A Chapter For Detroit To Open: Detroit needs a Chapter 11

[CrimsonWhite]

The Big Three U.S. automakers need more than an injection of $25 billion from the federal government. Because of their ongoing losses, they would burn through that money in less than a year and would soon be back for more.

General Motors, Ford and Chrysler can make excellent cars, but they cannot sell them at prices that are competitive with the prices of cars produced in the United States by Toyota and others or with the prices of cars imported from Europe and Asia. The basic reason is the labor costs imposed by union contracts.

The Big Three pay much higher wages than production workers are paid in the nonunion auto firms and in the general economy. And the health-care costs of current workers and retired union members are an enormous additional burden.

The simplest solution is to allow GM and the others to file for bankruptcy. If the companies file under Chapter 11, they would be able to continue producing cars, and the workforce would remain employed while the firms reorganized. The firms would also be able to get short-term credit under bankruptcy protection.

Martin Feldstein - Martin Feldstein - Why Detroit Needs Chapter 11 - washingtonpost.com

 

[foggedinn]

Filing chapter 11 would lead to chapter 7 in very short order. The complete destruction of the big three.

I personnally believe this is exactly what is going to happen. The ripple effect throughout the economy will turn the current severe recession into a full blown depression. They won't last till Jan. 20th, and senate republican antipathy to a "union bailout" virtually insures it.

 

[Zoomie1980]

Filing chapter 11 would lead to chapter 7 in very short order. The complete destruction of the big three.

I personnally believe this is exactly what is going to happen. The ripple effect throughout the economy will turn the current severe recession into a full blown depression. They won't last till Jan. 20th, and senate republican antipathy to a "union bailout" virtually insures it.

Too bad, I say. We all had it coming. We as a nation have lived well beyond our means for at least two decades and we are all due a MAJOR BUST BACK. In 1980 we had no microwave ovens, no flat panel high dev TV's, no cell phones, no personal computers, no iPods, no DVD Blue-ray players, no GPS navigation systems. We take many of these things for granted but never in human history as the standard of living increase so fast. It is unsustainable and has been for many many years.

We simply cannot afford to keep a manufacturer afloat so they can continue to pay manual labor over 100,000/yr for screwing in bolts. We, as a nation, NEED a standard of living READJUSTMENT because our current collective standard is simply NOT SUSTAINABLE in the modern GLOBAL economy. Period. There is not getting around that. IT just IS.

The big 3 are not going to go completely under, but they are going to be completely reorganized and reborn into completely DIFFERENT companies from what they were. Happened in a lot industries like Steel and Airlines and it will happen here, too. They will make good cars and will pay a COMPETITIVE wage, not an EXORBITANT one. And their new execs won't get compensated at those ridiculous rates either.

 

[tigerbob]

Filing chapter 11 would lead to chapter 7 in very short order. The complete destruction of the big three.

I personnally believe this is exactly what is going to happen. The ripple effect throughout the economy will turn the current severe recession into a full blown depression. They won't last till Jan. 20th, and senate republican antipathy to a "union bailout" virtually insures it.

I am rather hoping that they will go into Ch 11 and then, when they are unable to get the required Debtor In Possession financing, that may be when the government steps in with a low cost loan. This would potentially get round the problems of buyer consideration of a manufacturer in bankruptcy, yet still allows them to reorganize and get out of the ridiculous UAW contracts under Ch 11.

That thought has only just occurred to me. I'll have to think about it some more - probably full of holes.