Why a GM Bankruptcy Would Be a Disaster

[opebo]

Yes, I do believe bailing out GM would be the best economic policy, but unfortunately, most Americans do not agree. Their innate sense of fairness tells them that GM should be allowed to fail.

And no matter how sound an economic policy is, if it lacks political support, it will be seriously hampered. In 1933 for example, FDR had total political support for his actions. Watch the video of his inauguration speech-- the loudest cheers came at the moment after he politely promised to side-step the Constitution and ask for emergency powers. Swedish authorities, when evaluating the success of their own much lauded bank bailout of 1992, regarded the unified political support of both parties are critical to the success of their actions.

Right now there is very little political support for continuing to support the automakers, and little political support for any government actions whatsoever, except possibly of the very populist type that the current team of Tim "Masters Degree in International Economics and East Asian Studies" Geithner and his superiors at the NEC are not inclined to undertake at the moment. *Sigh*

Yes, both Americans 'innate sense of fairness', and their master's unwillingness to do the necessary are symptoms, obviously, of the same disease that caused the whole problem in the first place. 

[opebo]

If GM cannot come up with a plan that would make them profitable again, then why keep throwing money at them? We are already at record levels of debt. GM has not been profitable for years!

It used to be quite profitable when the country was run in a reasonable fashion - that is, in the 1960s and 1970s.  The blame for General Motors troubles falls to the same people who are to blame for impoverishing the american worker.  It was all planned, Dirty Duke.

My vote is for not only continuing to throw money at them, but to continue to throw money at the other victims, and then to remake the entire country upon the model of, say, 1969.

[opebo]

But why would one have such confidence if what is keeping the company afloat is government money? In both instances, that hardly gives one confidence for the long term.

Well obviously government money is more secure than any other kind (technically there is no other kind, but leaving that aside).  For example, it is a lot more reasonable to rely on Social Security than 'investments', as we have recently seen.

In any event, the only possible "solution" for GM, and it may not be enough, is if it sheds all of its debt and health care and pension obligations, and absent creditor willingness to throw in the towel, the only way to do that is through bankruptcy.

That's a poor solution.  Like all your right-wing solutions, it relies on impoverishment of the american worker for 'success'.  Obviously this is not unnecessary.  These are all political choices, and I would prefer that health car and pension obligations similar to those provided by the UAW simply be extended to all americans.  If you want a 'level playing field', why does it have to be the one that maximizes human misery?

[opebo]

Opebo, you favor of course the government just taking over GM's pension and health care obligations (and perhaps of every other company in America, I don't know). I understand that.  But why would you want to say, bail out myself, if I owned a million dollars of GM's debt as a creditor, or say of some hedge fund? That is what would be happening if the government just kept writing checks. The only way to get rid of such debt is through bankruptcy. It is unconstitutional as you know for the government to just seize the assets of a private party.

Alas, it may be unconstitutional, though I find that a bit debatable.  However I would be happy to give the creditors some chits in order to nationalize GM.

[opebo]

...buying a brick of gold, and just sitting on it...

That sounds uncomfortable.

Anyway, you people seem to know nothing about cars or economics.  Prior to the late 1990s there was no question that General Motors products were far, far superior to Ford's, and I personally believe they are still somewhat superior.  Btw, how is Ford's 'business model', or that of Toyota for that matter, any different from that of General Motors?  Make cars; sell cars.  That's the business model.

What has caused General Motor's troubles are two factors - 1) a depression caused by the State, and 2) reduction in car purchasers standard of living, also caused by the State.   It is quite reasonable for the State to try to ameliorate the damage that has been caused politically, now that more sensible heads are in charge.

[opebo]

Thanks UAW, thanks a lot.

Agreed. Unions are responsible for the weekend, safety and labor standards, greater benefits and wages (even for non-unionized workers, as the threat of a union forming helps keep pay higher in all professions) and overall greater standard of living for us all. They deserve our thanks.

Well said.  But no.. a mythical creature called 'the Market' demands otherwise.  heheh.

[opebo]

Thanks UAW, thanks a lot.

The UAW isn't at fault for this, it was incompetent managing and an inability to adapt to the changing times. At their base wages, UAW workers don't get paid a great deal more than non-unionized manufacturing plants. If you want to blame anyone, blame ballooning healthcare costs to start with.

(Also they've agreed to a number of cuts as of late.)

Keep in mind that autoworkers wages are only in the $30-35/hour range.  In what world is that a lot of money?

[opebo]

$30-35/hour range.  In what world is that a lot of money?

How hard do you laugh when you post that drivel?

What do you mean?  Is the figure inaccurate?  I have to admit it was just a guess, but I think its roughly correct.

That's only maybe $60-70,000/year before taxes at best.. what do you think it costs to support a family?

[opebo]

Well said.  But no.. a mythical creature called 'the Market' demands otherwise.  heheh.

I second that.  It seems conservatives look at only microeconomic "supply and demand" and base all their simplistic anti-worker dribble on that.  My father told me this would happen back in the 1980s when he was actually a Democrat and everyone seemed to be supporting Reagan.  Now young professionals coming out of college are laden with debt and companies either don't want to pay them sh**t or they get let go with relative ease compared to the 1960s and 70s.  We need a massive pro-labor legislative overhaul and quick 

Yes, this is the way things are - made so by political actions.  My point about 'the market' is that it is nothing but a cover story for political choices - application of political power - by the owners.