[sgarnett]

The Senate, UAW, et al, just gave up (ie failed) on reaching a compromise a few minutes ago.

I don't know how GM will come out after bankruptcy (they just hired the bankruptcy lawyer), but the stock market futures are looking ugly tonight. It actually held up well through some dismal recent employment numbers, but I suspect tomorrow is gonna be ugly. Rebuilding my retirement is going to mean austerity and no new cars for a very long time, and I suspect that will be true for many others. That can't be good for any automaker.

I'll admit I wasn't convinced that bridge loans to March could solve the problems for GM, so I don't claim to know what the right answer was. Nevertheless, this is going to be a big kick in the teeth for the economy.

This post has been edited by sgarnett: Dec 12 2008, 04:07 AM

[marka]

Howdy,

Having said that... I'd rather have seen GM/Chyrsler go though a "managed" chapter 11 with the government stepping in as a creditor as needed, plus incentives for folks to buy a domestic car, plus some program / "money vault" to ensure service for ten years.

I think expecting everyone involved to sit down and agree that they should hurt themselves for GM to succeed is completely insane. Gettelfinger in particular doesn't strike me as someone that will bend at all.

GM has other problems and its 100% true that its not all just about the UAW... But the UAW isn't helping. If the workers aren't being stepped on, the UAW is just making things cost more, unless all the union employees that work only on union business and the union lobbyists are doing it for free (and they sure as hell aren't). Chapter 11 would let them ditch that anchor, hopefully along with another few.

Couple that with some new direction (which they're already starting to do, but need to do more of... No minivan? Really?) and I think GM can be as good as any other car company.

But I think Chapter 11 is the only way they'll politically be able to shed the deadweight.

Mark

[94bird]

But I think Chapter 11 is the only way they'll politically be able to shed the deadweight.

Whether or not it's formally called Chapter 11 or not, GM and Chrysler are functionally in bankruptcy right now, with DIP financing from the government. A real Chapter 11, where you go to court to get your plan approved before you can come back out of it, is what Delphi has been in for about 4 years now. They still don't have an approved plan to exit Chapter 11. GM's been bankrolling Delphi's buyout packages for UAW workers, etc. for the duration of Delphi's bankruptcy, and it's seemed like a money pit. There are just so many stakeholders and road blocks to getting everyone to agree to a final company structure and debt settlement it becomes nearly impossible.

Multiply that by at least ten fold, and you're somewhere in the ballpark of how difficult it would be for an OE automaker Chapter 11 to work. Compound this by the fact that if Delphi is in bankruptcy, OEs will still order parts from them. albeit with purchasing terms designed to protect the OE if the supplier moves to Chapter 7. If an OE goes into bankruptcy, customers won't buy from them. End of story.

The current path has a shot at working, but there has to be a big stick in the negotiations that scares everyone enough to think that negotiating is better than just fighting for a spot in a Chapter 7 liquidation. I haven't seen that big stick yet.