Now they tell us


GM More Open to Bankruptcy

Top General Motors Corp. executives are more open to a speedy bankruptcy reorganization financed by the government, pushing aside earlier concern that such a move would scare away so many customers the company wouldn’t survive, said a person familiar with the matter.

While the company still wants to avoid bankruptcy, the new view represents a reversal from GM’s position late last year, when it sought a federal bailout. The change in thinking, combined with the disclosure Thursday that GM’s auditor has raised “substantial doubt” about the car maker’s ability to keep going, appears to move GM closer to the possibility it will file for reorganization.

Oh, I see. So all of that business about how customers would never buy cars from a bankrupt company, all of those nuclear winter scenarios of bankruptcy costing 10 gigajillion jobs, that was just … a version of the truth.

Well. If bankruptcy is not so unthinkable as all that, and if the purpose of giving lending GM (and Chrysler) all those billions was to avert bankruptcy, then how about we just go straight to bankruptcy, minus the billions of wasted public dollars? Because even with bankruptcy protection, there isn’t going to be any “speedy” resolution of this mess. GM is losing around $100 million a day — $9.6-billion in the last quarter — and you don’t turn around an ocean liner that size in a few months, or even quarters.

So the notion that Tony Clement was peddling the other day, that we could just flip them a few billion more (in addition to the billions already granted) and that would be the end of it — that if the auto makers came back for yet a third helping, “the answer would be no” — is pure fantasy. Indeed, the greater likelihood is that governments will plunge ever deeper into debt to prop up a company they know isn’t “viable,” simply because of all the billions of borrowed dollars they have already poured into it. If, after all, they had the stomach to force GM into bankruptcy at some point in the future — the implication of Clement’s claim — they would presumably be prepared to do so now. And since they aren’t now, why would they be any more likely to then?

Either GM/Chrysler have a long-term future — in which case, bankruptcy should allow them to work things out with their creditors, workers etc — or they don’t: in which case this really would be a case of throwing good money after bad. Either way, the time for governments to say no is now.

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Now they tell us

  1. yup, get rid of the waste! diversify transportation and stop getting taken to the cleaners by these fraudulent companies like GM.

  2. Well requiring quarterly injections of cash across multiple jurisdictions just fills me with hope!

    Structure your bankruptcy and EARN people’s trust back. The trust is gone, as are the profits. Not much left to lose…

    Clean the slate best you can and try building cars people want again. Won’t be easy, but is more interesting than just imploding because the company is too big to have direction.

  3. Did anyone catch the interview that Carol Off did last night on As it Happens with the GM flack? I hope to god Clement was listening, because the flack was so hostile to the very idea that GM should have to explain and justify its request for more cash ti was nauseating. I got road rage driving home listening to her. Sample exchange:

    CO: “The government has said that are concerned that they are just throwing good money after bad.”
    Flack: “I’m sure they are.”

  4. I may be more that consumers now treat GM as if it was bankrupt, seeing as it’s sales have dropped by 56.7% in February, so there is not point in trying to avoid it any more.

    • 2x
      I suspect that GM and Chrysler thought people would distinguish between having issues, and bankrupt. They aren’t so there’s no further loss.

  5. The situation is a mess and I don’t understand why our pols are full steam ahead with bailout cash. There are steady rumours that GM and Chrysler are going to merge so we wouldn’t have to bail them both out.

    Ivison has good article today in Nat Post where he points out that GM has pledged its worldwide ops to secure American bailout so anything we give GM/Chrysler won’t be backed by any security or collateral. But not to worry, Flaherty is on top of it all. He said yesterday that automakers will have to ‘assure’ us that this won’t be a waste of taxpayer $$$. I feel better already, now that Flaherty is going to make them ‘promise’ to not waste my hard earned $$$. What could possibly go wrong!

    I am really surprised by GM’s stance on Chap 11. From everything I have read about bankruptcy court, it will be a horror show if they get involved in the process – good bye layers of mgmt, UAW pensions and health care, factories will be closed … etc.

    I don’t understand why we bail out companies that are failing. If we have to give cash away why don’t we give money to Honda or Toyota, and have them expand their operations, because Canadians and others are actually buying their vehicles.

  6. Chrysler is owned by Cerberus Capital Management, which has the cash to prop up the company for years if they thought it had a real chance at being turned around. There’s a lesson there, somewhere, which you can be sure politicians on both sides of the border will not learn.

  7. How blind can we be? This is the beginning of the end of mass consumption and instead of taking a deep breath and having the courage to face the future our ‘leaders’ are doing everything they can to prolong the agony.
    I know Obama is not the saviour but I am so tired of a cynical media knocking him for even trying. His vision reminds me of the George Bernard Shaw saying, famously quoted by Robert F. Kennedy. “Some men see things as they are and ask why? I dream things that never were and ask why not?”
    We are living in fear and it is the only thing in reality we have to fear. Yes, things will be different. That doesn’t have to mean bad.

  8. In thinking of GM and all its lunatic foibles, I am reminded of the line from the Neil LaBute movie In the Company of Men: “F**k Her! Let’s get a sandwich!


    Let her sink strip away excess brands and costs and there is a profitable core their with great products like the Malibu, Acadia and assorted trucks

  9. How about we spend these countless billions in bailouts on social support and retraining for the workers of these failed companies?
    That would make much more sense in the longterm.

    • How about because “we” are bankrupt ourselves, in debt up to only slightly less than our eyeballs compared to years ago.

      How about because that’s picking and choosing between capitalism and socialism to the point that society can’t figure out what it is anymore.

  10. O Yeah….and don’t forget folks….GM will be building the muscle car Camero very soon!!….that’s all we need….another fringe car of which only a few fans will be interested….talking about mistakes made…they’ll never learn!

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