It’s absolutely stunning to hear the quotes and soundbites coming out of Congress regarding the Detroit bailout being debated. Where were these Representatives and Senators when Congress was piling on benefit costs, “gas guzzler” taxes, higher CAFE standards, and pillorying them for attempting to renegotiate labor contracts that put GM, Ford, and Chrysler at a disadvantage to foreign manufacturers operating in right-to-work states as non-union plants?
GM in particular has been hamstrung by state by state franchise laws that prevent them from pruning their dealer channel, instead forcing them to buy dealerships in order to eliminate them. Congress never once stepped up with a national framework for franchise law. The UAW is also at fault for refusing to recognize the dire financial reality even when these companies were selling record numbers of vehicles (and still losing money).
The UAWs response to the healthcare issues the big 3 were facing was to set up VEBAs and transfer $50 billion from GM, Ford, and Chrysler… not surprisingly this has not exactly turned out to be a solution that will result in any of these companies being financially viable and as a consequence the UAW membership is no faced with a complete eradication of their benefits. The UAW simply couldn’t look beyond the immediate future to the bigger issue facing these companies.
So now we are treated to the likes of Barney Frank lecturing CEOs about prudent decision making and financial responsibility… some Members of Congress actually believe they can run these companies on their own.
I say prepackaged bankruptcy with Federal government sponsored debtor in possession financing is the way to go. Bankruptcy law was intended for precisely these kinds of restructuring efforts and we should not continue to operate under the assumption that anything Congress is going to do outside of bankruptcy will actually be helpful. If GM goes bankrupt by the end of the year and works out a reasonable restructuring through 2009 I would still be first in line to buy a Volt when they are offered for sale.