First, let’s recognize that G.M. doesn’t need life support. What it needs is Chapter 11. The bankruptcy process is not a bad thing – indeed, it should be embraced. Bankruptcy allows companies to do tough things they could never do in the normal course of business. It has helped many companies turn themselves around and come out even stronger.
Will this mean a hit to auto workers’ benefits? Well, yeah, probably.
Bankruptcy would give G.M. enormous leverage with its debt holders – and, perhaps more important, with the U.A.W., whose gold-plated benefits are one reason G.M. is no longer competitive. A bankruptcy filing would also give G.M. the cover to close plants, rid itself of unprofitable brands and shed dealerships. In fact, unless G.M. files for bankruptcy, state laws would make it prohibitively expensive to shut dealerships.
Conditions on the deal? Yes.
Both companies would have to jettison brands – lots of them…. And then we need these companies to agree to serious, strict enforcement of gas mileage standards. They should be producing the cleanest cars on the street. We may lose hundreds of thousands of jobs in this industry in the near term, but with the right kind of innovation, we should have millions of new jobs in the next 10 years.
Finally, we need to kick out management. That Rick Wagoner, chief executive of G.M., can say with a straight face that he still deserves to run this company is laughable. It would be impossible for him to put in place the serious changes that need to be made because he carries too much baggage. He’d have to undo years of his own neglect.
Here’s this columnist’s suggestion for the government’s role, which entails not only helping to find DIP financing, but also to address the “psychological” issue that people may not want to buy cars from a company that’s in Chapter 11.
After all that is agreed, and only then, the government should come in with what’s known as debtor-in-possession financing to help the company through the bankruptcy process. Ideally, the government would be a “seed investor” and others would join it…. The government should [also] establish a warranty insurance fund that would insure the warranties of all G.M. and Chrysler vehicles bought while the combined company is still operating under bankruptcy protection. The cost to taxpayers should be next to nothing, assuming the company survives and can takeover the warranty obligations.
Here’s the toughest part:
G.M. currently employs about 8,000 people who actually don’t come to work. Those who do go to work are paid about $10 to $20 an hour more than people who do the same job building cars in the United States for foreign makers like Toyota. At G.M., as of 2007, the average worker was paid about $70 an hour, including health care and pension costs….
Part of the problem is summed up by comments like this one in The Detroit Free Press, made by Kandy O’Neill, 39, an assembler at G.M.’s plant in Lake Orion, Mich., where she builds the Chevy Malibu and Pontiac G6. “I think we’ve given enough,” she said about the cuts to her salary and pension plan.
“Everybody wants to come down hard on the workers,” she said. “Nobody knows what we do inside there but the people who work there. It’s hard. It is not an easy job.”
When you read a line like that you might sympathize with her, but then you realize that nothing can be accomplished without bankruptcy. Ms. O’Neill: your company is asking the taxpayers – many of whom don’t have health care coverage – to pay your salary and health insurance.
That is basically what this boils down to, isn’t it?
Nobody wants GM to shut its doors — it really is “too big to fail.” The question is how best to manage a reorganization of the business so that, billions of dollars later, we don’t find ourselves right back where we are now in six months or a year. This recession is not going to be over in that time frame; it may even get worse before it gets better. So an infusion of cash into a company that isn’t surviving in this economy will accomplish nothing. Big changes are needed. Wiping out shareholders and replacing management seem like decent places to start; giving new management leverage with the U.A.W. and with creditors seems like a decent second step. Chapter 11 accomplishes all of that — that’s what it’s designed for.
Yes, it’s a drastic solution. So is everything else on the table.
I’m considering this from a purely political point of view. The problem with the automakers going for Chapter 11 is that the bankruptcy courts approve the deal. That is, a judge–most probably appointed by Reagan/BushI/BushII, calls the shots. Even allowing for this, we’ve all read too many stories of how bankruptcy courts are very lenient on current management, including, quite often, approving gigantic salaries and bonuses “to keep the continuity of management.” I don’t want some superannuated judge who plays golf with the CEO of Ford on Sundays approving a deal. I want some smart, tough Obamacrats making sure that fundamental changes are enacted. Coping with the UAW would in all likelihood be easier if the deal were not in the court system.
Thanks in large measure to the Republican Congress passing, and President Bush signing, the 2005 revision to the Bankruptcy Code. See 11 USC 503(c); 548(a)(1)(B)(ii)(IV). Also, for your information, bankruptcy judges are not appointed by the President, but by the circuit courts of appeal. 28 USC 152.
<
p>So, your comment is screechy knee-jerk liberal paranoid ranting, without basis in fact, law, or the reality-based-community.
