| Re: Auto Bailout
It's unfortunate that I have to say I am for the bailout. I believe in capitalism, and part of capitalism is failure. Without the bailout though, GM is no more. Ford may follow suit, however Alan Mullaley seems to actually have the place running good. Chrysler has a boat load of cash, but it's not in good shape either.
The reason I say GM is no more, is because Chapter 11 bankruptcy isn't available to it. The only form of bankruptcy that GM can file is Chapter 7, which is liquidation. The reason being is that GM doesn't have any DIP loans available to it because of the credit crunch (GM would need a lot more than Circuit City's 1.1 Billion), it doesn't have a whole lot of assets that can be sold off, and finally, GM isn't going to turn a profit for quite some time, not until its costs are reduced, and even bankruptcy won't help that (more on it later).
If GM were to file bankruptcy, Chapter 7 bankruptcy that is, it would put close to
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, which would be absolutely catastrophic to the economy. Additionally, as time went on, more and more people would lose jobs, as suppliers, like Delphi, Rockwell, and so on would be forced to layoffs.
Ultimately what GM needs to do is reduce a lot of its costs. GM right now is paying over $70 an hour per employee, while Nissan is paying a little less than $40 an hour per employee. This is due to the burdensome UAW benefits that labor union has forced on the company. I just wish that these UAW members would realize that in order for GM to survive, they're going to need to make sacrifices. If they don't, things are going to be a heckuva lot worse. |