The unthinkable: A General Motors bankruptcy

mcall ^ | April 30, 2006 | Tom Petruno and John O'Dell

[Smokin' Joe]

Every single thread has a "sad" post nowadays.

No solutions, information, discussion or debate.

Just "This is sad".

Sad, isn't it?

[fifthestate]

GM, allowed the unions to destroy it. How's that?

actually-Historically-Financially-correct.

I had an acquaintance in the 70's who worked at a GM plant. He referred to GM as "Generous Motors". He often slept on shift. He would get put on furlough and he would laugh that he was making more than if he had been working. Yes, management let it happen, but surely the unions are to blame. I wonder what he thinks now that his pension is beginning to look very uncertain.

[El Gato]

would like to buy one of their new cars in 6 months to a year. Would there still be a warranty if they go bankrupt? Will the taxpayers bail them out, like they did Chrysler?

No, a warranty is a liability and the point of a bankruptcy is to shed liabilities. When Wards went bankrupt, I lost the last 4 of 5 oil changes I'd bought as a package. No oil changes and no refund either.

Yes, the government will probably go bankrupt in order to bail out GM.

[El Gato]

Can't individual brand companies just "jump ship" while the deckline is still above the waterline??

I suspect they are all too integrated on the manufacturing, and design, side to do that. But Chevy and Cadillac might manage it, since the top and the bottom of the line share less than the ones in the middle.

[El Gato]

We should then implement legislation to remove unions from education and from the civil service or our schools and government will end with the same fate as GM.

I'd say it's probably too late for those institutions as well, the rot is too widespread.

[El Gato]

I drive/buy American. GM, Ford and my cars/trucks run great. I like the idea of buying American made instead of American assembled.

Then take a lot at the % US (and Canada) content on your next vehicle. "Japanese" brands often have as much, or more, US content than GM and Ford. If you buy MoPar, your money is going to Germany, in the same way it goes to Japan if you buy Toyota, Honda, Nissan, Mazda, etc. (Mazda's are often built in Ford plants, since Ford owns a major fraction of Mazda)

[stig]

I should hope taxpayers would do no such thing. Nothing lasts forever, and GM is no exception. Bankruptcy is the legal mechanism needed to undo bad business decisions once they reach a certain point.

If only that were true. We will pay for GM whether we want to or not. GM can dump its pension in bankruptcy on the Pension Benefit Guaranty Corporation. And once GM goes Ford will follow and dump its pension and then the PBGC will have to be bailed out by the Federal Government.

It's our own fault we let the airlines play in this bankruptcy game far too long now we will reap the benefits as other major industries follow suit.

[nicollo]

re. UAW/ Detroit's decline

Not a direct line between the two. Folks are missing the most important connection between them: government.

The Wagner Act, along with New Deal and post-WWII price controls consolidated the Big Three dominance -- and at the same time killed, most violently, the vibrant independent mfgs. It bought a few decades of shareholder value in GM, Ford and Chrysler, but the decline and disappearance of the independents has proved fatal for Detroit.

Think of it this way:

Studebaker = Honda.
Nash = Mazda
Packard = Nissan
Hudson = Toyota

[Caipirabob]

Interesting and thanks. In either case I've become so soured against Ford and GM for the thousands they have cost me due to high maintenance I don't think I'll buy them again if I can afford a used Lexus or Toyota. I'd truly love to see our domestic manufacturing industry revived, but I believe that too many obstacles have been created to crush success. Those days may be over unless dramatic reform come to both government and industry. We're talking revolutionary reform before the situation gets any better, I'm thinking...

[HiTech RedNeck]

Kennedy killed in 1975?

[RFEngineer]

"I used to work at NASA years ago. Every now and then someone would show off thier new Japanese car. I would always ask them "How are the people in Detroit going to pay your salary if you won't buy thier cars?". "

So an overpaid union employee needs to exist to fund an overpaid gov't powerpoint engineer at NASA?

The all but dead space shuttle program is a perfect parallel to GM. Instead of focusing on what the need is, focus on the salaries and pensions of the employees.

American innovation, when focused on solving a problem is unbeatable. When distracted with peripheral issues of bureaucracy, or union benefits we couldn't suck more.

Exhibit A - GM
Exhibit B - Space Shuttle