The reason I think that liquidation would be the result of a bankruptcy filing is primarily the UAW acting as an unsecured creditor. They would be the creditor most unlikely to agree to a plan of reorganization. Do you recall how long it took for the pilots, the stewardesses and the maintenance workers to finally agree on what they would get out of the United Airlines bankruptcy? It was more thyan a year. The UAW would be worse. And if the bankruptcy took a long time, sales would sink to next to nothing because people simply wouldn't take the risk of buying a car from a company that could be out of business soon. That doesn't even consider the dealer network, which would be likely to fall apart without the throughput of enough vehicles to keep them in business.

My idea would work, I think, as a "pre-packaged" bankruptcy, where all the creditors agree to the deal before the bankruptcy is ever filed. Then they file, take the plan to the judge, get it approved, and the company immediately comes out of bankruptcy with a different set of liabilities. But to get the UAW to agree to a prepackaged deal is unlikely, I think. It would take a most unusual and talented representative of the government to convince the union leaders of their dire circumstances and that the deal proposed would be better for their membership than liquidation of the company.

I don't think our elected representatives will ever think of something like this. If they do, I doubt they'd have the guts to take the political heat from unions and their supporters across America for making such a proposal. That wouldn;t make it wrong...it would just make it impossible.

Originally Posted by Villages Kahuna

The reason I think that liquidation would be the result of a bankruptcy filing is primarily the UAW acting as an unsecured creditor. They would be the creditor most unlikely to agree to a plan of reorganization. Do you recall how long it took for the pilots, the stewardesses and the maintenance workers to finally agree on what they would get out of the United Airlines bankruptcy? It was more thyan a year. The UAW would be worse. And if the bankruptcy took a long time, sales would sink to next to nothing because people simply wouldn't take the risk of buying a car from a company that could be out of business soon. That doesn't even consider the dealer network, which would be likely to fall apart without the throughput of enough vehicles to keep them in business.

My idea would work, I think, as a "pre-packaged" bankruptcy, where all the creditors agree to the deal before the bankruptcy is ever filed. Then they file, take the plan to the judge, get it approved, and the company immediately comes out of bankruptcy with a different set of liabilities. But to get the UAW to agree to a prepackaged deal is unlikely, I think. It would take a most unusual and talented representative of the government to convince the union leaders of their dire circumstances and that the deal proposed would be better for their membership than liquidation of the company.

I don't think our elected representatives will ever think of something like this. If they do, I doubt they'd have the guts to take the political heat from unions and their supporters across America for making such a proposal. That wouldn;t make it wrong...it would just make it impossible.

There is still an alternative available - Employee-Ownership.

SAIC, Publix Supermarkets and Andersen Corporation are examples of successful employee-owned companies. Nothing stops the unions from stepping to the plate and acquiring control of any US auto maker.

If there is a potential for taxpayer bailout, neither management nor labor will do anything other than wait everyone out, but congressional inaction forces the two sides to save each other.

GM closed Friday at a little more than $3 a share. They have 610.5 million shares outstanding, therefore a market value of only about $1.8 billion. That's a really cheap price for a company with sales of over $200 billion a year. In contrast, both Toyota and Volkswagen are worth about $200 billion, Honda about $40 billion, Daimler-Benz about $30 billion, even Nissan is worth about $16 billion. Ford, with all its troubles is worth more than twice as much as GM.

Some market experts say that GM's stock will be close to worthless by the end of the first quarter of 2009. If anyone, including the employees, wanted a company that could generate $200 billion in sales cheap, now's the time to buy. Heck, if GM earned only 1/2% on sales, the buyer could pay for the company in only one year.

If the employees think the company is so great, they can buy it right now for a song. Heck, at Friday's price the employees could buy the whole company for only $6,000 apiece! By keeping their hands in their pockets, they seem to be telling us all something.

Unfortunately, this bow-wow of a company employs more than 300,000 employees directly and probably three or four times that number among raw material producers, parts suppliers, dealers, etc. Altogether more than 1 million people rely on GM for their livliehood. That's how many would hit the unemployment lines should GM go belly-up. And I'm not even counting the municipal employees, police and firemen, school teachers, etc. who will lose their jobs as the tax payments from GM and other supplier compnaies dry up.

We need to support GM financially. I only hope that our elected representatives just don't hand the GM management a check with no strings attached like they did with the huge amount of money they kicked into the banks, Fannie, Frddie, AIG, etc. All that would do is to prolong the ultimate failure of GM. No, this time everyone should be required to pay a stiff price for a taxpayer bailout--the management, the unions, everyone involved. Otherwise it will just be wasted money.

