Let them all bankrupt

[scooterbob]

Someone can correct me if I am wrong but if they file Chapter 11 that absolves from paying pensions. So essentially tens of thousands of retired autoworkers would lose their retirements. I can't see how that is good for anyone.

 

It may or may not absolve the company from paying pensions. However, one thing is certain, it isn't good for the retirees. On the other hand, it may well be a good step toward saving the company. Obviously, if the company goes out of business, those pensions won't be paid and, in addition, the present workers are out of a job.

 

Do you sacrifice some or all? I know it sounds hardhearted but that is the reality of it.

[scooterbob]

I blame two entities for the current situation of the "big 3"

 

1st the big three themselves. They have to be drug kicking and screaming to any change. For years they produced products that were inferior to foreign competetors and now that it looks like they have remidied that situation there were far to many people driven away from their products. I know several people who staunchly say they will never own another vehicle produced by American manufacturers. They ahso fought any meaningful fuel economy restrictions and very foolishly chose not to make theyr most fuel efficient vehicles available here.

 

2nd the unions. They have negotiated so many inflated contracts that the companies can now not afford to honor them. How many people are being paid that are completely non-productive? How much in befefits do retirees get? Union greed is a huge factor in this.

 

And I agree, let them declare bankruptcy.

 

:thumb:

[Newman]

Would you buy something from a bankrupt company?

 

I heated my home with natural gas from Columbia Gas when it was bankrupt.

[nkuclubbaseball19]

The country would, on the whole, be better served if the automobile companies and others with similar financial problems filed for protection under the Bankruptcy Code.

 

Obviously, these companies would file what is known as Chapter 11 (Reorganization). They would not go out of business as many seem to believe. However, bankruptcy would allow the companies to reorganize and, hopefully, become profitable. A creditors's committee would help oversee the process. It could, and should, allow for such needed changes as trimming of the excess fat- both in management and in the unionized labor force- and increased productivity and quality.

 

Some years ago it worked for Walt Disney (as it has through the years for many others) and it can work for these companies. Of course, if the problems cannot be worked out through this approach, they probably need to lock the doors and move on. We need responsibility instead of bailouts.

 

:thumb: I've said this since the beginning.

 

Would you buy something from a bankrupt company?

 

Absolutely.

[HHSDad]

Large companies going bankrupt tend to have a snowball effect. Company A files bankruptcy, lays off many employees, cuts orders from vendors. Companies B, C, D and E file bankruptcy because Company A is a major customer and has cut their sales dramatically. Companies B, C, D and E lay off many employees. Companies G, H, I, J, K, L and M have financial difficulties because former emplolyees of Companies A-E have curtailed spending and no longer eat at their restaurants or buy from their stores. Employees at Companies N-Z see their pay raises disappear and may have to give pay concessions due to the number of unemployed people available willing to do their job for less.

 

And so on.

[H]

I think there is a lot more to this than just "letting the free market work". How much liability does the government take on if the Detroit 3 turn over their current pension obligations to the Pension Benefit Guaranty Corporation? What would the implications be to U.S. national security if a major component of its manufacturing base was allowed to disappear? These companies are facing insolvency because the meltdown of the U.S. financial system has placed unprecedented stresses on certain segments of "the real economy". Annual auto sales in the U.S. have plummetted from an average of 16-17 million cars and truck to a rate of about 11-12 million. And not everyone thinks Chapter 11 bankruptcy reorganization is a viable alternative for these companies:

 

One reason for the casual support for letting GM fail is the assumption that bankruptcy would be no big deal: As USA Today editorialized recently, "Bankruptcy need not mean that the company disappears." But, while it's worked out that way for the airlines, among others, it's unlikely a GM business failure would play out in the same fashion. In order to seek so-called Chapter 11 status, a distressed company must find some way to operate while the bankruptcy court keeps creditors at bay. But GM can't build cars without parts, and it can't get parts without credit. Chapter 11 companies typically get that sort of credit from something called Debtor-in-Possession (DIP) loans. But the same Wall Street meltdown that has dragged down the economy and GM sales has also dried up the DIP money GM would need to operate.

 

That's why many analysts and scholars believe GM would likely end up in Chapter 7 bankruptcy, which would entail total liquidation. The company would close its doors, immediately throwing more than 100,000 people out of work. And, according to experts, the damage would spread quickly. Automobile parts suppliers in the United States rely disproportionately on GM's business to stay afloat. If GM shut down, many if not all of the suppliers would soon follow. Without parts, Chrysler, Ford, and eventually foreign-owned factories in the United States would have to cease operations. From Toledo to Tuscaloosa, the nation's?assembly lines could go silent, sending a chill through their local economies as the idled workers stopped spending money.

