Comments on: Let G.M. go bankrupt

By: Miraj Patel

Miraj Patel — Tue, 02 Jun 2009 05:53:26 +0000

If only they had listened to everyone of us who said to let them go bankrupt in the first place- they wouldn’t have wasted billions of our dollars.

And now they want to subsidize auto purchases- I really don’t understand when they will stop ignoring economics and realize that all of this meddling is only going to make things worse.

By: Paul P.

Paul P. — Sat, 06 Dec 2008 14:15:52 +0000

As a (long ago) GM worker… Lets clear up a few points…

1) The UAW killed itself when it shifted (as did the airlines) from “vested pension contributions” (where GM paid into a fund, and the *union* administered the fund) to “pay retirees out of current cash-flow” (this in exchange for higher wages). Current retirees, depending on when-retired, fit into a number of different pay-categories.

2) GM killed itself by going along w/the UAW pay-or-strike modus operandi (GM knew “this day would come”)

I am not anti-union by any means. But, in this case both GM and the UAW are guilty of killing themselves.

3) The Pension Benefit Guarantee Corporation was a fiasco from the start. It pays *no more than* 60% of anyone’s pension (ask any retired United Air Lines pilot) and the fund is broke. PBGC is more ludicrous than social security.

4) The gov’t is significantly to blame here. “Rules” prevent technology cooperation (e.g. EPA compliance) with gov’t mandates (leading to massive redundant-expenditures by the Big-3). Japan does not have this problem. Gov’t “laws” (honest) prevent Big-3 CEO’s from even *talking* to each other (the suggestion that Big-3 CEO’s would “carpool” to DC was “illegal” unless pre-approved by the gov’t!).

I could go on. But (sadly) the auto industry is so hopelessly broken, no “fix” is going to work. What a mess. Let them fail. The point made “already 95% out of business, so-what on the other 5%” is excellent.

By: steve a

steve a — Sat, 29 Nov 2008 05:22:51 +0000

To further the prior comments about why helping GM is a problem, in addition to what Peter Schiff (and others) have said about helping to keep a GM job takes away one elsewhere, a case can also be made that by alleviating GMs woes right now and preventing a bankruptcy / liquidation they also deny someone in the market place the ability to buy and better utilize the resources that GM currently uses, so the attack is on two fronts, it keeps bad GM management in place when they’ve done nothing but run the company into the ground AND it prevents the assets from being purchased by someone who could perhaps turn the company (or parts of it) into a profitable entity.

It’s government interventionism that’s gotten us to this point and for some reason many think that more interventionism will solve the problem…not likely in my view. Government needs to get out of the market and let the mechanisms work properly to eliminate this kind of behavior. By continuing this bailout mentality they’re just creating butt-loads of moral hazard…imo.

By: Malik Aziz

Malik Aziz — Thu, 27 Nov 2008 18:11:44 +0000

Part of the problem with GM is that they were stealing from the pension fund. Thats why its underfunded. Gross mismanagement that everyone in the business sector turns a blind eye to; this as well as the corporate greed. Union employees making 25 an hour vs. Salary buffoons with a million dollar bonus and a golden parachute; and people want union employees to take a pay cut?Give me a break! The media makes it look like toyotas and hondas are GOD’s cars. They are small and zippy but I am 6′3″ and I need something to feel comfortable in. The car magazines never have anything good to say about any american car products. Now this is anti-american terrorist activities. This undermines the very hardworking work ethic, work a job- make a better life for you and your family. I go to the auto shows in chicago, indianapolis, and toronto. The american cars have more torque, more power, more room and yes more durability. You have to do preventive maintenance like any other car, and your auto should run for at least 150,000 – 200,000 miles. Remember union employees only work at the plants they do not ” Run the show “. For those who know – Chip cutters make the money for the company, not salary, its an expense. So why do different manufacturing plants have a salary to hourly ratio of 2 to 1, 3 to 1? The overhead at these plants is beyond asinine. GM has been making profit overseas, they have new dealerships and manufacturing in china. They have a deal in the works in russia, so its doing fine in their ventures overseas. On the homefront GM does not care about the american workers, its not that we make too much money, its GM is not making enough profit. Business 101 at Purdue University – Payroll is the least expense of any company but its always the first to be cut because you can readily see a change. Graduate in Aeronautical Technology.

By: Mr Mack

Mr Mack — Sat, 22 Nov 2008 15:02:05 +0000

I live in Detroit, and was educated in Detroit Public Schools.
Let the Auto Industry live and die by their own device.
Detroit once almost 2 million people. People came from all over the country to Detroit for the jobs.
When the Detroit Auto Industry started investing in other countries, like Mexico and Japan, the jobs started drying up, and people looked elsewhere.
The Auto Industry have been spoiled by State and National laws that protect them from the fair market environment.
If they fall, and have to restructure themselves, then it will be a better industry for everyone.
FYI: My friend that is layed off from Chrysler make 95% of his wage… and does not have to leave his house. How long can an industry survive with setups like that… it is just a matter of time anyway.
THe US at one point had almost 200 auto companies.

