Chapter Book
Incidentally, if it’s really the case, as Paul Krugman says, that “If the economy as a whole were in reasonably good shape and the credit markets were functioning, Chapter 11 would be the way to go” but trouble in the credit markets makes that impossible, I don’t understand why we can’t use federal funds to facilitate GM’s transition into Chapter 11 protection rather than a full-scale bailout designed to avoid bankruptcy.
Everyone says that part of the conditions of doing a bailout is going to have to be some major restructuring of this and that. But normally Chapter 11 bankruptcy is precisely the means through which such restructuring is done. If unusual circumstances mean we can’t do Chapter 11 and we need extraordinary congressional intervention, then it seems to me that the extraordinary intervention should be aimed at making Chapter 11 possible. Of course key GM stakeholders on both the management and the union side would prefer to avoid that scenario. But the reason they’d prefer to avoid it is precisely that they’d prefer to avoid major restructuring.
108 Responses to “Chapter Book”
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November 17th, 2008 at 11:43 am
Samuelson at WPost says something similar today
http://www.washingtonpost.com/wp-dyn/content/article/2008/11/16/AR2008111601734.html
November 17th, 2008 at 11:43 am
Shorter Matthew:
Since I get to live on a trust-fund, I think union jobs should be replaced with non-union jobs, preferably ultra-low wage jobs overseas, so I can buy stuff cheaper.
November 17th, 2008 at 11:43 am
sounds like Krugman is leading up to the feds being the “debtor in possession” for GM’s chapter 11, at least for a while until private participation in that role can be sorted out?
November 17th, 2008 at 11:45 am
Looks like bailing out the Big 3 will only be act one, as a lot of the parts supplier companies will need bailouts as well. Hold on to your wallets (Remember the “$85 billion” AIG bailout? Well, now it’s up to $144 billion).
FROM: http://biz.yahoo.com/ap/081116/meltdown_auto_suppliers.html
November 17th, 2008 at 11:46 am
“Samuelson at WPost says something similar today”
Samuelson and Yglesias. Perfect.
Matthew stood with George Bush on the Iraq war, and now he stands with Samuelson on the auto bailout.
Is Podesta too busy on transition matters to fire his ass? I’d prefer CAP to employ progressive Democrats, rather than Robert Samuelson acolytes.
November 17th, 2008 at 11:46 am
About bankruptcy: many months ago, Ford decided to mortgage the entire company (every factory, etc) in order to get the cash on hand to make it to 2009 when the new line of fuel efficient Euro Fords can be built. GM waited too long, and right now such mortgaging is impossible due to the credit crunch. Doesn’t it make sense for the government to act as lender of last resort so that yuppies like you can buy the Chevy Volt?
November 17th, 2008 at 11:47 am
The beautiful thing about living on a trust-fund is that the checks keep coming in even during economic depressions.
November 17th, 2008 at 11:47 am
The UAW made huge concessions in the 2007 CBA. When fully implemented it will lower labor costs for the Big 3 below the cost for foreign manufacturers operating in the US. If GM is allowed to go into Chapter 11 and get out of that contract, the other two domestic automakers will have to into Chapter 11 as well in order to obtain the same advantages GM obtains. Republicans are opposed to this bailout because they want to crush the UAW. A weakened UAW, or a UAW membership that believes that Democratic politicians cannot protect them from union busting Republicans, will no longer continue to provide electoral victories for Democratic politicians in the industrial Midwest.
November 17th, 2008 at 11:48 am
Absolutely no Democrat should be pushing for a bankruptcy. The whole reason for the Right to push for bankruptcy is to cut wages and do away with the pensions of hundreds of thousands of retired workers. Those workers took lower wages because they were promised a pension and healthcare in their golden yrs. To do away with those contracts made with the workers is nothing short of robbery. Imagine having spent your life working and planning to retire with a pension that would allow you to live without fear only to have it stripped away by a Judge so the Executives could keep their billion dollar bonuses.
Any Democrat the votes to force bankruptcy should just go ahead and change his party affiliation. We must protect the workers retirement and wages at all costs. To do anything less is just plain undemocratic.