 

 

I can tell you that if GM tried to file Chapter 11 bankruptcy, in which they are granted protection from their creditors, the action would rapidly send most of the domestic parts supply base into financial convulsions. Why? Because the supply base are creditors to the Detroit 3 and many, many parts suppliers are themselves in precarious financial condition due to industry volumes that have dropped about 25% from last year. What would the impact on the economy be if several hundred thousand to potentially over a million middle class workers were put on the street over the course of a few months?

 

I agree that the Detroit automakers have been in a state of decline for the past 3 decades, and that many of their woes are traceable to poor management decisions, such as overinvesting in trucks and SUVs and underinvesting in cars. But Detroit has taken many significant steps in the past 2 years to improve its competitive position, such as negotiating a 2-tier wage structure with the UAW under which new hourly workers hire in at roughly $14/hour (about half the old rate). They have also negotiated that the UAW take over responsibility for retiree health care benefits, by making lump sum payments into a trust fund that the UAW must manage. These are major changes that will have a large impact on the cost structure of GM, Ford, and Chrysler in the long term, but the more immediate concern is if these companies can survive the next 12 months.

 

I would argue that we have a legitimate national security interest in maintaining our domestic automobile manufacturing capability.

Edited November 18, 2008 by H

[H]

And to those people saying they would absolutely buy something from a company in bankruptcy, we're not talking about a DVD player or a toaster. We're talking about ~$35,000 on an automobile. Most people would have serious reservations about paying that kind of coin for a product that may not have a reliable warranty.

[GusMcRae]

Large companies going bankrupt tend to have a snowball effect. Company A files bankruptcy, lays off many employees, cuts orders from vendors. Companies B, C, D and E file bankruptcy because Company A is a major customer and has cut their sales dramatically. Companies B, C, D and E lay off many employees. Companies G, H, I, J, K, L and M have financial difficulties because former emplolyees of Companies A-E have curtailed spending and no longer eat at their restaurants or buy from their stores. Employees at Companies N-Z see their pay raises disappear and may have to give pay concessions due to the number of unemployed people available willing to do their job for less.

 

And so on.

 

This is the best response yet...

 

I am a capitalist and believe in free markets...but I was listening to a show the other night that said as many as 30 million jobs are tied to the domestic auto industry.

For the most part the Big 3 are just assemblers. Most of their parts and what not are purchased from suppliers...many domestically. If they file for Ch. 11 protection then many of those suppliers acct rec will be washed off the books. This could single handedly become a domino effect for the economy as a whole.

 

Also, keep in mind that GM is the largest purchaser of steel in the world. AK is already "temporarily" idle in Ashland. A Big 3 collapse could be devasting for the domestic steel industry which in turn would cause a collapse in our local coal market.

 

Now I do not believe that the Big 3 should be just given a blank check for bis as usual...but there is NO way that we can just let them go into bankruptcy.

[Da champ]

This is the best response yet...

 

I am a capitalist and believe in free markets...but I was listening to a show the other night that said as many as 30 million jobs are tied to the domestic auto industry.

For the most part the Big 3 are just assemblers. Most of their parts and what not are purchased from suppliers...many domestically. If they file for Ch. 11 protection then many of those suppliers acct rec will be washed off the books. This could single handedly become a domino effect for the economy as a whole.

 

Also, keep in mind that GM is the largest purchaser of steel in the world. AK is already "temporarily" idle in Ashland. A Big 3 collapse could be devasting for the domestic steel industry which in turn would cause a collapse in our local coal market.

 

Now I do not believe that the Big 3 should be just given a blank check for bis as usual...but there is NO way that we can just let them go into bankruptcy.

 

All contracts would be void if a bankruptcy happens. Thats contracts with suppliers. Thats contracts with the union. Those folks that work at Toyota making 75,000 to 100, 000 a year are going to get a big decrease in pay.

 

Remember this is not a bailout, its a loan by 2011 the unions will take over the expense of health care for all retired workers. Thats a big savings for the factories. The factories pay more for health care than they do steel.

[75center]

I would hope that if this goes through it would be tied to drastic changes by both the auto companies and the unions.