<
p>Also, if the goal of the bankruptcy is to see existing managemnt fired, we might as well save the money and extend unemployment benefits by a few weeks instead. Bankruptcy reorganizations that do not have the benefit of management that is already fully familiar with all contractual relationships and customer relations fail, expensively.
Like Smalltown guy, I also predict that management will be very well compensated for their failures.
$70 an hour, though? Wow. Is that for real?
http://vps28478.inmotionhosting.com/~bluema24/s…
<
p>Here are the facts!
As I pointed out in a previous comment the $70 per hour figure is an hourly labor cost, which includes payments for current and future retiree health care, the job bank and pension contributions. The UAW got creamed in the last round of bargaining and the actual take home pay is in line with Toyota. The costs are high, but an individual is not getting $70 per hour…
And attributable to labor expenses, even if the expense was deferred from 40 years ago.
That a Large Manufacturing Company with and equally large work force over time will find itself saddled with a large retired work force?
<
p>If so what then do you suggest we close up shop after x number of years and that a young person needs to check and see how long the company has been in business before he applies or takes a job offer because when they reach that tipping point it’s time to go?
<
p>Reminds me of that cartoon sitcom a few years back with the dinosaurs. In one episode they had a long discussion of Hurling day the day the Male Father Ralph I believe was suppose to get to throw his mother-in-law into the tar pit it was her time to go. So is it hurling day for the Auto Industry and what then?
<
p>I am sticking with my original position not bailing out the Auto companies with strict conditions of Exec compensation is needed. It also should be a consideration that this decision can not be made in a vacuum that you must take into consideration the current economic crisis and the risk of making that meltdown worse. Chapter 11 has less value to the Auto Industry since we are not talking about restructuring money owed in a financial institutional way the only relief for them would be 1. Retooling to make better products, and two cutting contractual obligations and forcing Middle class individuals and families to pay the price of the cut after faithfully working with a promise of a return after.
<
p>What do you say to creditability of any employer if you throw promises out the window at the first sign of trouble?
<
p>As Usual Just my Opinions
Obviously, defined benefit plans are not sustainable over the long term. For those employees, having this plan is an investment in the company, and like any other investment, it may turn out to be a bad investment that loses money. Like the retiree with an IRA that went south, the GM retiree is about to experience altered circumstances that require lifestyle adjustments. As for anyone else, certain government benefits are available if those adjustments are too severe.
<
p>__________________________________________
<
p>GM, in particular, has several structural problems. One, they have the pension problem. Two they have the existing UAW deal with present workers, which is not the biggest problem they have. Three, they have way too many dealers, and it costs way to much, under the law of the various states, to cut those dealerships off, and so they have continued to carry them at great cost. This is actually among their most severe constraints. Four, they have too many brands and models, but trimming those down is difficult because of number three. Five, they have a excessively bureaucratic management, and are bound by too many union work rules, to be innovative. Six, they pay the senior execs too much.
<
p>As offensive as number six is to you, it doesn’t really begin to address the many structural problems that face the company. It is kind of like the homeowner who doesn’t have enough income to support their mortgage, car, and credit cards, and decides to cut back by paying bills electronically in order to save on stamps. The fundamental problems remain unadressed.
<
p>The problem of executive pay, even though offensive to “progressives”, is more of a political problem than a business one. If the bailout tends to focus on political problems rather than business problems, then the business will nevertheless fail.
may be a “political” problem. But bad executives is a business problem. They simply need to be replaced, and there is no reason to reward them for their sucky work on the way out.
I know not another comment about CEO compensation but just one. If you watched any of the local or national news you may have seen the clip of the testimony on Capital Hill yesterday by the big 3 Auto companies CEOs.
<
p>Well if you did I think it is clear that MrWogner of GM, based on his testimony is the biggest problem the industry is facing today and likely his comments have sunk any hope of getting a bailout for the Auto Makers before the next congress is seated. Now I am sure he was well prepped in his comments by some high priced PR firm and overpaid consultant who, had word tested his entire speech, but let me tell you even if I was asked to vote on the bailout after listening to his comments I would have looked that man in the Eye and said sir not a dime till you leave your post and take nothing with you.
