Internal Combustion Engine
Big 3 auto Beg For Help.
GM, Ford and Chrysler are currently begging for money from your government. If you do not want to give, underscore give, them any money, then write, call or email your congressman and senator.
On a very simplistic plane, we have 3 remedies to failure in this country. Legal remedies which have been in place and served us well for many years.
As an individual you have the right to file for Chapter 13 bankruptcy. This allows you to negotiate better payment terms with your personal debt holders – credit cards, mortgages, car loans whatever. The idea is here is time will heal a temporary problem.
As a corporation you have two options. If you just want to quit, then you can file Chapter 7 and the system will sell all your assets and distribute the sale results among your creditors per their ranking. The second option is Chapter 11. This is more of a restructuring. It again is in the vein of time heals all. The system will allow you time to renegotiate both amounts and terms with your creditors, labor supply, material suppliers, customers and so on. After you operate on a stable level, then you can emerge from this type of bankruptcy. This assumes that you believe that your company just made some mistakes and the overall idea and business model is sound.
Excuse me. For 40 years the government and the marketplace have wanted a fuel efficient personal vehicle. For 40 years we have wanted an alternative to the internal combustion engine so that we could escape our dependency on oil or oil related products. Does no one remember the shortage in the early 70′s. How about the one in the 80′s.
Recently a representative of the UAW was on TV telling the country that the UAW developed the middle class in this country. This was said because it looks like the auto companies are going to bankrupt shortly (within weeks or months – not years). It is assumed that it will be chapter 11. It is also assumed the first thing to go will be the UAW contract and pension claims.
There are two very significant points to be made here.
First – if you ever did business as a supplier to the big 3 you know that they were arrogant to say the least. They demanded impossible delivery schedules, lower prices, higher quality components than were reasonable. The good side was volume. There is an old joke about ‘making up for losses with volume’. More and more companies are deciding that the correct volume is ZERO when dealing with the current management and executives of the big 3.
Second. Simple arithmetic will answer the bail out question. The market cap ( the total value of all of the shares of all 3 of the big 3) is less than $7 billion at today’s market prices. Why would you give someone $25 billion when you could buy all 3 companies for $7 billion? Maybe because you can’t run them efficiently and thereby maintain their market presence and the associated employment. Do you think you could do any worse?
Why doesn’t the government just buy all 3 companies and give them to ACORN to run. They seem to be able to get things done and no one dares to bother them.
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