As I see more and more people who don’t know what they’re yammering about keep making excuses for why Chapter 11 isn’t feasible, it becomes impossible.
Pretty soon, any Chap11 filing will be moot and Chapter 7 will be the only avenue open to GM. Ford has a little more time. Chrysler is a dead horse that hasn’t hit the ground yet.
The time for GM to declare Chap11 was in September, or even back in July.
This is another example of how egomaniac CEO’s are taking down the business world of the US in flames around them. Another example of this: If Lehman had management with a lick of common sense and a little less hubris, they would have done a Chap11 and prevented a LOT of the turmoil we now see in the markets. As it was, Fuld had far too much pride and arrogance that prevented saner heads from filing a pre-pack C-11 much earlier one.
And here we are. No more Lehman, huge market distress, etc.
Same deal with GM. Their management keeps yammering this BS that “Chapter 11 is not an option.” Bullcrap. Of course it is an option. It is an option they don’t like because their pay package is going to be one of the things that gets axed, but that’s just tough.
There is no way around the fact that GM is insolvent. Period, end of discussion. There is also no way around the fact that they have to shed huge fixed costs and re-negotiate their existing debt burden to not be just pissing any bailout into thin air.
What has accelerated GM’s (and F/Chrysler’s) demise is that the US consumer is tapped out. Done. Finished. A lot of consumers had been buying cars with HELOC’s - and HELOC’s are now frozen and/or not being written. GMAC has just decided that they want to loan to only people with a FICO of 700 or better. In other words, the easy credit with which people used to buy cars is gone, gone, gone. There is nothing in any of the Big Three’s bailout plans that can or will address this issue.
This is borne out by the fact that November’s auto sales numbers show even the Japanese automakers are seeing big y-o-y sales reductions - Nissan’s sales numbers year-over-year were worse than GM’s! Nothing about baling out the Big Three is going to put more money into the consumer’s pocket and incent them to buy a car - much less a domestic car.
The fastest way to stop the bleeding is to file Chap 11 and start hacking away at the fixed expenses.
Very well stated, and I agree completely. A couple of weeks ago I posted a list of reasons why we should not bailout the automakers. But the contrary view seems to be gaining ground.
Cutting taxes for everyone will put more money in buyers hands.
Allowing for the interest deduction to return would spur people to buy.
Stop bailing out companies and give the money BACK to the people. It’s our money.
Exactly, these GM execs bet the whole ball of wax on getting this bailout.