November 17th, 2008 at 11:53 am
Isn’t Krugman’s fundamental point that letting the autos go into a Chapter 11 restructuring during a credit crisis would greatly exacerbate the recession? So a bailout right now might postpone the inevitable, but letting it happen now would be a catastrophe. We’re already going to see huge unemployment and shrinking consumer demand — the last thing we need right now is to help companies shift to Chapter 11 and lay off a million workers.
November 17th, 2008 at 11:57 am
JDS,
you are right. Gentry liberals and republicans want to provide the final blow to the UAW. Simple and plain. The idea that Yglesias and Samuelson are in league is no surpise. This is standard fair.
November 17th, 2008 at 12:03 pm
Apparently Petey has missed the fact that trust funds are generally invested in the market.
November 17th, 2008 at 12:04 pm
CN,
You make a valid point, and one that is seemingly in contradiction with Matt’s previous snarks about “Neo-Hooverites”. Isn’t this just Hooverism from Matt? Good money being thrown at bad and all that? Funny how Matt thinks that the Gov. should be spending billions more than it is to stimulate the economy, but should loan a few billion to GM. Why does AIG get over 100 billion in bailout money, but we can’t loan GM just a few billion? We could make them pay it back with interest, just like we did with Chrysler.
November 17th, 2008 at 12:04 pm
The beautiful thing about living on a trust-fund is that the checks keep coming in even during economic depressions.
No, actually they don’t.
November 17th, 2008 at 12:20 pm
Seriously, why does CAP employ a scumbag who transcribes right-wing talking points on the desirability of going to war in Iraq, on the undesirability of universal healthcare, and on the joy of busting unions?
Does John Podesta really approve of the right-wing crap Yglesias writes?
November 17th, 2008 at 12:21 pm
Matthew finds himself in the uncomfortable position, for a “progressive,” of siding with the Bush Administration, Republicans in Congress and libertarian organizations like Cato in opposing a bailout. In contrast to President-elect Obama, congressional Democrats, the UAW, Paul Krugman, and many other left-leaning economics pundits, who all favor a bailout.
November 17th, 2008 at 12:28 pm
Matt is way off on this one. Distressingly, I am in 100% agreement with Petey on this one.
If you read Matt’s GM posts in conjunction with his tin-eared support of greater subjection of the Western US to the depradations of the extraction industries, you begin to realize that he knows next to nothing and cares even less for anything (including the quality of human life) that doesn’t directly affect affluent hipsters living in the Boston-New York-DC axis.
November 17th, 2008 at 12:31 pm
I believe the problem with simply letting GM go into Ch 11 is time and scale. All of GM’s creditors and anyone with whom they have a contract is entitled to have input on the reorganization. It would be over a year in the courts. The prolonged uncertainty would kill off much of what is otherwise worth preserving. The ripple affects would be significant due to the economic climate.
When you consider the breath and diversity of the people affected by a GM bankruptcy, making the Congress a surrogate for the bankruptcy judge and the many, many petitioners is not unreasonable. It is a rare situation in which the combined house, senate and presidency is the less cumbersome decision making body.
November 17th, 2008 at 12:32 pm
Oh fun, a good ol’ yuppie vs. union battle! Those are always fun… Maybe if GM made good cars that people wanted to drive they wouldn’t need a bailout in the first place, it’s not like GM struggling is a new phenomenon. It would help UAW if they were just a little more humble about the current bredicament their industry was in.
November 17th, 2008 at 12:42 pm
Has MattY actually even considered the likely consequences for workers, retirees, and the related economy if GM goes into Chapter 11?
November 17th, 2008 at 12:43 pm
I keep hearing the analogy of comparing GM to United Airlines. I don’t think that is a fair comparison. Even if UA is in bankruptcy, I will still buy tickets because I get them with my credit card- which gives me protections to get my money back if they cancel the flight. I am usually buying a ticket to fly within the month so I can judge how confident I feel about them surviving the month.
A car is a huge ongoing commitment. If the company goes into bankruptcy then no one will buy a car- period. Because no one will be sure if GM will be around in a year to honor the warranty or continue to make parts or provide mechanics with the codes and repair manuals. Your loan will be with a third party meaning you will have to pay the full price even if GM has gone out of business and you can’t drive your car because it costs 3,000 to repair and warranty wont cover the cost anymore.