<
p>His comments that the industry has done everything it could to prepare for the future and that their car lines are well positioned in the market is LAME. He further and I paraphrase went on to say all the woes currently are the result of the credit crisis and Banks not lending. This may be true in the broad overview yet sir if you had models that lasted as long, offered the same features, and got gas mileage that met those of the foreign competition you may be justified in you comments but you do not not and as a result of your poor decisions and market conditions you are here before us not with hat in hand but a clear chip on your shoulder if you were a CEO with visions and innovation on your resume you may be able to make such claims but you clearly do not and as such you have placed your company into the current peril. Let’s not forget that American auto manufactures once lead the world in bring new developments and introductions of new technology to the industry, currently and under the recent past leadership we have done little but to try to catch up with more innovative foreign competition. To put it simply were getting spanked in innovation and all these three can say is thank you may I have some more sir.
<
p>The old saying the fish rots from the head down could not be truer in this case. This is certainly unfortunate that so many of America’s workers have to suffer under such inept leadership as we are currently witnessing. I do believe that GM, Ford and Chrysler can survive but they need money and just as importantly new leadership and in this case my position has changed not a dime should be awarded until they clear the top levels out.
<
p>You know I do believe (may not sound it) that just rewards for a job well done should not be limited but at the same time when you are doing a poor job you should be the one paying the price currently the culture of American Capitalism places CEO’s and Key Staff up to a level of Demigod and rewards them for just showing up for work.
<
p>How many stand and scream for the teacher making $30,000 a year to be held accountable for performance of their students yet no one talks about a CEO being held to the same standard or stricter considering the number of lives they effect.
<
p>Today a good start would be to institute a means test beyond dividend payments that challenges the future vision and measures success based on anticipation and innovation.
Not simply a bottom line because we now know that bottom lines can be smoke and mirror shows thrust upon us by illegal immoral and unethical leadership the list of such schemes grows daily.
<
p>I strongly suggest that MrWogner of GM should consider tending his resignation immediately and then have his assembly line workers show up at Capital hill with the paper and sit down and discuss what can be done to save their jobs and get the industry back on it’s feet. Also please let the Board of Directors know they are next in our sights if they can’t make better choices in who they chose to lead in the future
Nice quotes reasonable resources but with extremely skewed Data to suggest that the average worker in GM makes $70 an hour is doing a grave disservice to the Facts only if you include the total compensation and divide by the # of workers do you come up with a $70 dollar an hour cost basis. I posted on your last thread the actual rates for the majority of the corporations production/manufacturing workers with the dollar per hour pay rates per the contract. GM’s last public figures are for 2007, which I posted.
<
p>I would like to offer just one comment that I think is germane to the discussion and that is our Economy is consumer driven. This can be sited from our Current King George to Bill Clinton to Congressional leadership in speeches and testimony before the Commerce Committee. If we assume the numbers of late that says 3/4 to 4/5ths of our economic future is based on the middle class living paycheck to paycheck how do we justify abandoning the last major/global manufacturing we have here in our Country? To suggest that filing for Chapter 11 holds a guarantee that a judge will be able to determine how to do what no one else has been able to do with the big three I think is a real reach.
<
p>I regardless of my recent posts do not believe that government will solve all. I do believe that government needs to step in and provide safety nets when needed. This can be accomplished in two ways one the creation of direct programs Like Social Security and unemployment insurance and then their are the safety nets that regulations can provide by putting reasonable guidelines that are to assure us all that with in reason life will lumber along and we will all retain a certain level of confidence and dignity in life.
<
p>Conditions or regulations your choice of words can be put on any loans or grants to the Auto Industry that will help to change the course remove the obvious greed by the few seeking immediate gratitude from run away profits in order to bring and industry critical to our way of life through an extraordinary occurrence caused by their actions and the actions of the other systems in our economy.
<
p>Enough the risks of a Chapter 11 filing far out weight the positives and the risks of a loan are far fewer then the positive results change can bring.
<
p>As Usual Just my Opinions
“Gold-plated [UAW] benefits”?
<
p>From a 2005 Globe editorial by one of my fave raves, Robert Kuttner (co-editor of The American Prospect):
The first thing the NYT editorial writer does, of course, is throw auto workers under the bus (no pun intended).
I’m still pissed off at GM for this, and I wasn’t even born yet. I can’t hear the current discussion of bankruptcy and bailout for the auto industry without wanting to tie this in with health care reform, even if it were only symbolic justice for the decades-old sins of the industry.
Three years later (and 60 years after they thwarted Walter Reuther’s agenda), I think that — just before we march them to the gallows — Big Three management should be paraded before the American public and forced to unequivocally endorse single-payer universal health care for all Americans; but that’s just me…
<
p>My preference over telling two or three entire states and their auto-dependent economies to go to hell, is to find the level of conditions that would make the automakers refuse a bailout, back up a notch, and make that the deal. 50 MPG by 2012? Not unreasonable.