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General Motors presents a plan worth implementing



Published: Wed, February 18, 2009 @ 12:00 a.m.

General Motors presents a plan worth implementing

For some, the suggestion that General Motors should “just go bankrupt” rolls off the tongue with the nonchalance of someone saying they’re going to throw away a scratched CD. It’s damaged goods, no big deal, and there are always other CDs to listen to.

Such an attitude can be seen in a column on the page opposite this by a policy analyst at the Heritage Foundation: GM and Chrysler are as good as bankrupt already, stop throwing good tax money after bad. That’s a more popular point of view in some places than others, and it is not surprising to hear it espoused by a conservative think tank that sees free trade and right-to-work philosophies as among America’s most traditional values. But even here in the Mahoning Valley, it’s easy to hear such talk in any coffee shop and almost any barroom. If an extended family sits down to dinner, at least one relative can be counted on encourage bankruptcy for General Motors, even if he knows its going to start an argument.

It’s not surprising, given human nature and the perception that autoworkers have a better deal than most blue collar workers and many white collar workers.

A two-letter answer

But the bottom line in the debate over whether General Motors should get additional government loans to enable the company to restructure is not whether or not its workers will be better off. It’s whether the nation would be better off if General Motors were forced into bankruptcy, and the answer is a resounding no.

The nation needs a domestic automobile manufacturing industry and the Mahoning Valley needs General Motors to be a part of it. It is to all our benefits to see that Congress and the Obama administration respond positively to the restructuring plan presented to the Treasury Department yesterday by General Motors and explained to the public and press by GM CEO Rick Wagoner.

Not everyone would agree. As a Los Angeles Times story reported in October, some economic analysts and industry insiders predict a financial cataclysm if GM were to go bankrupt, “but others foresee little more than a shift of the industry to foreign companies such as Toyota Motor Corp. and Honda Motor Co.” The italics are ours. It would just be a shift of production, don’t you see. Little more than a scratch on that CD we were going to throw out some day anyway.

Here’s a reality check. A nation dare not casually drop a 100-year-old company in the trash can.

In the United States alone, GM spends $31 billion on parts from 2,100 different suppliers. GM’s employees and retirees earn paychecks and receive benefits totaling hundreds of billions of dollars that are poured right back into the economy. Tinker with that economic engine in even the best of times and there would be consequences; do it in today’s economy and there’s no telling the damage that could be done.

Trickle down would be a flood

There are few things that are truly too big to fail, but General Motors is one of those things. If it defaulted on it’s pensions, those pensions would overwhelm the Pension Benefit Guaranty Corp. If it needed financing for bankruptcy reorganization, there’s only one entity large enough to provide it, the federal government. If its workers and retirees lose health care coverage, those costs will inevitably be shifted to Medicare, Medicaid or to unpaid care that ends up being passed along to private health insurance providers. GM owes billions of dollars to its dealers, suppliers and others with whom it has contracts, and the ripple effect of default is almost impossible to imagine. No one could safely say he or she is immune.

Even under the restructuring plan announced by GM yesterday, there will be pain. Some GM brands will be eliminated, dealerships will close, factories will be shut down, thousands of additional hourly and salaried workers will lose their jobs. Negotiations are continuing between GM and the United Auto Workers union over funding for the trust fund that is supposed to provide health care coverage for UAW retirees.

Returning to the bottom line, it is this: Loans provided by the federal government — estimated now at $30 billion — are far cheaper than the alternative. It is cheaper for the government, which otherwise would suffer the effects of a near catastrophic hit on the national economy. It is infinitely cheaper than the human costs that would be suffered in communities like ours.

There will be a chorus of voices aimed at President Barack Obama and Congress calling for them to let General Motors fail. Those voices must be ignored. Failure, quite simply, is not an option.


Comments

1Tugboat(759 comments)posted 5 years, 7 months ago

People have been preached to about financial discipline, spending less than they earn and have redrawn the lines between needs and wants. They demanded better, longer lasting cars and got them yet production snowballed. Did not the captains of industry see this coming?

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2apollo(1227 comments)posted 5 years, 7 months ago

If the Cobalt is light years better than the Cavalier and yet the latest Consumer Reports ratings put the Cobalt next to last, now I know why my Dad's Cavalier was indeed a piece of trash. So was his 1998 Malibu. Sorry, but to keep buying cars that the manufacturer keeps telling you is of equal quality to the Japanese, only to find out otherwise after the fact, is a fools game. As Tugboat said, even an 11 million run rate in the US is pie in the sky numerology.

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3VINDYAK(1799 comments)posted 5 years, 7 months ago

Even the Japanese cars are now running into recall issues. We recently traded our Toyota for a Chevy and this Chevy is a very nice vehicle.

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4jimiohoh(86 comments)posted 5 years, 7 months ago

What a joke. Who is to pay the interest on this loan, not to say the princple? Why not have them make a national car and the goverment give one to every household?

