General Motors wants its freedom

Our little experiment in industrial socialism didn’t work quite as well as the Democrats are saying.  General Motors did not pay back the bailout, and the American auto industry is not exactly “roaring back,” as the President said.  The government still owns over a quarter of all GM stock.  The company wants the government to sell out, but if it does, such is the low stock price, taxpayers would lose billions.  From Market Watch:

The Treasury Department is resisting General Motors’ push for the government to sell off its stake in the auto maker, The Wall Street Journal reports. Following a $50 billion bailout in 2009, the U.S. taxpayers now own almost 27% of the company. But the newspaper said GM executives are now chafing at that, saying it hurts the company’s reputation and its ability to attract top talent due to pay restrictions. Earlier this year, GM GM -1.41% presented a plan to repurchase 200 million of the 500 million shares the U.S. holds with the balance being sold via a public offering. But officials at the Treasury Department were not interested as selling now would lead to a multibillion dollar loss for the government, the newspaper noted.

via General Motors pushing U.S. to sell stake: report – MarketWatch.

About Gene Veith

Professor of Literature at Patrick Henry College, the Director of the Cranach Institute at Concordia Theological Seminary, a columnist for World Magazine and TableTalk, and the author of 18 books on different facets of Christianity & Culture.

  • mikeb

    But officials at the Treasury Department were not interested as selling now would lead to a multibillion dollar loss for the government, the newspaper noted.

    For those of you who don’t speak bureaucrat, let me translate: ‘ But officials at the Treasury Department were not interested as selling now would lead to a potential loss for the incumbent.

  • mikeb

    But officials at the Treasury Department were not interested as selling now would lead to a multibillion dollar loss for the government, the newspaper noted.

    For those of you who don’t speak bureaucrat, let me translate: ‘ But officials at the Treasury Department were not interested as selling now would lead to a potential loss for the incumbent.

  • Tom Hering

    If GM wants its freedom, maybe it shouldn’t have traded it away in the first place. Its executives weren’t “chafing” in 2009.

  • Tom Hering

    If GM wants its freedom, maybe it shouldn’t have traded it away in the first place. Its executives weren’t “chafing” in 2009.

  • Cincinnatus

    Tom is right. GM’s tears are delicious.

    And anyone who believed the President when he claimed that bailing out GM would be a good deal for the taxpayers like me deserves to have their right to vote revoked.

  • Cincinnatus

    Tom is right. GM’s tears are delicious.

    And anyone who believed the President when he claimed that bailing out GM would be a good deal for the taxpayers like me deserves to have their right to vote revoked.

  • http://theoldadam.com/ Steve Martin

    This is their (the Dems) vision for America. ‘Partnership’ between govt. and business.

    What a joke.

    Look at the postal service. The can’t even get it right when they have total control.

  • http://theoldadam.com/ Steve Martin

    This is their (the Dems) vision for America. ‘Partnership’ between govt. and business.

    What a joke.

    Look at the postal service. The can’t even get it right when they have total control.

  • Steve Billingsley

    GM should do what they should have been allowed to do in 2009. Go through a managed bankruptcy with the proper bankruptcy court and without the administration’s “assistance”.

  • Steve Billingsley

    GM should do what they should have been allowed to do in 2009. Go through a managed bankruptcy with the proper bankruptcy court and without the administration’s “assistance”.

  • http://www.bikebubba.blogspot.com bike bubba

    Steve, one possible “gotcha” there is that if they’re playing by the rules in bankruptcy, GM cannot declare again until 2015 unless they file Chapter 7, if I remember correctly.

    My take here is that GM executives are finally realizing that their board of directors–a majority from the UAW and the government–doesn’t know shoe polish about the business of building cars (see the “Volt” as an example), and hence they’re trying to escape so they can at least survive until they can file Chapter 11 again and shed the UAW tax.

    One nasty thing–and I posted on this on my blog–about the bailout is that the clear winner was the UAW, the clear losers investors and the white collar workforce for GM. So the bailout more or less ensured that (a) GM would pay the UAW tax in perpetuity, (b) GM would pay a lot more for working capital, and (c) GM would not be able to get the white collar help it needs. The end result is that GM is not meeting product requirements with key products like the new Malibu.

  • http://www.bikebubba.blogspot.com bike bubba

    Steve, one possible “gotcha” there is that if they’re playing by the rules in bankruptcy, GM cannot declare again until 2015 unless they file Chapter 7, if I remember correctly.

    My take here is that GM executives are finally realizing that their board of directors–a majority from the UAW and the government–doesn’t know shoe polish about the business of building cars (see the “Volt” as an example), and hence they’re trying to escape so they can at least survive until they can file Chapter 11 again and shed the UAW tax.