November 17th, 2008 at 12:44 pm
Maybe if GM made good cars that people wanted to drive they wouldn’t need a bailout in the first place,
For many years GM made huge profits selling SUVs, which Americans eagerly purchased at a markeup of thousands of dollars. It is estimated that GM made a profit of $10,000-15,000 on the sale of every large SUV.
But it lost money on passenger cars, thanks to absurd union agreements that made GM’s labor costs so much higher than those of Japanese automakers. Auto workers can thank the UAW for putting them out of work. Bailout or not, I think the era of ridiculous union agreements in America is over. Workers for U.S. auto companies will have to make do with the same wages and benefits as U.S. workers for Toyota and Nissan receive. If they don’t like it, they can go and work at Walmart instead.
November 17th, 2008 at 12:44 pm
For those of you crucifying Matt on a cross of trustfunds, he said:
I think that is a bad idea. I believe Matt, as he states, clearly does not understand. While that usage of, “I don’t understand…” is often a rhetorical device, I believe that with such a complicated subject, asssuming rhetoric is not warranted. I believe Matt does not understand the consequences of the proposed course of action. Rather than assuming Matt is a proponent of higher unemployment and union busting, one could assume he is honestly looking for a counter argument.
November 17th, 2008 at 12:53 pm
Workers for U.S. auto companies will have to make do with the same wages and benefits as U.S. workers for Toyota and Nissan receive.
I’m pretty sure they’ve already agreed to that, in the GM-UAW contract signed last year.
Njorl: Nobody whose opinion differs from Petey’s is ever acting in good faith.
November 17th, 2008 at 12:53 pm
Can you cite for me the starting pay for line workers at Ford, GM, Chrysler, Toyota, Honda, and Nissan? Or average pay?
November 17th, 2008 at 12:55 pm
I am a registered Democrat, and I’m not going to change my party affiliation for considering the option that American manufactureres be allowed to go into bankruptcy. What good is it for workers to continue to be at the mercy of dying corporations that don’t know how to compete? As Democrats, we’re not allowed to consider that this bailout is only putting off the inevitable? Can’t the bailout money be used to help those workers? To be honest, I am inclined to trust the Krugmans of the world. But Matt’s instincts on this issue recognize some important facts.
November 17th, 2008 at 12:57 pm
Marcy Wheeler (Emptywheel) wrote one of the best pieces you will ever read about GM and possible consequences (bankruptcy, bailout, a buyout from Chinese automaker SAIC), she lives in Michigan, and has worked as a consultant to automakers. I highly recommend reading her piece instead of playing doing all this macroeconomic wanking.
Go read Marcy’s piece, We are all Flint, MI Now
November 17th, 2008 at 1:04 pm
But it lost money on passenger cars, thanks to absurd union agreements that made GM’s labor costs so much higher than those of Japanese automakers. Auto workers can thank the UAW for putting them out of work.
I’ve heard this line of argument from GM appologists before. While I’m open to this line of argument, I’d like to see some actual meat behind it. Are American workers really paid more than their German, Sweedish and Japanese counterparts? Proof please. I do not want to see GM go under, nor do I want to see the Big 3 rewarded for their utter incompetence. Is there a middle ground somewhere?
November 17th, 2008 at 1:06 pm
The reason they’d prefer to avoid [chapter 11] is precisely that they’d prefer to avoid major restructuring.
There’s a little more to it than that on the management side. Theoretically, the management of these companies work for the shareholders. The shareholders are worse off under a bankruptcy because they potentially lose much more of their equity than under a bailout. (And the top management are large stock holders as well.)
November 17th, 2008 at 1:11 pm
“What good is it for workers to continue to be at the mercy of dying corporations that don’t know how to compete?”
While I’m sure the UAW appreciates your concern for their dignity, probably they would prefer to be employed than be cast off into the wilderness at a time when unemployment is already high and the credit market is impossible.
November 17th, 2008 at 1:17 pm
Can you cite for me the starting pay for line workers at Ford, GM, Chrysler, Toyota, Honda, and Nissan?
Well, I probably can, but I’m not going to. Do you have a point?
November 17th, 2008 at 1:20 pm
You made an assertion without evidence. And now you blithely dismiss any requests for evidence? You are very boldly intellectually dishonest, it seems. I don’ believe that you can procure said evidence, which also makes you a liar.
