It’s in the best interest of the American and Canadian taxpayers to let GM and Chrysler enter Chapter 11 bankruptcy. General Motors (henceforth referred to as Government Motors) has asked for another USD$4.6 billion to meet its request from December 2 of USD$18 billion, according to Motor Authority. Then, “if” sales worsen, GM will ask to tap another USD$7.5 billion. I don’t quite see how the “if” plays into the equation, it sounds more like a “when” to me. The total bill for GM alone is approaching USD$30 billion, which is about CDN$37 billion. These staggering sums of money should be enough to get GM out of its current mess, right? Surely, all this money is enough to protect American and Canadian jobs, even in this tough economic climate, right?
Wrong. If GM gets the money, it will axe 47,000 jobs over the next ten and a half months, close 5 US plants, and continue to burn a couple billion bucks a month on Lord knows what. Those are both sickeningly huge numbers and hardly an incentive for our governments to give Government Motors any more money. Yet, GM and Chrysler continue to play their little game of extortion with our governments by threatening unimaginable consequences if we don’t cough up some more tax dollars. Our governments are in so deep now that they are experiencing Stockholm Syndrome and feeling the plight of Detroit’s automakers despite a mountain of evidence that viability in their current state is impossible.
If GM and Chrysler entered Chapter 11, they would be relieved of some of their debt and be given time to restructure. I’m pretty sure that Chrysler and GM need to do both of those things, so why didn’t they enter Ch. 11 months ago? My theory is that it’s all just to save face. GM and Chrysler don’t want to appear weak. I think they’ve long since passed the point of appearing weak.
Since Chapter 11 is an inveitability, even with government support, then it should not be delayed. Procrastination is not an admirable trait in anyone and companies should not be rewarded with taxpayer funds for such short-sightedness. Taxpayers would be better served if GM and Chrysler were honest and open about the gravity of the situation. Instead, we are treated like children and told that everything will be alright as long as we’re the ones making the sacrifices and not them. Yea, I don’t get it either.
Just as Wagoner neglected to see the future trend towards hybrid and electric vehicles when he cancelled the EV-1 program, he is again failing to recognize future vehicle sales and his company’s ability to remain solvent. Just a couple of months ago, his “worst case scenario” for 2009 sales was 10.5 million units, with the “best case” being 12.5 million. Now, just a month or two later, he has revised his outlook to 9.5 million, which still might be optimistic. GM also needs $2 billion dollars more than it did two months ago. It seems like Rick Wagoner and his cronies are doing the minumum amount of work possible and being as short-sighted and optimistic as they can get away with. This is not facing the music, despite claims to the contrary. Taxpayers can not and should not be expected to fork over more money every couple of months just because these automakers failed to sufficiently account for tough times.
One of the largest issues with GM in particular is its culture. GM has a culture that does not punish poor performace and only dwells on past successes, not past failures. There is also no accountability within GM nor Chrysler to take responsibility for even a fraction of the issues facing the automakers. It’s as if GM and Chrysler were just fine and dandy until the credit market collapsed and everyone got scared. I guess that making rubbish cars and destroying stock prices for decades had nothing to do with people’s loss of faith.
Think about $30 billion for a second. Just think about it. How do we expect these automakers to repay it? Turning a profit alone would be a miracle, but now we’re expecting a Super-Sized miracle if we think that by 2012 GM will have made $30 billion in profit, as Rick Wagoner is arrogant enough to suggest. This is coming from the mouth of the same man that has run his company into the ground and has yet to turn a profitable year since becoming CEO in June, 2000. During his reign, GM has lost over 95% of its stock price. You would think that losing billions of private investor dollars would be enough for Rick, but that would be to misunderstand the Harvard MBA grad. Mr. Wagoner is not a man connected to the same reality that you and I share. He views life through rose-tinted lenses that have cost his company, and now taxpayers, dearly. He should be content to have run what was once the world’s largest automaker into the ground without bringing the United States of America down with him.
Coincidentally, Wagoner became CEO in the same year that G.W. Bush entered the White House. Both men have ensured that we never forget them and that we will feel the effects of their decisions for decades to come. Usually, that would be a compliment, but not this time.
To add insult to injury, today, there was word from TTAC that Chrysler owes our fair Canada Revenue Agency an outstanding tax bill to the tune of CDN$500 million. But what’s half a billion between friends? I’m sure that Chrysler can just put it on its tab and pay it of as soon as it makes a profit. No biggie.
The situation is spiralling out of GM and Chrysler’s control. Chrysler is a private company and should be allowed to fail, just like any other private company that is mismanaged and fails to turn a profit. GM, although publicly-traded, should also enter Ch. 11 immediately because it is the best solution for the company and taxpayers, even if the company has to lose face.
I’ve yet to mention Ford because they are the one company that seems to have its head on its proverbial shoulders. Ford is losing the least, asking for the least, and making the best. Therefore, Ford is the only Detroit automaker that deserves to be saved.