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Romney says let Detroit go bankrupt

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  • Romney says let Detroit go bankrupt

    Not exactly what I'd expect to hear from the son of an automaker.

    http://www.newsmax.com/insidecover/Romn ... medium=RSS

  • #2
    Romney is right.

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    • #3
      Originally posted by lonewolf
      Romney is right.
      "Without that bailout, Detroit will need to drastically restructure itself. With it, the automakers will stay the course — the suicidal course of declining market shares, insurmountable labor and retiree burdens, technology atrophy, product inferiority and never-ending job losses. Detroit needs a turnaround, not a check.”

      Not unlike the subprime mess, $2,000 costs for each GM car manufactured to cover retiree costs. Ford has made some right steps, but GM has had it's head up and locked for ages.

      Too bad McCain did not select Romney as his VP selection. I don't think he would have won, but at least he would not have looked like an Alaskan buffoon.

      Let the big 3 go into bankruptcy, get out from under the retiree burden. Thousands will take a hit, millions will benefit from the big 3 staying in business.

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      • #4
        I am of two minds on this but at the present time, the cost of them going bankrupt is likely to be very high. Too bad that this is happening at the wrong time inthe business cycle.

        First, almost any other time, GM would be able to get debtor-in-possession funding; now it would be very costly, if available. That would mean that there would be a freeze up of the GM production under Chapter 7 instead of continuation under Chapter 11. This would mean that several times (3, 5 or even 10 times) as many workers at suppliers that would go bankrupt would be out of a job at almost the same time with large multiplier effects and some very nasty regional effects. In addition, those retiree benefits, if cut off, would also freeze up those local economies (and Floridas?) and would bankrupt the US kitty for such failed firms (i.e., it would cost US taxpayers money in the short-run and companies in general in the long-run to pay those retiree's benefits. I would not be surprised if a failure would sink the state budgets of 5-10 states (Michigan's especially but a number of others as well). I would not be surprised if the direct effects were for an increase in the unemployment of up to 1,000,000 and multiplier effects larger.

        GM has a lot of cost concessions coming in about 15 months that would alter their profitability (especially for health-care cost), including that they have been biting the bullet with current expenses to get the long-term expenses down.

        A bailout is unlikely to help the shareholders a lot, as the conditions will take a bunch of the gains if it works out.

        [A report on CNN Money gives an estimate of the additional unemployment in the first year of 3,000,000; this comes from the Center for Automotive Research, so take it for what it is. ]

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        • #5
          And in a self-fulfilling prophecy, the notion that GM might go bankrupt has frozen their car sales. Who wants to buy a car from a company that has a good chance of going out of business??

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          • #6
            Originally posted by bad hammy
            And in a self-fulfilling prophecy, the notion that GM might go bankrupt has frozen their car sales. Who wants to buy a car from a company that has a good chance of going out of business??
            True, but IMO Chapter 7 is GM's best chance to stay in business.

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            • #7
              For the record (and the curious), here's the original Romney piece:

              http://www.nytimes.com/2008/11/19/opinion/19romney.html

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              • #8
                Why shouldnt they bail out the big three, those CEOs only take 28million a year for a salary, Wall st. gives that kind of chump change for a holiday bonus and we had the good sense to bail them out.
                ... nothing really ever changes my friend, new lines for old, new lines for old.

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                • #9
                  Romney's mostly right... the most painful part of his prescription is the one sentence dismissal of retiree benefits (cut 'em). He seems to equate retiree benefits with bloated executive compensation as unjustified costs. And although there would be some poetic justice to see the execs who made idiotic decisions in as much misery as retirees whose former employers use bankruptcy to evade their promises, it seems wrong to double-cross aging people who made life plans based on empty promises.

                  The other question is Romney's idea that people from outside the auto industry ought to be put in charge now. It always sounds good to have a fresh perspective, yet in my experience adminstrators who know nothing about the specifics of the business simply make different disastrous errors rather than the same old bad decisions.

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                  • #10
                    let's just hope your last graph isn't a description of USATF.

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                    • #11
                      knock on wood... I'll probably continue to buy Honda products no matter what the Big Three do, but I'd find it tough to support Japanese track programs!

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                      • #12
                        Originally posted by lonewolf
                        Originally posted by bad hammy
                        And in a self-fulfilling prophecy, the notion that GM might go bankrupt has frozen their car sales. Who wants to buy a car from a company that has a good chance of going out of business??
                        True, but IMO Chapter 7 is GM's best chance to stay in business.
                        Are you confusing Chapter 11, reorganization, with Chapter 7, liquidation? Chapter 7 is zero chance to stay in business.

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                        • #13
                          Yep, my bad, Chapter 11, sorry

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                          • #14
                            A local biz writer explains why letting the auto makers file for Chapter 11 before providing federal bailout funds would be the way to go: http://www.sfgate.com/cgi-bin/article.c ... 147QK6.DTL

                            Comment


                            • #15
                              Originally posted by 26mi235
                              Originally posted by lonewolf
                              Originally posted by bad hammy
                              And in a self-fulfilling prophecy, the notion that GM might go bankrupt has frozen their car sales. Who wants to buy a car from a company that has a good chance of going out of business??
                              True, but IMO Chapter 7 is GM's best chance to stay in business.
                              Are you confusing Chapter 11, reorganization, with Chapter 7, liquidation? Chapter 7 is zero chance to stay in business.
                              These days, you have to know the difference if you're going to send the right card.

                              http://www.newyorker.com/humor/issuecar ... 03?slide=7

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