By Lloyd Graff
I talked to Paul Eisenstein, TMW’s resident auto guru in Detroit. He is pessimistic about a bailout for the domestic car builders. He sees the legislation caught in a food fight between the lame duck Republicans and the Democrats who find themselves defending a bailout for big business.
I asked Paul if he thought a Chapter 11 bankruptcy approach would work for General Motors. He felt the stigma of a filing would kill the sales of GM’s vehicles for years. He also says that Rick Wagoner, GM’s president, does not accept the fact that he is part of the problem. Wagoner is determined to gut it out as head of the company, which also mitigates against a Chapter 11 filing.
Eisenstein says that the big irony is that GM has made major progress in the last few years with the negotiation of a reasonable rollback settlement with the UAW. They have been ambushed by high oil prices and the current economic gloom, two things out of their control.
Eisenstein concedes GM has a crappy product line aside from the Malibu and the Escalade, but he thinks the option of allowing GM to fail is too awful to accept.
Question: Is declaring bankruptcy the worst possible course of action for General Motors?
While I’m very tempted to say let the chips fall where they may to the Big Three, it’s painfully obvious that the rest of the U.S. would suffer greatly for their bad management decisions. It’s really a connundrum. If other areas of our economy weren’t in such bad shape, we could probably whether the storm. But then again, the Big Three are partially in trouble because of this meltdown. Who comes first, the chicken or the egg? At the moment I’m leaning toward a very structured bailout with lots of rules and regulations and, above all, a congressional oversight committee who has power over all executive decisions.
The Machinist’s Wife
General Motors is getting close to going bankrupt and to being liquidated. Ineptitude and greed of its management, its board, and its union are finally catching up with the former king of the automotive industry.