November 17th, 2008 at 1:31 pm
I’ve heard this line of argument from GM appologists before. While I’m open to this line of argument, I’d like to see some actual meat behind it. Are American workers really paid more than their German, Sweedish and Japanese counterparts?
See, for example:
http://money.cnn.com/2007/01/26/news/companies/pluggedin_taylor_ford.fortune/index.htm
Quote:
November 17th, 2008 at 1:35 pm
Al: See here.. Basically, a plane ticket is a commitment of a couple months and a few hundred dollars. A car is a commitment of a dozen years and tens of thousands of dollars. As a customer, you don’t have to worry about what happens to the airline company after you fly, but you do have to worry about the car company after you buy a car because you need to know that you’ll still be able to service it.
November 17th, 2008 at 1:36 pm
You made an assertion without evidence. And now you blithely dismiss any requests for evidence?
I didn’t say anything about “starting pay.”
You are very boldly intellectually dishonest, it seems.You are very boldly intellectually dishonest, it seems. I don’ believe that you can procure said evidence, which also makes you a liar.
You are an idiot, it seems. Try reading my post again, more carefully this time, and maybe next time you comment you make such a fool of yourself, you lying moron.
November 17th, 2008 at 1:47 pm
This was an awesome idea, and all the fault of the unions, of course:
Maybe we ought to offer a reverse tax incentives, offering small businesses the ability to write off $100K off of their purchases of small, efficient passenger vehicles. But that would be communist and socialist and inefficient for the market and generally too faggy for the manly, manly Republicans, who liked their big-ass SUV’s so that the local weightlifting shop could drive an ad-wrapped H2 around shopping centers.
And, of course, you can blame the unions for that too, just because.
November 17th, 2008 at 1:48 pm
Wow, what the fuck happened to Petey? I thought he just suffered from election-season psychosis.
Dude, our host here is a fairly well-regarded pundit. Until very recently he lived in the type of flophouse I outgrew when I graduated from college. If he’s living off of a trust fund he’s being pretty damn frugal with it.
As for a bailout, fuck that shit. The people who worked at Mervyn’s or Ciitgroup need their jobs just as much as the people who work at GM. It’s not the federal government’s place to save Mervyn’s and its not the federal government’s place to save GM.
If GM can barely compete as it is, just imagine what would happen if cars weren’t some of the most heavily tarrifed imports.
November 17th, 2008 at 1:54 pm
The people who worked at Mervyn’s or Ciitgroup need their jobs just as much as the people who work at GM.
Citi’s laying off ~50,000 workers, and I imagine Mervyns employed maybe 20,000, tops. I’d guess the entire GM/Ford/Chrysler supply chain probably constitutes several million workers, and happens to be the economic backbone of a large fraction of the American Midwest.
November 17th, 2008 at 1:55 pm
Boy, little taffy-rumped trust fund kid opposes bailing out the industrial and technological backbone of the Country. Paging Captain Louis Renault!
The fact that Matt doesn’t even consider the humanitarian costs associated with destroying the UAW and liquidating two (or 3) of the big 3 is telling. Why is he considered a progressive?
November 17th, 2008 at 2:01 pm
“The people who worked at Mervyn’s or Ciitgroup need their jobs just as much as the people who work at GM.”
Mervyn’s give people clown collar, subsistence level jobs. Auto manufacturing jobs are much more important, especially to anyone who cares about a progressive model of dignified employment. And, of course, the Big-3 jobs are clustered in Michigan/upper midwest, so the elimination of those jobs at the beginning of a recession would pretty much destroy the metro Detroit area (4 million residents), if not the entire state of Michigan.
What people seem to be ignoring is that the only reason Matt (and his fellow right wingnuts) has for desiring bankruptcy over a bailout is to punish unions and the middle class for their alleged grievances against Matt’s beautiful market. What a progressive.
November 17th, 2008 at 2:10 pm
But the reason they’d prefer to avoid it is precisely that they’d prefer to avoid major restructuring.
Maybe, but I think they are honestly afraid that nobody will buy their cars if they go into Chapter 11, for the reasons Colleen mentioned, and that bankruptcy will thus be the end of them. Maybe that is a refutable argument, and maybe it’s not. But that’s at least the argument that should be considered.