    One nasty thing–and I posted on this on my blog–about the bailout is that the clear winner was the UAW, the clear losers investors and the white collar workforce for GM. So the bailout more or less ensured that (a) GM would pay the UAW tax in perpetuity, (b) GM would pay a lot more for working capital, and (c) GM would not be able to get the white collar help it needs. The end result is that GM is not meeting product requirements with key products like the new Malibu.

  • DonS

    I’m with Tom @ 2 and Cincinnatus @ 3. GM must live with the deal it made or make the government an offer for its shares that make it whole.

    Someday, people will learn that “partnering” with the government is never a good idea.

  • DonS

    I’m with Tom @ 2 and Cincinnatus @ 3. GM must live with the deal it made or make the government an offer for its shares that make it whole.

    Someday, people will learn that “partnering” with the government is never a good idea.

  • Stone the Crows

    Ford is doing well, Fiat-Chrysler is on the rebound, GM on the other hand is not roaring back. The difference being Ford took government money but did not go through a forced restructuring, Chrysler was essentially given away to Fiat and was restructured by Sergio Marchionne, who unlike quite a few suits at GM does know what he’s doing. GM on the other hand had a superficial brooming of the old guard but left the sclerotic system in place that drove them to bankruptcy in the first place.

  • Stone the Crows

    Ford is doing well, Fiat-Chrysler is on the rebound, GM on the other hand is not roaring back. The difference being Ford took government money but did not go through a forced restructuring, Chrysler was essentially given away to Fiat and was restructured by Sergio Marchionne, who unlike quite a few suits at GM does know what he’s doing. GM on the other hand had a superficial brooming of the old guard but left the sclerotic system in place that drove them to bankruptcy in the first place.

  • Cincinnatus

    Stone the Crows@8:

    I don’t know if that’s entirely true. GM made some fairly radical changes in the wake of its bailout. I, for one, am sad that new Pontiacs, Saturns, and Saabs will never grace the roads of America (not to mention the folding of Oldsmobile a few years before). Hummers I can do without. But eliminating several marques entirely seems a rather dramatic step to me.

    Moreover, GM is finally producing some original and quality vehicles that can actually compete against similar cars in their respective classes.

    As you suggest, though, it was too little too late. And blowing millions (billions?) on the Volt program was a mistake directly encouraged by the Obama Administration. To be fair, though, Chrysler isn’t exactly “roaring back”: the success of its rebound is very much still to be determined. Ford’s success, meanwhile, is rooted in the fact that it actually decided to start producing quality vehicles prior to the recession, and it narrowly managed to avoid the need for government intervention by mortgaging its real properties prior to 2008–a product of luck rather than prudence.

  • Cincinnatus

    Stone the Crows@8:

    I don’t know if that’s entirely true. GM made some fairly radical changes in the wake of its bailout. I, for one, am sad that new Pontiacs, Saturns, and Saabs will never grace the roads of America (not to mention the folding of Oldsmobile a few years before). Hummers I can do without. But eliminating several marques entirely seems a rather dramatic step to me.

    Moreover, GM is finally producing some original and quality vehicles that can actually compete against similar cars in their respective classes.

    As you suggest, though, it was too little too late. And blowing millions (billions?) on the Volt program was a mistake directly encouraged by the Obama Administration. To be fair, though, Chrysler isn’t exactly “roaring back”: the success of its rebound is very much still to be determined. Ford’s success, meanwhile, is rooted in the fact that it actually decided to start producing quality vehicles prior to the recession, and it narrowly managed to avoid the need for government intervention by mortgaging its real properties prior to 2008–a product of luck rather than prudence.

  • Tom Hering

    @ 4 & 7, partnering with government is hardly bad for business in all cases, as proven by shared research programs (that have turned American companies into world leaders) and shared efforts like the space program (that have led to a multitude of profitable spin-offs). Partnering with government makes it possible for companies to take big risks they’d never take on their own, and it’s American consumers who ultimately benefit.

  • Tom Hering

    @ 4 & 7, partnering with government is hardly bad for business in all cases, as proven by shared research programs (that have turned American companies into world leaders) and shared efforts like the space program (that have led to a multitude of profitable spin-offs). Partnering with government makes it possible for companies to take big risks they’d never take on their own, and it’s American consumers who ultimately benefit.

  • Cincinnatus

    Tom,

    That post was so sappy it almost sounded like you were trolling. “Government always wins, but American consumers are the real winners. Vote Obama!”

