Why not a structured, disciplined, at-least-partially-pre-packaged bankruptcy for GM?
"Bankruptcy is not an option--we can't afford all the job losses." Come on, it's rather remarkable that many politicians and pundits still don't know that bankruptcy doesn't mean close the doors; it might, but rather it is a process that can lead either to a shut down or to all parties taking giant haircuts in a command (vs. voluntary) environment with the threat of a shut down bringing them to their senses. ONLY through a process where ALL parties take GIANT reductions (see my previous blogs below on a ten step plan for GM) does GM have a CHANCE to be a viable company. Catch these key words; ONLY, ALL, GIANT,CHANCE.
"No one will buy a car from a company in bankruptcy." Why would anyone buy a car from a company not in bankruptcy but surviving only on the back of government issued short term loans? While there is some reality in this point, it is primarily a mantra eminating from the UAW who don't want to see their authority, high wages and benefits, and choking work regulations threatened. Anyway, this threat of extinction while in bankruptcy is actually a good thing; it can lead all the parties to rapid resolution and a rapid re-emergence. If necessary the government can issue, while in bankruptcy, a temporary guarantee on car warranties. There are creative ways around this issue.
"No one will provide DIP (debtor in possession) financing to this company." True. But if the USGov. has an option to provide bailout funding (clearly throwing good--well anyway recently printed--money after bad), or providing DIP financing (with at least some chance of recovery), then the latter is a much, much wiser bet.
The auto industry is in a real crisis. Crises bring opportunities, sometimes once in a generation opportunities. Poor leaders squander such opportunities. Great leaders take full advantage and create a new and potentially prosperous future.
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