Hi Tony. Failure is part of capitalism. Sometimes very painful failure. Out of that failure, crucial lessons are learned. When the failure is artificially and politically avoided, lessons are not learned.
I disagree with the article. It assumes the shutdown of both companies. That was never going to happen. In a chapter 11 proceeding there can be debtor in possession management or a trustee, upon cause being demonstrated, can be inserted. A chapter 11 is not a liquidating bankruptcy until and unless it is converted to a chapter 7. The nature of the "rescue" package finally put together was highly political and screwed the bondholders in a very abnormal way.
We will never know which company might have bought the assets of GM out of a normal bankruptcy proceeding and what that company would have done with those assets. It cannot be assumed that a company doing same would not have been successful and the alleged economic domino effect eliminated or at least largely mitigated.
A writer for the New York Post wrote what I have quoted below. I agree with him.
The GM recall indicates that from 2001 until very recently the culture of GM, like the Ford culture used to be at the time of the Pinto gas tank issue, was morally corrupt. Lives were willfully sacrificed when a known problem was concealed. Can you honestly say you believe that they did not conceal anything else? Something else that could effect some of their performance vehicles? Other than a new CEO, how many of the people who made and supported the decision to conceal the ignition switch problem still work there?
To my knowledge, neither the old Chrysler nor the new Chrysler has had this type of scandal for as long as I can remember.
"It’s true that, in the scheme of things, $10.5 billion is a drop in the bucket of federal spending. It’s also true that the bailout helped GM get back on its feet, and some people who might have lost jobs kept them.
The problem is that the real costs of the bailout are both higher and hidden. For one thing, bailing out a carmaker was certainly not what Congress had in mind when it passed the Troubled Asset Relief Program. For another, the political nature of the intervention ensured that when the claims were sorted out, politics guided the decisions as much as economics. That’s why the United Automobile Workers Union made out and certain creditors did not.
Then there are the costs paid by those that didn’t need a bailout: notably, Ford, as well as foreign automakers with plants here. Presumably, they all lost sales and market share and profits when the federal government intervened on behalf of their failing competitors. And had GM gone through the regular bankruptcy system, it would itself be stronger today.
That’s because the bankruptcy process reorganizes companies or places their assets in the hands of those who can make them productive. We’re glad our government is out of the car business. Pity we’ll never get an honest accounting of the full costs."
I disagree with the article. It assumes the shutdown of both companies. That was never going to happen. In a chapter 11 proceeding there can be debtor in possession management or a trustee, upon cause being demonstrated, can be inserted. A chapter 11 is not a liquidating bankruptcy until and unless it is converted to a chapter 7. The nature of the "rescue" package finally put together was highly political and screwed the bondholders in a very abnormal way.
We will never know which company might have bought the assets of GM out of a normal bankruptcy proceeding and what that company would have done with those assets. It cannot be assumed that a company doing same would not have been successful and the alleged economic domino effect eliminated or at least largely mitigated.
A writer for the New York Post wrote what I have quoted below. I agree with him.
The GM recall indicates that from 2001 until very recently the culture of GM, like the Ford culture used to be at the time of the Pinto gas tank issue, was morally corrupt. Lives were willfully sacrificed when a known problem was concealed. Can you honestly say you believe that they did not conceal anything else? Something else that could effect some of their performance vehicles? Other than a new CEO, how many of the people who made and supported the decision to conceal the ignition switch problem still work there?
To my knowledge, neither the old Chrysler nor the new Chrysler has had this type of scandal for as long as I can remember.
"It’s true that, in the scheme of things, $10.5 billion is a drop in the bucket of federal spending. It’s also true that the bailout helped GM get back on its feet, and some people who might have lost jobs kept them.
The problem is that the real costs of the bailout are both higher and hidden. For one thing, bailing out a carmaker was certainly not what Congress had in mind when it passed the Troubled Asset Relief Program. For another, the political nature of the intervention ensured that when the claims were sorted out, politics guided the decisions as much as economics. That’s why the United Automobile Workers Union made out and certain creditors did not.
Then there are the costs paid by those that didn’t need a bailout: notably, Ford, as well as foreign automakers with plants here. Presumably, they all lost sales and market share and profits when the federal government intervened on behalf of their failing competitors. And had GM gone through the regular bankruptcy system, it would itself be stronger today.
That’s because the bankruptcy process reorganizes companies or places their assets in the hands of those who can make them productive. We’re glad our government is out of the car business. Pity we’ll never get an honest accounting of the full costs."
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