Friday, December 12, 2008

Americans Say Bankruptcy, Not Bailout for BigThree

from red planet cartoons

from stix blog

... what's happening so far - excerpts from
"Congressional Republicans blocked consideration of a $14-billion federal loan for the auto industry Thursday night.

Republicans leaders said they want the U.S. auto industry to survive and thrive, but they also insist that a multi-billion-dollar taxpayer loan is not the only option. There’s also federal bankruptcy protection.

According to the Associated Press, the deal stalled over the United Auto Workers’ refusal to agree to wage cuts before their current contract expires in 2011.

The auto bailout bill, which easily passed the House on Wednesday, failed to advance in the Senate Thursday night. Fifty-two senators voted to consider the bill, but 35 of them (31 Republicans and 4 Democrats) voted against consideration. Supporters needed 60 votes for the bill to advance. ....

...“We simply cannot ask the American taxpayer to subsidize failure,” McConnell added.

McConnell also drew a distinction between the financial industry bailout and the auto bailout: While the financial rescue plan approved by Congress in October was intended to rescue the entire economy, the auto bailout is intended to save a single industry, he said. ...

...McConnell said the simplest reason to oppose the bill is also the best reason: “A government big enough to give us everything we want is a government big enough to take everything we have,” he said. ....

....“Government should not be in the auto industry,” DeMint told the National Review Online. “We’ve set up laws to deal with companies that are financially strapped, and we’ve got bankruptcy protection under Chapter 11, which would allow them to restructure their debt and their union contracts under the authority of a bankruptcy judge, who could help them make the hard decisions that would create a sustainable business.”

DeMint pointed to the airline industry as an example of an industry that has “gone through the bankruptcy process and come out the other side.” He told NRO the American people would have more confidence in buying a General Motors product if they knew the company was reorganizing under bankruptcy protection, rather than “being propped up by the federal government.”...
and some info from Human Events:
"Taxpayers should not be held accountable to bailout the automobile industry or any other industry for that matter. There is constitutional authority for the decades of poor management decisions, forecasting and labor deals that have put GM, the U.S.'s largest automobile maker, perilously close to going belly up.

That constitutional authority is the basic freedom everyone in America has: to succeed or fail on your own, and accept the consequences or the benefits. ....

...GM, Ford and Chrysler are sinking ships. With cash reserves dwindling, their only viable option is to try and stay afloat in these turbulent economic seas is bankruptcy.

Truth be told, it is not a question of if GM will file for bankruptcy protection, but rather when. Bankruptcy will provide GM the necessary protection and some time to possibly turn a dying automotive dinosaur into a smaller, lithe, profitable company that is sized for its shrunken market share. "Possibly" being the operative word.

Filing Chapter 11 protection protects GM from itself. Bankruptcy could free GM from costly labor contracts, provide them the opportunity to restructure hugely expensive pension programs, and renegotiate health benefits. Other unprofitable assets could also be amputated. Bankruptcy puts all options on the operating table to try and stop the massive bleeding of cash....

...Bailing out GM with billions of taxpayer dollars is the wrong approach. GM is not too big to fail. What GM may be is too unprofitable to stay in business." - Ted Nugent

A really good explanation on the Bailouts.... Blame the Bailouts on Mister Rogers?

Throwing money at failing businesses doesn't save the businesses - it postpones the failures. Sooner or later we have to pay the piper.

Here's a parable to understand this concept:
"There is a parable I learned long ago from the continuous improvement management philosophy. It’s called “rocks and water.”

Imagine you want to row your boat along a full, gently flowing river. No sweat. Imagine the water level drops significantly, exposing the jagged rocks along the riverbed. Now try rowing. Can’t do it; too many rocks.

In the parable, the water is any enabling resource of which having lots can obscure problems. In many businesses, the water is cash. Too much cash makes it easy to ignore the rocks underwater. Only when the water is drained can we see — and remove — the rocks. Many of the best organizations keep their water level low on purpose so that when rocks begin to appear they can be seen and dealt with. ...

We’ve let the water level rise for decades, hoping it would keep everyone floating along. The so-called “predatory lending” that some point to is just a sliver of the problem. The real problem is that, driven by well-intentioned policies, some smart pencil-pushers figured out how to create a mechanism for avoiding risk altogether. Make the loans, sell the risk to someone else. This opened the floodgates as it became easy to invest with little apparent downside. With the system set up this way, no one feels the pain — until everyone feels the pain. ...

The river’s drying up now. ...

I know from listening to ordinary Americans all through the country that there is a pervasive sense that, at some point, we’re going to have to pay the piper. The people I hear almost lament that nothing seems able to shake us from our collective consumption and obsession with more. When that time comes, companies will fail. Our lifestyle will drastically simplify. We will feel pain, all of us.

Maybe that time is now. Maybe, with the water receding, we can set to work removing the rocks." (- by Brad Rourke)
We got to remove the rocks at some point - either now or later - pouring more water (money) in the river NOW won't make the rocks (problems) disappear. Later when the river dries up again, we will be faced with the same rocks (problems) and have less water (money) to spare. When are we going to remove the rocks?

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