By: Steve

Steve — Wed, 19 Nov 2008 16:10:25 +0000

Someone please inform Paul (see below) that Obama and 97% of the democrats supported the 700$ Billion Bailout of the banks and the nationalization by the Treasury. As did about 60% of the Republicans. Maybe he was watching MTV when it was being discussed and voted on. No wonder Ron Paul didn’t win. Nobody pays attention and informs themselves. LOL

paulNovember 8, 2008 @ 3:22 pm
15
Perhaps with the change in administrations we’ll see an end to the nationalization of industries (people can talk about “Obama the Socialist” but the nationalization of investment banks is far more socialist than anything the president-elect has proposed) before the Big Three can make a case for their bailout.

It has long been the case that the big car manufacturers have been mismanaged: consider the fact that if American workmanship is to blame, why have German and Japanese automakers opened successful plants in the US with domestic workers? I think the republic will survive if one or more of the surviving carmakers follows Packard, DeSoto, Kaiser, AMC and the rest into history.

By: Michael Jordan

Michael Jordan — Wed, 19 Nov 2008 05:08:55 +0000

Let GM and the other auto companies go into restructuring. These companies could not make money during good times. Why do they think that by getting loans from government, they are going to be able to make money and survive? These companies have wrong and inefficient business model. Let them go into bankruptcies, restructure the companies and become leaner and more competitive companies. Will it be painful? Of course, it will. Will the America survive if these guys go out of business? Sure, why not. Lending money to these guys without restructuring will just be delaying the inevitable.

By: AverageGuy

AverageGuy — Wed, 19 Nov 2008 01:36:45 +0000

There is no amount of money that can save a company from poor management. The fact that the GM Board of Directors is still supporting the CEO of GM is all the proof that you need that management is broken.

By: george stallsmith

george stallsmith — Tue, 11 Nov 2008 20:02:33 +0000

I read every single posting above. To me the solution is simple….i look to the group to poke holes in it for me.

1- the goal agreed by all is to return the big three to health. The government and thereby the people are willing to help because we all agree that the alternative would be catastophically bad.
2- america is not a socialist country….we believe in private ownership of businesses and markets to value businesses and allocate capital.
3- then why not do the following:
a- allow the government to buy the unused and un-needed factory space. this would tighten up the big three, give them cash, and allow them to unburden themselves of useless assets.
b- Allow new auto startups to come in there and lease these buildings. Leasees must pay for the leases at a reduced rate….this will still require a lot of money and they will have to raise capital to do this. Think of tesla Motors, or the rocky mountain institute who is building carbon fiber cars. There are many more of these companies out there. Many are building batteries (the engines of the future)
c- Obama is going to do something about health care costs…..there will still be premiums, but they will be lower (if you believe him). This should help with health care costs by the big three.
d- something is going to have to be done about the retirees….I do not know enough about this to say. I do not advocate f@@king them over.

Doing the above will reward innovation, re-allocate America’s productive capabilities from the big three who is failing (due to the fact that they cashed in on the short term and now the long term bill is coming due).

PUMPING IN GOOD MONEY AFTER BAD WILL NOT WORK. Socialism will not work. INNOVATION IS THE ONLY WAY WE WILL WORK OURSELVES OUT OF THIS MESS.

We all know that kia, hyundai are supported by the government. We know that toyota and nissan and honda were supported by the government and have taken off now to be HUGE. The fact is that to start a car company is too big of a nut for somebody to grow organically.

When planning remember that America grew because of risk taking, hard work, innovation, and allowing people to fail!

By: BA

BA — Tue, 11 Nov 2008 05:00:46 +0000

As an engineer employed in Detroit in the auto industry, I say: Let them fail.

This company is burning through 7 Billion a quarter. They will be right back with their hands in the public trough next year for another “fix.”

This cash burn-rate is completely unsustainable.

“Just this one time…” Where have we heard that before? Oh yea – it was AIG, who is ance AGAIN feeding in the public trough of newly printed dollars for another 50-or-so billion. I think it’s AIG’s third time back, but who’s counting.

The company is failing for the same reason Social Security is failing: Totally flawed basic mathematical premise (guaranteed income for life).

The more horribly managed companies we bail out “just this one time,” the longer and deeper the depression will be in the end, the weaker the dollar becomes, and the worse-off EVERYONE becomes.

Things ARE going to be tough, there is no panacea, it is inevitable. The longer we delay the inevitable, the worse the inevitable becomes.

There is no Keynesian economist that is going to come riding to the rescue with some fancy equation making it possible to repeal the laws of economics (though I’m sure they think they can – and I’m sure it will involve trillions more in newly printed dollars).

Let’s not forget where all this “bailout” money comes from – click this link.

http://research.stlouisfed.org/publications/usfd/page3.pdf

Businesses fail for very good reason.

If we don’t LET them fail, the U.S. dollar fails, now if we want to talk about “systemic risk,” let’s talk about THAT.