Posted on 12/17/2008 9:11:09 AM PST by 5thGenTexan
My guess: Because someone would get a look at their books.
I'm not a bankruptcy expert, but I have been closely watching a certain corporate bankruptcy case. This one (The SCO Group) is probably abnormal since their aim appears to be to gut the company before they lose some more court cases they started, but I've seen how some things work.
First, the bankruptcy lawyers will get paid. But in that case I haven't seen any payments to any of the companies they owe money to during the normal course of business, except for their continuing office space (which, IIRC, they had to scale back).
Enron was the canary in the coal mine.
The biggest reason is risk to future sales.
Confidence in a car company that may not be around means people will not buy your product and get stuck with an orphan. For a long term durable good this is a bad place to be.
Which is why I have said for a while now, the fed should not bail out these guys, but let them declare Chap 11 reorg, and instead of paying billions out to the companies, simply guarantee their warrantees.
That way this fear is assaged, even if the company would go under buyers would still be guaranteed to have parts and warrantee work done. If they don’t go out of business (And they should not if they reorg) it costs the government nothing, and if they do the cost will still be far less than the billions they are talking about.
However this won’t pander to the unions because Chap 11 would nullify their contracts, and Dems would never allow that.
Note to GM's shareholders: Can't say you weren't warned.
If they stick it to the taxpayers, and enough angry taxpayers decide to boycott all their products as a result, these companies are going to go down the tubes anyway.
Buy Honda!
Sure. If they went Chapter 11, they could greatly reduce their costs and be financially viable. BK is the only real option if they want to survive. I've taken many flights on airlines that were in BK.
They have some very good products. They could dump their weak lines and layoff workers at those plants and return to profitability within a year or so. Without BK, it will never happen.
“Would you buy a car from a bankrupt company?”
Absolutely yes!!
Why would I buy a car from them now? The bail out is not a done deal yet. We can only hope that enough pubbies and perhaps some dems of conscience will oppose the deal and the companies ultimately will be forced to bankruptcy.
People flew on bankrupt airlines so I don’t see that as any great negative for those who are continuing to buy Detroit’s junk as we speak.
This is a new chapter .
Bankruptcy would allow re negotiation of union CBA agreements, as it did with airlines and everyone.
UAW don't want their contracts renegotiated.
It's pay back time, on the taxpayers dime.
ding, ding, ding, ding, ding......we have a winner...
In a bankruptcy, the impaired creditors run the reorganization which is what Chapter 11 is all about. Usually this group are the unsecured trade creditors. The executives, stockholders, and unions have to accept whatever the reorganization plan says, and these terms are dictated by the creditors. If a deal can’t be struck that meets the needs of the creditors, then there is a liquidation of all assets.
In this process existing warranty holders are a creditor class. The companies would continue to operate and the suppliers would all jump at the chance to supply them because they would get paid in advance and probably at better pricing and terms than before.
The key is DIP financing, which might be difficult, but here’s where the government should twist some bank arms. After all the banks got a lot of money and now would be a good time to lend it. Terms would be stiff but then they should be.
It wouldn’t be hard to construct a plan for each of the car companies, but it would chop a lot of jobs. New companies, at reduced prices with warranties on good terms, would sell their cars. Some lines would be sold. Foreign operations which make money would be ideal divestitures.
Bankruptcy isn’t unthinkable it’s just messy.
I’ve flown a bankrupt airline and rode a bankrupt train(AMTRAK)...
Couple reasons.
First, the top executives lose complete control over the company. Bankruptcy places you under the power of the bankrupty court, and there is someone placed over your company to oversee operations. They can direct the executives as to what steps need to be taken, incuding firing executives, cutting their pay, removing their decision-making abilities. The executives do not want this to occur.
Second the unions do not want this. It voids their contracts and will cause the pension arrangement to be gotten rid of (a step that will make ‘the big 3’ much more competitive with the other automakers). But of course the union’s power of contract leverage they have now is gone. They don’t want that to occur.
Third, it’s a stigma thing, at least from their perspective. They say ‘who wants to buy a car from a bankrupt company?’ The fact is they will be no different in terms of being able to make the cars they made the day before bankruptcy, the day after bankruptcy. Bankruptcy that they are dealing with is not the kind that liquidates the entire company, and then they cease to exist. This bankruptcy is a RESTRUCTURING bankruptcy. Most people understand they need to restructure in order to become competitive with other automakers. Only the executives and the unions appear to not want to do it.
We would buy cars from a company that appears to be in the process of making itself more competitive and attempting to correct the problems that got them in the mess they are in at the moment. Other industries have had to make changes to face stiffer competition - and you can see that the big 3 had to be forced to make better cars, which they have done, by being denied additional bailouts in the 1980s. They are kidding themselves into believing people would shun them if they declare bankruptcy. They just don’t want to lose whatever power they have now - executives, unions - if what is necessary to fix the problem, bankruptcy, occurs.
What, you say? Surely their creditors will be made whole in the event of Big Three Chapter 11.
GM alone has $28 billion in accounts payable as of their Q3 statements. If American Axle or Johnson Controls or Delphi, Lear, Guardian, Goodyear, etc., etc., etc. are told to take 10 cents on their payable dollar by some bankruptcy judge, they'll end up in bankruptcy just as quickly.
"Ripple" is an understatement.
so what then..spread the misery to all of us who didnt make stupid management decisions?
let them fail, let them go bankrupt, let the ripples ripple..the sooner we get to the bottom, the sooner we can start to recover...bailing these idoits out will only makethe pain last longer and make it more severe in the end...THE ROAD TO HELL IS PAVED WITH GOOD INTENTIONS
Sure.
That makes ONE. Now we just need ~7-8 million more of you per year to make it work.
2 reasons:
1. why would they file for bankruptcy if there is still hope for a bailout?
2. the politicians will do everything possible so that unions wont have to do major givebacks in bankruptcy.
Isn't that the real reason they oppose school vouchers because it threatens their control?
Unions do not survive independent of government.
The big government handouts are coming in January.
Charles Krauthammer made the comment that Auto company say they need 2 billion a month to survive. So, Bush should give them 2 billion and let Obama deal with it.
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