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so what would it take to get me to bailout GM?

Ok, let's say we dont want to go to bankruptcy because that would poison the ability for GM to sell cars. Lets agree for the sake of argument that this is core of the case against GM using bankruptcy as a way to solve its problems. I dont agree, but let's do so for now so that I can illustrate a few things in the process.

The alternative to bankruptcy seems to be that we give GM more money, with fewer strings. This seems to be a genuinely bad idea.

Shareholders buy stock because they believe that the future price of the stock will increase. They believe this through a combination of their own prognostication methods and what is published for the shareholders by the company itself. Its in this way that a companys management is kept accountable. If they fail to meet their goals, the stock is sold ( sorry - dumped ) and a shareholder revolt occurs, resulting in the removal of the management team that failed to deliver. Thats how its supposed to work, and for the most part, it does.

So again the options on the table now are:

1) Bankruptcy.

or

2) To give GM management access to more money and undergo even less accountability than they currently receive from their large institutional investors.

So let's try a third option. Let's call it a "Reorganization" for the lack of a better word. It will work something like this:

A) Let's go ahead and give GM money for a "reorg" but in return, lets break the company up into smaller, more competitive units. In thend, there will be Three GM's, Let's say a separate company for Cars, Trucks and commercial vehicles and Defense. Since its not reasonable for GM to find a buyer for some of the more asinine and incompetant existing product lines, lets go ahead and fund the removal of these business units through a direct "buy out". For example, shut down Buick for lets say 20 billion. You name your business unit and we will agree to a fair price to help you (GM) shut it down. Sound fair?

B) Let's take the Pensions and bundle them into some sort of newly expanded Government Pension protection plan. Oh, and after this - NO MORE PENSION PLANS, its 401k, funded at 7%. Employees in GM/REORG manage their own retirement from here on out, no more of this "cradle to the grave" crap. Oh, and this applies to all employees, not just labor. Everyone sinks or everyone swims at GM/REORG.

C) Retiree Health Benefits. Ok, Let's get that off of GM's back and place the UAW retirees into Medicare. We fund Medicare for each of the GM Retirees added to the plan, thus ensuring that Medicare gets more money and the folks get some form of Health Care. But Frank, "Medicare sucks" you say. Well, ok, we can look at reform of Medicare at the same time makybe kill two birds with one stone. Oh, and dont lay any of that "This isnt what we agreed to in our contract with GM" because if you do that, we can just go ahead and go into bankruptcy and that pretty much puts the end to your contract, right? Consider yourself lucky that we are going this far.

D) Let's have a capital gains cut for any new investors of GM/REORG Stock. Investments in GM Reorg Stock that are kept over 10 years will be free of Capital Gains taxes, now how's that sound? That way the shareholders of GM/REORG can keep an eye on management for their investment and will have an interest in it doing well. Oh yeah, theres that whole, "Its not government money" thing, which naturally makes me happy.

E) Legislative Knot Cutting. Let's take a wholesale look at removing the barriers that keep GM/Ford/Chrysler from being competitive in the world marketplace and lets remove those barriers, ( costs nothing to do and keeps the legislature busy in the mean time, its a win-win). But Frank, wont that make the UAW mad? Look, if the UAW wants more "Auto Workers" in its union, they need to start figuring out how to make more "Autos" in the USA, its a symbiotic relationship between host and parasite and it never foes the parasite any good to kill the host.

That process starts here. Yes, UAW rank and file, you might have to move around a bit, but in the end there might just be more of you, which is good for you, good for me and dare I say it, good for the UAW and GM. PLEASE NOTE: I DID NOT SAY RAISE TRADE BARRIERS TO KEEP OUT JAPANESE CARS FROM THE US MARKET. What I said was, remove the barriers from GM that keep it from competiting on the world market.

Weird? Out of the box? Sure. Would it work? Well, Yes, I think most of these would work and more to the point they would work far better than just giving the current management team access to more cash to keep making the same mistakes they have always made. It would also make the US car industry more competitive and it would remove the knife from the US taxpayers next marked with the words "too big to fail". In my way of thinking, any company that says that they are too big to fail is an immediate candidate for being broken up as part of the agreement to a bailout. Sorry kids, you cant have it both ways.

So yeah, I can see helping GM, but I just dont think giving them a firehose of money to drink from is going to help them with the problems that they have. They need to be reorganized, so let's go do that.

Posted @ November 13, 2008 03:51 PM | Current Affairs

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Posted by: Vootie at November 13, 2008 07:56 PM