[martstone]

We can help them survive now , or pay later ! The "snowball effect" mentioned earlier will happen. It is estimated that thirteen million people will be jobless if they go under. Thats thirteen million not paying taxes , and thirteen million probably on some type of assistance that the rest of us pay for in the end. They built gas gusslers because people wanted them , but that finally caught up with them. GM currently offers three of the best mileage cars available that are selling very well. They don't need a blank check , just some operating capital for a couple of years. Chapter 11 won't work because they do not have capital to retool.

[formerkywrestler]

Here is something I have a problem with. One of the reasons that these companies are in trouble is because they paid retirement and health insurance for their employees that they really couldn't afford. Now they want the tax payers to bail them out because they were irresponsible. A lot of these same tax payers have to pay for their own retirement and health insurance and now they are going to have to pay for other people's as well. This is a scary time in American politics.

 

We have unemployment benefits until they can find another job. We have the TAA and the ATAA to help with those who have lost their jobs to shift in productions outside of the country.

 

If our economy's growth is not held back by an $810 billion tax bill, then more jobs would be created for those who lost them. In this situation, the tax bill keeps growing, the unproductive business behavior keeps happening, and everyone keeps losing.

 

But I am sure you already knew that.

Excellent post!

[Mr.Fundamental]

When and why should the government go into the private sector? I have real issues with this question. Under what authority does the government do such a thing? Is bailing out the big three a responsibile thing to do? Where in the constitution everyone is entitled to a house, a car, or even a job? Would you do this with your own child?

 

For those that said yes, let us say your child ran up a credit card debt, you love them so you paid it off, only to see your child run up another credit card debt, you love them so on and so forth, now you have created more of a dependent on you. So what is the point, love sometimes has to be tough!

 

Please understand, I know that I sound heartless, but it is the exact opposite, we are a great people that once pushed in a cornor we will come out and fight, not have someone else (the government) to come and fight for us!

 

If we don't get back to this train of thought, apathy will set in, then destruction. Getting back to that thought though will be difficult, someone said that 13 million jobs could be lost, a sacrifice, but if they are worth thier mustard and God is with them (which He said He will be with us always) they will bounce back!

[GusMcRae]

When and why should the government go into the private sector? I have real issues with this question. Under what authority does the government do such a thing? Is bailing out the big three a responsibile thing to do? Where in the constitution everyone is entitled to a house, a car, or even a job? Would you do this with your own child?

 

For those that said yes, let us say your child ran up a credit card debt, you love them so you paid it off, only to see your child run up another credit card debt, you love them so on and so forth, now you have created more of a dependent on you. So what is the point, love sometimes has to be tough!

Please understand, I know that I sound heartless, but it is the exact opposite, we are a great people that once pushed in a cornor we will come out and fight, not have someone else (the government) to come and fight for us!

 

If we don't get back to this train of thought, apathy will set in, then destruction. Getting back to that thought though will be difficult, someone said that 13 million jobs could be lost, a sacrifice, but if they are worth thier mustard and God is with them (which He said He will be with us always) they will bounce back!

 

While I agree with what your saying in principal...its just not that simplistic. You would be looking at a snowball that "could" be catastrophic. Remember, this isnt just the "Big 3" that everyone is concerned or even that worried about. Its the 10million jobs that are tied to them. Many of these are fundamentally (no pun:lol:) sound companies who have been doing business with Detroit for many many years. And its the many small towns that have been dependent on these companies for many many years. Without "those" companies many of the communities are in big trouble.

 

As I said earlier...I think there must be (seems its already done) some kind of bailout. But there has to be many things tied to the $$$.

[SKINPIG]

While I agree with what your saying in principal...its just not that simplistic. You would be looking at a snowball that "could" be catastrophic. Remember, this isnt just the "Big 3" that everyone is concerned or even that worried about. Its the 10million jobs that are tied to them. Many of these are fundamentally (no pun:lol:) sound companies who have been doing business with Detroit for many many years. And its the many small towns that have been dependent on these companies for many many years. Without "those" companies many of the communities are in big trouble.

 

As I said earlier...I think there must be (seems its already done) some kind of bailout. But there has to be many things tied to the $$$.

 

 

No Bailout! Just because any of the "Big 3" were to file bankruptcy does NOT mean they will stop making autos. Nor will they lay off every worker or not need their suppliers anymore. It means they will re-structure their company to be more efficient.

 

The Bailout has nothing to do with the economy, automakers or their employees. It has everything to do with the UAW and their support for the democratic party. It is nothing other than another step up the ladder of socialism. There will be no end to this foolishness if this goes through. The "Big 3" must do as we do...Bite the bullett! They will be stronger in the long run.

 

Talk to your Congressman and insist they do not vote for ANY kind of a bailout.