Originally Posted by Villages Kahuna

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We need to support GM financially. I only hope that our elected representatives just don't hand the GM management a check with no strings attached like they did with the huge amount of money they kicked into the banks, Fannie, Frddie, AIG, etc. All that would do is to prolong the ultimate failure of GM. No, this time everyone should be required to pay a stiff price for a taxpayer bailout--the management, the unions, everyone involved. Otherwise it will just be wasted money.

Strings or not, no matter how many people (suppliers, spin-off services, etc.) rely on GM in some manner or another, throwing money at a company with insufficient sales now, and no reliable forecast for break-even sales in the future, is simply delaying the flush for a very short time at high cost to the taxpayer - GM's primary customer base who is not buying the product!

Sales are the only way to prop up a company which exchanges metal-for-money. So, if a "bailout" via a guaranteed purchase of GM products is the plan, it has a chance of being successful. Anything else just stacks more finished, and unsellable, products at dealership storage sites - and that does not solve the underlying problem, just makes it worse!

So, unless there is a plan (e.g., tax deductions, selloff at below-cost for existing inventory, etc.) that actually makes GM's products more attractive to consumers, and the consumers can be expected to respond by purchasing GM's build-to-inventory backlog, what good can possibly come from throwing money at a company which continues following the same business model that has led to potential implosion?

Originally Posted by captain1202

Kahuna,

With due respect, I think you are naive if you think any socialist bent will be reversed in the future without blood in the streets. The circumstances we find ourselves in now are exactly the ones that breed dictatorships because the citizenry will accept any solution to "ease the pain". This is precisely why I am concerned about the Obama win, because of his known past associations and leanings in this direction. Hopefully the congress will not be asleep at the switch....but I'm not optimistic.

Not exactly to the point, but you should all take some time to view "The Crash Course" on Chris Martenson's web-site. Read his background. A pretty insightful presentation me thinks. It's probably pretty accurate on where we are headed, sooner or later.

http://www.chrismartenson.com

I hope you are wrong.....

I fear that you are right !!

I can't differ with you, Steve. GM may be too far gone to save. If a cash injection had strings on it, something that would permanently adjust their costs, they might have a chance. But it's pretty well-known in the indiustry that GM didn't have the greatest product pipeline to begin with. But in order to conserve cash in recent months, they've pretty much cancelled all the product development on vehicles that would be more attractive to the marketplace when our economy recovers, say in 2010 or so. In their current situation, if they survives that long they'd be trying to sell some pretty tired and fuel-hungry vehicles. The foreign manufacturers and Ford, in paticular, have some superb, fuel-efficient products hitting the market in that time frame.

Like I said earlier, if the employees want to buy GM and give it a go, it can be had for about $6,000 per employee. That price will almost certainly go down in coming weeks. If they think it's such a good deal that the taxpayers should invest, why aren't they doing the same?

I'm afraid that we'll be down to the "big two" in a coupe of months. And again, it's common knowledge in the auto industry that Cerebus, the private equity firm that owns Chrysler, would dearly love to get rid of it at any price. It's tougher to know for sure with a private company, burt the word in Detroit is that Chrysler has an even worse product pipeline than GM. It may well trun out that by the summer Ford will be the only surviving U.S. auto company.

These thoughts are a lot easier to say than to imagine the widespread negative impact that the loss of two of the big three will have on America and our economy. I read a report today published by the Center For Automotive Research at the University of Michigan that projects that the loss of two of the three auto companies will cause the immediate loss of about 2-1/2 million jobs with the incremental unemployment caused by the failure of the two companies remaining at 1-1/2 million thru the end of 2010, with 1 million still being unemployed at the end of 2011.

In economic terms, the loss of two of the three U.S. automakers would reduce personal income by over $125.1 billion in the first year, and a total loss of $275.7 billion over the course of three years. The impact of this personal income loss on fiscal government operations at the local, state and federal levels include an increase in transfer payments, a reduction in social security receipts and personal income taxes paid. The net impact of all three of these categories results in a loss to state and federal government of $49.9 billion in 2009, $33.7 billion in 2010, and $24.5 billion in 2011—a
total government tax loss of over $108.1 billion over three years. In addition, the two auto companies provide, directly or indirectly, healthcare inurance for about 2 million U.S. citizens. That number would almost immediately be added to the number of citizens with no heathcare insurance coverage.