November 17th, 2008 at 2:20 pm
Oh, El Cid, the Virgin Mixie No-Friends says that things like the over-6000lb GVWR writeoff never distorted the market, because he (and only he) can see into the deepest soul of every American SUV purchaser. He also appears to be unaware of how most people pay greatest attention to the cost of the monthly payment when buying a vehicle, but we already know he’s a naif.
He does bluster a lot when he gets called on his bullshit, though. Not exactly a poker face when he’s always holding seven-deuce offsuit.
November 17th, 2008 at 2:21 pm
“My name is pseudonymous in nc and I live in a permanent state of uncontrollable rage.”
November 17th, 2008 at 2:54 pm
You have failed to provide any evidence that there is a disparity between the salaries of US workers and Japanese, and then you balk at any demand for said evidence, and then try to assert that I am a liar? No no, it is you who is the lying internet troll. You, sir, have been exposed.
November 17th, 2008 at 3:37 pm
Benny Lava, I guess you missed #35.
November 17th, 2008 at 3:39 pm
There’s further substantive differences between Mervyn’s and Citibank’s layoffs and what happens to people laid-off from the Big Three. There’s always going to be a large retail sector in the US, and laid-off Mervyn’s folks will eventually find similar (and similarly paid) jobs in retail. Other retail chains, once the economy is better, will (hopefully) need new people and people with Mervyn’s experience will look quite attractive. It’s not that difficult to start new retail chains, open new stores, etc. Also, since these Mervyn’s folks are scattered throughout the US, so (except perhaps for corporate HQ in Northern California) the impact upon any one geographic region will be pretty small.
Similarly, for laid-off Citibank folks. Eventually, they will find similar positions (and similarly paid) either in the financial sector or working in the finance departments of corporations. Again, eventually the economy will recover and hiring firms will be seeking people who have experience from such a major well-known name-brand corporation as Citibank. It’s not that difficult to start new financial institutions (you just need capital and some office space). Sure, it’s nasty right now, but financial sector workers transition from one sub-segment to another all the time, and they know that going in. I personally worked in the backoffice of an online brokerage, then mutual fund marketing, then marketing for a credit card company, then trading for a mutual fund complex, then in researching stocks for a hedge fund, then researching funds for a foundation’s endowment, then researching stocks at a mutual fund, then researching distressed credits for a family office, then real estate development and then in planning for software corporations.
Laid-off auto-workers are precisely NOT in these situations. If there’s no auto industry remaining in the US, other firms in other industries won’t consider them as experienced hires – but rather as aging entry level hires (which is not precisely an ideal profile to have). It’s incredibly hard to start a new auto company – it will take many years, and more likely several decades, to build up a major automobile manufacturer. Beyond that, of course, the laid-off automotive factory workers are heavily concentrated in a region that does not have other major industries to backfill the automotive industries’ collapse. There are other jobs besides retail in northern California, and other jobs besides banking in New York. Not so true about Detroit.
November 17th, 2008 at 4:02 pm
Top Ten Signs That Mixie Is Bullshitting:
10. Making sweeping, evidence-free claims.
9. Demanding evidence from others when asked to defend claims.
8. Frothing, petulant insults.
7. Refusal to admit basic factual errors.
6. Stick-up-the-ass pomposity.
5. Irrelevant citations (see #35, a classic case).
4. Whining.
3. Argument Clinic.
2. Lame sockpuppetry.
And your number one sign that Mixie is bullshitting [drum roll...]:
“Mixner Says:”
November 17th, 2008 at 4:05 pm
“My name is pseudonymous in nc and I live in a permanent state of uncontrollable rage.”
November 17th, 2008 at 4:17 pm
I dunno, pseudonymous’ rage sounds pretty controlled to me. But then, I won’t really know until I recite my Austrian school of economics bible over & over until it becomes clear to me.
November 17th, 2008 at 5:06 pm
Hi, it’s Christopher Barger with GM again. Actually, GM has consistently said that bankruptcy is not an option not because we’re afraid of restructuring – we’ve been aggressively pursuing that on our own, and well before the current crisis that has made this aid necessary – but because we believe that no one will buy cars from a bankrupt automaker.
Buying a car is essentially entering a long-term relationship with the automaker, the dealer, and local service centers, and our research shows that consumers in the market for a car would not enter that relationship with a bankrupt automaker.
