ohiogrammy]

I live in Ohio and we are a right to work state, but the unions are indeed the problem. They need to be gone from this industry, and then the schools!

[truth_seeker]

“The biggest change the B3 need is to move their factories to Right to Work states. Leave the Unions and Michigan and Ohio behind.”

The problem is far bigger than unions.

The biggest problem is bad management, letting problems like unions go UNSOLVED for so long.

If I was an influential shareholder I would want new boards and new management.

The boards of American companies are jokes, these days. They are made up of professors, and token women and minorities, who get paid significant sums to rubber stamp the CEO’s latest plans. And award him a staggering bonus.

[fightinJAG]

The only way to get out from under the UAW contracts is for the companies to go into bankruptcy. That’s the only reason the Rats are fighting this.

Even the proposed bailout of $25B has $12B that will go to pay UAW retiree benefitis. IOW, to people without JOBS. So how is this saving JOBS?

Hmm.

[Reverend Wright]

“The boards of American companies are jokes, these days. They are made up of professors, and token women and minorities, who get paid significant sums to rubber stamp the CEO’s latest plans. And award him a staggering bonus.”

You are so right, here is the GM board.
http://www.gm.com/corporate/investor_information/corp_gov/board.jsp

Check the executive compensation committee:
-Sara Lee executive
-Erskine Bowles, Clinton hack and UNC Chairman
-Armando something from unknown development company
-Kodak executive
-female executive from Pfizer

[Lumper20]

Sad. And labor costs are a mere 146K a year per person on average? Has anyone from the UAW to any in the big three offered to give up even 10 percent of their wages or salary or compensation?