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04 January 2009 @ 11:53 am
LaGizma's brain hurts. Help her out.  
If bankruptcy means being out of cash and unable to meet your obligations, well, then the Big 3 auto makers have admitted they are there, right?

Ford, GM, and Crysler are burdended with
- pension debt that few of their international competitiors face
- a bloated dealership system that served the country well decades ago but is now competive deadweight
- UAW contracts that render impossible any of the urgent, agile change required RIGHT NOW (like plant retooling)

Bankruptcy provides the means to deal with all of these issues immediately.

BUT, who would buy a car from a bankrupt auto maker? US airlines have emerged admirably from bankruptcy. However, I'm the first to admit that I was able to ride out Delta's bankruptcy (with my 100,000 frequent flyer miles) after watching United and others go through it first. Does a frequent flyer program really compare to your car warranty and service infrastructure? I think not.

So, restructuring is desperately needed, but do we need to package it as something other than bankruptcy? Or do we all just get over it?
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Yes, Jack Shoegazer!: Leisure/Chairjackshoegazer on January 4th, 2009 08:34 pm (UTC)
Bankruptcy really isn't an option unless one's goal is to kill the UAW. Bankruptcy will cancel all contracts and all of the retired workers who have pensions from the Big 3 will suddenly be without. Restructuring is much better. Also, with the loans they just got, they should be okay, but a lot of the recovery depends on the economy turning around and people actually being able to buy cars again. It's frustrating because this auto problem is so inextricably linked with all of the other problems our country is facing, like the credit crunch. Grrr!
(Deleted comment)
lagizmalagizma on January 9th, 2009 05:20 am (UTC)
I have a Honda
Fair enough. ;)
Flower Punkhelpimarock on January 5th, 2009 01:28 am (UTC)
This is such an enormous industry that's so intertwined with our society and we've never faced a situation like this before so I think we're going to have to build an all new solution. I think bankruptcy is needed, but with modifications that protect the workers. That is unless the loans work out and the don't have to give the money back, but I don't think they can pull it off by the March deadline. And why? Because, like you said, who wants to buy a car from a bankrupt automaker? Probably no one -- especially considering no one wanted their cars *before* they went bankrupt.

Edited at 2009-01-05 01:31 am (UTC)
musashi270musashi270 on January 5th, 2009 08:35 am (UTC)
They need a reorganization bankruptcy. However, I do not think they are that smart to be able to fully take advantage of that. Even if they canceled all contracts, not just labor, I do not believe they have the vision to be able to make a go of it from there. This lack of vision and ability to manage is what put them here.
jennifersuperjen on January 6th, 2009 01:41 am (UTC)
i recently bought a chevy. i will probably only buy chevy cars in the future, but maybe i would buy a honda.

anyway, i can see that people would still want to buy from bankrupt american car makers from the standpoint of supporting american workers in american factories.

not sure how their financial status affects the service warranties they could support.

but i mean.. i guess we're not all thinking that way.
princessblord on January 7th, 2009 05:56 am (UTC)
I don't think anyone knows...
I think everyone is making it up as we go along -- the only thing we know for sure is that we have to do something, because the economy as a whole is in terrible shape, not just the auto industry. If there were plenty of jobs and financial security, it wouldn't be such a big deal to have one industry fall apart - especially an industry that's been having problems for a long time. But the problems in Detroit aren't happening in a vacuum. I think there's a (legitimate) fear that allowing the industry to suffer the consequences of its bad decisions will result in a lot of other people suffering, too -- including retirees and current employees, shareholders, car dealerships, suppliers of raw materials for manufacturing car parts, etc, etc. I think the goal at this point is to contain the damage as much as possible, even if that means providing a bailout in lieu of bankruptcy.

NPR had an interesting conversation about this issue in November:
http://www.npr.org/templates/story/story.php?storyId=96945344

This is an article explaining (one view of) how the auto makers ended up in this position:
http://www.tnr.com/politics/story.html?id=cecbd59f-ab0c-4bd6-9f78-bf9f99cd5c80

This is an interesting analysis of why Congress is reluctant to bail out the automakers, even though they were willing to help the banks:
http://www.thebigmoney.com/articles/bail-me-out/2008/12/05/micromanaging-detroit