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5jimiohoh(86 comments)posted 5 years, 7 months ago

People working 30 years to pay off a home loan. Now, what's that worth? Over extend and the goverment will save your behind. IS IT FAIR?

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6Lesthanzero(35 comments)posted 5 years, 7 months ago

Build a better mousetrap...

As recent talks with the UAW demonstrate, any bailout of US automakers will be a bailout for the union.

Left to fail, it will be a bitter pill to swallow with enormous fallout. But Honda and Toyota will be there to pick up the pieces, as they have shown they can capitalize on opportunity. I don't think they'll take kindly to union coercion, however, seeing what it's done to our Big Three.

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7rick51(94 comments)posted 5 years, 7 months ago

It will cost the U.S. more to allow G.M. to go bankrupt than the to bail them out.

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8scrooge(563 comments)posted 5 years, 7 months ago

I'd like to see the figures on your logic Rick.

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9MzVirgoLuv(157 comments)posted 5 years, 7 months ago

As a contacted employee of GM, I hate them. They are full of crap because everyone wants the power but not the responsibility. When they get rid of guys who come in and get paid to sleep all day because there is nothing for them to do, that's when they will succeed. Until then, they will continue to fail. When they really pay attention to the workers and stop letting them make cars when they drunk out of their minds or high off of whatever the drug of choice was for that day, then GM will succeed. I see everyday the types of people who so call run this place and I tell you, my 10 year old could do better. See, someone commented on they only made what we wanted and that's why we are in this mess. Boy, get some ballz because we can only buy what they make. If they were only making good environmentally safe cars, then that's what we'd have to drive, right? do you let your kids determine what bills you pay, what clothes to buy them, when to put gas in your car, when they need a hair cut, etc? No, then sometimes, government/businesses shouldn't let everyday, non-business people determine what's right in business. GM is full of crap and if they don't change more than the car plan they will still fail!!!

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10YSUgrad99(200 comments)posted 5 years, 7 months ago

Overall, this has been a long time in the making. GM and the UAW must make the necessary cuts to survive and pay back 30 billion in bailout loans. I'm sorry UAW workers and GM exec's, but its time to face reality and re-adjust your compensation to competitive levels with Honda and Toyota. You also must build more reliable, yet affordable cars.
Consumers must also understand what they can afford to avoid over extending themselves. This means people on welfare or those earning under $50 grand a year shouldn't buy Escalades, Yukons or Tahoe's. You wonder why auto sales are down over 30%, its because all the forementioned consumers can't access any credit to buy or lease the vehicles that they really couldn't afford to begin with! Banks aren't making those bad loans anymore, since that's what got them into trouble to begin with inside the housing industry!

Lets review:
1.) GM Labor = Must equal competitve world labor and health costs...sorry UAW Lordstown!
1b.)Get rid of lazy UAW workers and replace with people who want to work for a living!
2.) GM must build better cars!
3.) GM Exec's must curtail their own compensation and wasteful corporate spending! Get rid of exec's who helped GM fail.
4.) Consumers must buy what they can afford! If your on welfare or earn minimum wage, use the bus...or buy used....very used!!!
5.) GM, Ford and Chrysler must continue forward with alternative fuel technology (ex. hydrogen)!

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11peabain(2 comments)posted 5 years, 7 months ago

I agree. I've heard employees in the past talk about how high they were working on the line. Seeing the vehicles hop, going on the roof at lunch time. Going to doctors for a written excuse to go on sick leave. GM Lordstown..what a joke ! No wonder they are in the shape they are in. Way to go UAW !

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12steelerbill115(2 comments)posted 5 years, 6 months ago

THE CONCEPT OF BANKRUPTCY I DONT BELIEVE IS A VIABLE OPTION WHEN IT COMES TO THE AMERICAN AUTO INDUSTRY. THAT BEING SAID, THE UAW CONSISTS OF APPROXIMATLY 160,000 MEMBERS AND IF THEY WERE TO DEFAULT AND GO BANKRUPT IT WOULD AFFECT OR COST UPWARDS OF THREE MILLION JOBS. IS IT FAIR OR RIGHT FOR THESE 160,000 INDIVIDUALS TO DICTATE THE OUTCOME OF AN ADDITIONAL THREE MILLION FAMILIES THAT ARE NOT UNION WORKERS? I WORK FOR A UNIONIZED COMPANY IN THE VALLY AND I DO MAKE A GOOD LIVING FOR MYSELF AND MY FAMILY AND THE WAGES /BENIFITS THAT I CARRY ARE FAR LESS THAN WHAT THE AUTO WORKERS MAKE. ITS NOT THE UNION CONCEPT THAT IS THE PROBLUM, BUT THE SENSE OF ENTITLEMANT AND ARROGANCE THAT THE UAW MAINTAINS.

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