Beyond that, Paul Krugman puts it well – bankruptcy would mean that we’d lose our ability to pay suppliers, and if we can’t pay suppliers, we’re no longer a functioning company.
November 17th, 2008 at 5:06 pm
Actually, GM has consistently said that bankruptcy is not an option not because we’re afraid of restructuring – we’ve been aggressively pursuing that on our own, well before the current crisis that has made this aid necessary – but because we believe that no one will buy cars from a bankrupt automaker. Buying a car is essentially entering a long-term relationship with the automaker, the dealer, and local service centers, and our research shows that consumers in the market for a car would not enter that relationship with a bankrupt automaker. Beyond that, Paul Krugman puts it well – bankruptcy would mean that we’d lose our ability to pay suppliers, and if we can’t pay suppliers, we’re no longer a functioning company.
November 17th, 2008 at 5:15 pm
Don’t you hate it when the inner workings of a corporation get revealed?
Yes, Tom and I just posted virtually the same comment. Tom and I both read your blog, we both wanted to respond, and we compared notes on a thoughtful response to you. Unfortunately, what we didn’t do was specifically say which of us was going to go on. We both did, and that’s why you got the same comment twice.
Wish I could cop to some massive corporate conspiracy to invade blogs, but the reality’s a lot less exciting: two employees wanted to say something here, we compared notes, and we forgot to say “I’ll do it” to each other. That’s what happened… sorry about that!
November 17th, 2008 at 5:40 pm
Who cares what a trustafarian like Petey thinks?
I agree with Why-glesias on this one. The most important part of “saving” GM is saving the employees’ jobs, that means all the way down the chain of distribution.
November 17th, 2008 at 5:45 pm
No Mixner, I did not. That link does not compare pay for US autoworkers and their foreign counterparts, both overseas and in the US.
Basically all your link does is demonstrate that the legacy costs of Toyota workers is subsidized by the government of Japan.
Also, it is pretty pathetic that you snark behind a puppet pseudonym. It is juvenile and dishonest.
November 17th, 2008 at 5:48 pm
I wonder if Mixner’s real name is Michael B. Brodkorb?
November 17th, 2008 at 5:55 pm
Here is what I wrote to my congressional representatives this morning:
“Dear Senator:
Having given thought to whether we should bail out the auto industry, I believe the arguments for and against can be summed up thusly:
1) there are a few “let-it-fail” advocates that come from states with vested interests in other (foreign owned ) auto companies: Alabama, Tennessee, etc;
2) there are an abundance of “let-it fail” advocates who believe that bankruptcy in the form of Chapter 11 reorganization is the best course because the companies can shed non-productive contracts, excessive pensions, etc;
3) there are a considerable number of pragmatists who counsel an immediate bailout because the truth is that Debtor in Possession financing has dried up (GE, for example, the biggest provider of such financing, has gotten out of the business), and so a Chapter 11 would surely become a Chapter 7, with unsavory elements able to buy up American technology and assets at fire sale values, losing needed industry and military capability in the process;
4) there are a considerable number of bail-them-out-now-but-with-conditions proponents, but it seems obvious to me that such conditions would quickly become needlessly political, with fights over trivial union or contractual minutia, and not much bailout to be had.
I think we should consider whether the GOVERNMENT could or should provide DIP financing in Chapter 11 Bankruptcy for the auto industry (or guarantees to those lending entities willing to take on the debt). In that way, Chapter 11, which is after all the premier tool for rehabilitating and restructuring ailing firms can be employed, while keeping politics to a minimum.”
What do you think?
November 17th, 2008 at 6:00 pm
“Wow, what the fuck happened to Petey? I thought he just suffered from election-season psychosis.”
Policy is actually far more fun and important than elections.
You don’t win elections to have a party the night the returns come in. You win elections to govern.
—–
The problem is that Matt has a rich boy ’suburbs are icky’ agenda which manifests itself in things like his sliming of the Democratic attempt to preserve a domestic auto industry throughout the downturn using right-wing talking points.
If I’m wrong and Matt just truly believes in Herbert Hoover economics, why is he working for CAP? I’m sure CATO or the WaPo would be fine landing places for him.
November 17th, 2008 at 6:11 pm
“I agree with Why-glesias on this one. The most important part of “saving” GM is saving the employees’ jobs, that means all the way down the chain of distribution.”
