The Cost of General Motors' Death Much Greater Than a GM Bailout, Editorial Says
In an editorial posted today
, Automotive News
(subscription required) reports than Congress should consider the cost of a General Motors failure if it thinks a bailout of the troubled automaker is expensive.
Let's be clear, the publication states: The alternative to government cash for GM is not a dreamy Chapter 11 filing, a reorganization that puts dealers and autoworkers in their place, ensuring future success.
No, even if GM could get debtor-in-possession financing to keep the lights on (which it can't), Chapter 11 means a collapse of sales and a spiral into a Chapter 7 liquidation.
GM's 100,000 American jobs will die, Automotive News states. Health care for a million Americans will be lost or at risk. Hundreds of GM's 1,300 suppliers will die. Their collapse could take down Ford Motor Co. and Chrysler LLC, perhaps even North American transplants. Dealers in every county of America will close.
The government will face greater unemployment, more Americans without health insurance and greater pension liabilities.
Criticize Detroit 3 executives all you want, the publication states, but the issue today is not whether GM should have closed Buick years ago, been tougher with the UAW or supported higher fuel economy standards.
In the next two to four months, GM will run out of cash and turn out the lights. Only government money can prevent that. Every other alternative is fantasy.
The editorial states that "Ford, which borrowed big two years ago and thus has more cash today, may skip a bailout and the strings attached. Cerberus, which bought Chrysler last year, doesn't deserve money. Government cash might help sell Chrysler to a strategic owner."
A few paragraphs down the editorial concludes: "The stark fact remains: Absent a bailout, GM dies, and with it much of manufacturing in America. Congress needs to do the right thing--now.
- Posted by
- Scott Doggett November 14, 2008, 10:56 AM
- Permalink
- Categories:
- Chrysler, Emissions, Ford, Fuel Economy, General Motors, Legislation, Opinion
- Technorati Tags:
- Auto Industry Bailout, Automotive News, Chrysler, Congress, Ford, Fuel Economy, Fuel Efficiency, General Motors, GM
Thanks for the post...
GM remains a pillar to the US economy and it would be foolish to dismiss it's current challenges by simply saying let them fail. So I appreciate your not simplifying things!
Looking at all the Op-eds from Left/Right, I can't help but think that we are destined (in short term) to fall into the classic problem of fixes that fail. Trying to link money to improving the combustion engine seems wrong and that the industry must move beyond the manufacturing and sales paradigm of the combustion engine.
The Big 3 have too many factories, too many supply chain networks and have to stop only making money when they sell a new car. It’s time to leapfrog into electric motors powered by combination of batteries, fuel cells and capacitors. And leverage the coming convergence of the auto industry and utilities, and auto and IT industry around new revenue streams.
While Execs often dismiss new platforms and worry about being too early, recent bets on energy storage systems to be made in Asia suggest that we might be close to being too late. I would hope that US leadership recognizes the need to kill the combustion engine.
Some related articles that look at the globalization of electric vehicles:
http://www.theenergyroadmap.com/futureblogger
/show/1272-the-future-of-the-us-auto-industry
Thanks!
Garry Golden
Editor
The Energy Roadmap.com
Any attempt by legislators to put strings on bailout money would likely lead to further market problems for U.S. automakers. Forcing GM to produce only hybrids or electric vehicles sounds great, until the public doesn't buy them. An Auto Czar cannot predict consumers' needs and tastes, and is likely to be far less qualified than the automakers themselves.