The loss of GM and Chrysler without government intervention is almost a certainty. It won't be a pretty picture for any of us.

The only reason that the bailout of the auto industry is being considered is because of the unions. The democrats depend on the union vote. The auto companies should be required to file chapter 11 and reorganize to a workable model. Non Detroit based companies are not looking for handouts.

Just an opinion.

PS when do I get to file for a bailout?

Originally Posted by Yoda

The only reason that the bailout of the auto industry is being considered is because of the unions. The democrats depend on the union vote. The auto companies should be required to file chapter 11 and reorganize to a workable model. Non Detroit based companies are not looking for handouts.

Just an opinion.

PS when do I get to file for a bailout?

When your bankruptcy puts 2 1/2 million tax payers out of work.


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While I believe we should not support a bailout of the auto makers as things stand, I would support giving them help or assistance if and only if they the following we input for the bailout of them.

1. Do something about the CEO and the rest of the High Ranking Exec's that will really benefit from the bail out. Take the stock options they have and their bank accounts and apply to the bailout. Take control of their property and sell off to pay for the bailout. One knows all the workers in the factories will lose their butts in this deal, so make the big guy's suffer as well.

2. Make the automakers redo the plants and produce so called "Green Autos". I believe we are way behind times of Japan and so on when it comes to Auto's. We need to be heading torward Energy Conservation when it comes to autos. While big suv's are nice they are gas guzzlers. We got rid of out Expedition and Supercrew 4x4. My wife drives a small car now and I ride bike to work. My choice but i am doing my part. Just because Gas prices are coming down, we dont need to get in a relaxed state of mind. I believe now is the best time to make changes in the right directions.

3. Make sure that we the people are informed on how they do it. Dont tell us you are going to bail them out and this will happen and that will happen. prove to us what is taking place. Look what AIG did, they went on a 440,000 retreat after the bailout of them took place/

This is my thought on this deal. I know there is alot more involved that we the people dont know and will not be informed on. Yes the unions are a big deal in this, but so are the Chief Exec's. If you are going to do it, DO IT RIGHT THE FIRST TIME!!

There is entirely to much bailout going on with nothing to show for it. Yoda posted a question about bailing Yoda out. Remark was made when you effect 2 million workers. Yoda has a point, if you bail out these big compaines your really are bailing out the CEO,COO and high ranking exec's. I understand and I think Yoda does also. Its a point that is being made with the comment. I hope I am putting it right.

Any way that is my 2 cents.

Originally Posted by chuckinca

When your bankruptcy puts 2 1/2 million tax payers out of work.

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The difference between giving unemployement benefits to 2.5Mil workers and dumping cash into a company that makes products no one is buying and will just sit on the storage lot is that in the latter case: 1) the company really doesn't change how it does business when it gets money for tears (it will just happen again); 2) any government direction regarding how to redesign products and retool manufacturing plants is the blind leading the overtly stubborn; and 3) if the workers at all levels within the company don't consider the company a wothwhile investment, why should anyone else?

Chapter 11 of the bankruptcy laws provides a company the mechanism to get debt protection while it reorganizes. Many airlines have gone this route, as well as a lot of businesses in this nation - and a goodly number have exited from Chapter 11 protection with success. Before a nickel goes to the auto makers, they should take advantage of what legal protection is available to them NOW, rather than expect free money for no substantive action to get better. No one has yet to explain why the Big Three haven't gone this route FIRST before seeking a handout, or why Chapter 11 won't work.

To me, the answer is a simple one. In Chapter 11, everything is open to revision, and that includes executive compensation, management staffing structure, labor agreements, benefit plans, et al in order to get a bankruptcy judge to release the company from court control. The union officials fear repercussions from the rank-and-file, the rank-and-file don't want the potential to lost what they have, the management staff is concerned about being in the unemployment line, the executives fear their [ersonal financial packages being turned inside-out.

We have decent laws and structure to cover ailing businesses which have a potential for recovery. Why aren't these options the first to be tried?

Sounds to me this auto industry bailout is more a money-for-votes payback thing than a legitimate economic issue.....

Originally Posted by chuckinca

When your bankruptcy puts 2 1/2 million tax payers out of work.


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SteveZ had a very good answer. I however dont have that much time. I do not want to see 2.5 million auto workers out of work. More than that, I dont want to pay their salaries at $80 per hour. They are not worth it. Hence the job of unions: Add worth to the worthless.

Yoda