- saving the jobs of those employees, all the way down the supply chain, is important.
- saving the country from an unnecessary economic depression is important.
- saving union jobs from being turned into non-union jobs is important.
- saving some form of an American auto industry for when the downturn is over is important.
—–
“Who cares what a trustafarian like Petey thinks?”
I’m not a trustafarian. I’m a pseudonym. For all you know, I’m just a very smart dachshund who’s mastered the QWERTY keyboard and American politics history and drinks water out of a bowl.
Matthew Ygleisas, on the other hand, is a real person with a real life story. And some of that story seems relevant in his strident attempts to affect policy in such a way that would turn large swathes of America into serfs or cannon-fodder for his uses.
November 17th, 2008 at 6:12 pm
I advocated a combo deal on a TPM post yesterday:
http://www.talkingpointsmemo.com/talk/blogs/frog_leg/2008/11/chapter-15.php
As usual, both sides are right and both sides are wrong. The oversight for the financial bailout has so far been mainly illusory; nevertheless, a bailout was, and remains, necessary. The question is what is the best structure for the bailout that meets all the necessary goals. Bankruptcy might be a good option, but Chapter 11 bankruptcy will not allow the influx of cash necessary to keep the auto makers open. So the bankruptcy courts are not the best option, at least not as bankruptcy jurisdiction currently exists.
Perhaps the best option then is a dramatic expansion in the jurisdiction of the bankruptcy courts. An entire new set of cases could be given to the bankruptcy courts (the jurisdiction to be created in a new Chapter 15 of the Bankruptcy Code). The bankruptcy courts can, and I believe should, administer the bailout. The advantages are huge:
* Coersion: A bankrutptcy court can force companies to do things they couldn’t normally do. The union contracts need to be torn up. Ditto for upper management. A special master can be hired to enforce best business practices at different levels of the company.
* Supervision: It is in the core institutional competency of the bankruptcy courts to oversee companies which are doing badly. In constrast, a board of oversight is attempting to create the procedures of oversight from nothing at all, without institutional knowledge of how it should be done. In bankruptcy courts, there are established procedures for ferreting out accounting and other malpractices hidden deep within the company books. This way, the bailout money can go directly to where it is needed.
The main reason for a new class of bankruptcy is that there is no existing mechanism for the court to disburse the money. If they are overseeing the reorganization, they should be overseeing the disbursement as well.
November 17th, 2008 at 6:48 pm
I did not.
Then you really are an idiot.
That link does not compare pay for US autoworkers and their foreign counterparts, both overseas and in the US.
It compares labor costs. That is, wages and benefits. Not “starting pay,” which no one mentioned but you.
Basically all your link does is demonstrate that the legacy costs of Toyota workers is subsidized by the government of Japan.
No it doesn’t, you fool. Read it again.
November 17th, 2008 at 8:18 pm
Actually, 40 billion worth of bondholders will take the big hit. Pontiac and Buick and GMC [and Saturn?] dealers would take a hit when those marques cease to exist. Shareholders (why would anyone own GM stock?) would lose their equity, but get to prove the basic theory of a limited liability corporation and not be held liable for their business’ debts.
Just screwing the bondholders would probably get GM back to profitability.
Chapter 11 would allow GM to renegotiate the UAW contract, but not necessarily break the union. Is there anyone who will actually defend the job bank? At the end of the day, GM and the UAW will still be able to kill each other, but can chose to avoid mutual suicide. Right now, they are comrades in arms hoping to each get a government teat to suck on.
All the government probably needs to do is guarantee the DIP financing. Maybe politicans on TV can reassure everyone that their warrantees will remain valid. That is basically a marketing problem, unlike the really big problem of crappy product. The biggest problem of all, however, is the widely held belief in GM that their product isn’t crappy.
PS “bankruptcy would mean that we’d lose our ability to pay suppliers, and if we can’t pay suppliers” is utter bullshit. Suppliers within 90 days have a priority claim, and GM can seek critical vendor status to pay them.
November 29th, 2008 at 3:00 am
Citigroup’s layoffs – part of a plan to cut about 53,000 jobs in coming quarters – represent the latest bad news to drop on the financial sector and the economy. The company also plans to cut expenses by 20%. (Read Citigroup’s
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