Time to head for bankruptcy court
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The bailout proposals unveiled this week made perfectly clear that both GM and Chrysler already are essentially bankrupt. Ford is teetering near the edge.
GM said it needed $4 billion by the end of December. Chrysler said it needed $7 million before the month is over.
Obviously, major, painful downsizing and restructuring is needed.
The best route to that end is through some sort of bankruptcy proceedings, perhaps in a special bankruptcy court created by Congress specifically for the automaker bailout.
In a typical Chapter 11 bankruptcy, the court can wield the kind of power that is needed.
The judge could, for example, fire executives. It could roll back wages and benefits for members of the United Auto Workers. It could reduce the number of auto dealers in the United States. It could grant relief or partial relief from debts.
In short, the bankruptcy court could provide the kind of supervision that is needed if the Washington bailout is to be successful.
Congress should insist on it.
Filing for reorganization under terms such as those that exist under Chapter 11 should be a precondition for the billions of dollars in aid the automakers are seeking.
There’s little doubt that the nation’s economy would be severely jolted without some sort of federal intervention in the auto industry.
According to the most recent statistics, Nebraska has more than 8,500 jobs in the transportation equipment manufacturing sector. In Nebraska, layoffs already have been announced at the Eaton plants in Hastings and Kearney, where valves and gears are made. Leon Plastics Inc., which makes exterior and interior parts for cars and trucks, plans to close its Alda plant by May. Surely the state’s auto dealers also are feeling a pinch.
Even with federal help, Detroit’s automakers will be forced to shed thousands of jobs. The auto market is tight. Toyota and Honda, which employ thousands of workers at U.S. plants, also have seen their sales this month drop by more than 30 percent.
If taxpayers are expected to pony up about $34 billion in loans, they deserve a decent shot at getting their money back.
So far, efforts by the administration and Congress have inspired little confidence in the quality of their oversight.
Creation of yet another oversight board with nebulous powers won’t do much to restore trust.
It may be true, however, that turning to the existing bankruptcy channels would be too slow to respond to the current crisis. Washington Post business writer Steven Pearlstein has suggested a “pre-packaged bankruptcy” arranged with federal help that could zoom through Chapter 11 proceedings. Paul Ingrassia, former Detroit Bureau Chief for the Wall Street Journal, suggested appointment of a “federal restructuring trustee.”
The essential element is that the overseeing officials have the same sort of oversight authority and latitude that exist in ordinary bankruptcy courts. The automakers deserve it. So do taxpayers.
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The bottom line is that if these companies are going to survive in any form, we the taxpayers are going to have to loan them the money. Might as well do it now (with conditions) than let them go to bankruptcy court and possibly unravel altogether. "
whatever wrote on December 5, 2008 6:02 am:
Scott wrote on December 5, 2008 7:18 am:
That was rhetorical, but I feel better. It's not curious at all. It is quite fitting that the LJS keep with it's mantra of siding with the monied interest over the working folk. How dare the auto workers make a decent wage? After all, it was their idea to design and market enormous vehicles which would cause the company to lose all of that money. "
Julia wrote on December 5, 2008 7:38 am:
I feel for all of these people who are facing unemployment. I wish that there was an answer. All we can do is hope and pray for these people that they make it thru this problem. "
stop wrote on December 5, 2008 9:22 am:
Joseph D. wrote on December 5, 2008 10:08 am:
Solution wrote on December 5, 2008 12:35 pm:
I think the Automakers and the Automakers Union have been very humble, and realize they are on a precipice. In the meetings with the Banks I did not see such willingness to be conciliatory towards the American Public. The Automakers after some well deserved tongue lashing got real!
We have an opportunity to change the way our world works here, I hope that the Senators don't drop the ball. We make it so that we become the Number one in Hybrid cars or Electric cars, would that be worth it? "
blueberri wrote on December 5, 2008 12:48 pm:
Kevin wrote on December 5, 2008 4:43 pm:
Scott when a manufacturing company pays more to people who don't work there than who do, or for raw materials it's time to actually fix the problem. The union wages, health insurance, pensions, etc, etc, is obscene, they don't ask for a living wage, they demand a living wage for when they get laid off. None of the white collar jobs have that kind of pay off, even if they get a higher wage. "
whatever wrote on December 5, 2008 7:32 pm:
Scotious wrote on December 6, 2008 4:41 pm:
"The judge could, for example, fire executives"
Good. Get rid of them and get some people in there who know how to run a business. "