    Anyway, what happened here wasn’t a case of GM “partnering with government” in a mutually productive exchange like, say, the DoD partnering with Lockheed Martin to develop a cool new stealth jet. What happened here was that GM came crawling on its knees to congress begging for several billions of dollars in taxpayer funds just to keep the factories open. And they got it, along with a heap of stifling regulations. And they haven’t been able to pull their act together.

    Also, Solyndra. So, basically, check and mate.

  • Cincinnatus

    Tom,

    That post was so sappy it almost sounded like you were trolling. “Government always wins, but American consumers are the real winners. Vote Obama!”

    Anyway, what happened here wasn’t a case of GM “partnering with government” in a mutually productive exchange like, say, the DoD partnering with Lockheed Martin to develop a cool new stealth jet. What happened here was that GM came crawling on its knees to congress begging for several billions of dollars in taxpayer funds just to keep the factories open. And they got it, along with a heap of stifling regulations. And they haven’t been able to pull their act together.

    Also, Solyndra. So, basically, check and mate.

  • http://www.toddstadler.com/ tODD

    Tom (@10), this statement is lacking something:

    Partnering with government makes it possible for companies to take big risks they’d never take on their own, and it’s American consumers who ultimately benefit.

    If it’s truly a risk being taken, especially a “big” one, then it’s necessarily true that American consumers are hardly guaranteed to “benefit”. It’s at least equally likely that American consumers would ultimately foot the bill for a bad idea.

    Note that I’m not actually weighing in on this particular intervention. But let’s not pretend that every time business and government team up, we all win.

  • http://www.toddstadler.com/ tODD

    Tom (@10), this statement is lacking something:

    Partnering with government makes it possible for companies to take big risks they’d never take on their own, and it’s American consumers who ultimately benefit.

    If it’s truly a risk being taken, especially a “big” one, then it’s necessarily true that American consumers are hardly guaranteed to “benefit”. It’s at least equally likely that American consumers would ultimately foot the bill for a bad idea.

    Note that I’m not actually weighing in on this particular intervention. But let’s not pretend that every time business and government team up, we all win.

  • Tom Hering

    @ 11 & 12, sheesh – read it again: “… hardly bad for business in all cases …”

  • Tom Hering

    @ 11 & 12, sheesh – read it again: “… hardly bad for business in all cases …”

  • Joe

    From the reviews I have seen the engineering and styling of the Volt is top notch. The problem is not that GM can’t build decent cars. The problem is they chose to build a car that almost no one wants to own.

  • Joe

    From the reviews I have seen the engineering and styling of the Volt is top notch. The problem is not that GM can’t build decent cars. The problem is they chose to build a car that almost no one wants to own.

  • Joe

    As for Ford, my recollection is that they did not take part in the actual “bail out” program but instead took 5.9 billion in federal loans. They were set to start paying back the loans this month and they are due by June 2022.

  • Joe

    As for Ford, my recollection is that they did not take part in the actual “bail out” program but instead took 5.9 billion in federal loans. They were set to start paying back the loans this month and they are due by June 2022.

  • DonS

    Tom @ 10: What Cincinnatus said @ 11.

  • DonS

    Tom @ 10: What Cincinnatus said @ 11.

  • http://www.biblegateway.com/versions/Contemporary-English-Version-CEV-Bible/ sg

    @14

    No one wants to own a stylish car with top notch engineering?

    Huh? Go figure.

    Okay, one day I was out driving and saw a Volt on the freeway two different times in the day. Haven’t seen another since.

  • http://www.biblegateway.com/versions/Contemporary-English-Version-CEV-Bible/ sg

    @14

    No one wants to own a stylish car with top notch engineering?

    Huh? Go figure.

    Okay, one day I was out driving and saw a Volt on the freeway two different times in the day. Haven’t seen another since.

  • Joe

    sg — no one wants to own them because people don’t want to plug in a car and because they cost way too much for the class of cars they compete with — because of all that top notch engineering.

  • Joe

    sg — no one wants to own them because people don’t want to plug in a car and because they cost way too much for the class of cars they compete with — because of all that top notch engineering.

  • SKPeterson

    Well, Tom – It has been said that GE completely abandoned doing lots of its own in-house research when it found that it was much cheaper to pay for a few Congressmen to have it done by the national labs, who bear the full cost and eat any unprofitable ventures as research expenses for science and pay a pittance for the rights to the technology. Just as an FYI if you want to get big federal dollars flowing right now the key words to use in combination are “BIG DATA” and “BIG SCIENCE.” Put them together in a slick marketing pitch and you’ll be on your way to your own little slice of Solyndra-like Heaven.

  • SKPeterson

    Well, Tom – It has been said that GE completely abandoned doing lots of its own in-house research when it found that it was much cheaper to pay for a few Congressmen to have it done by the national labs, who bear the full cost and eat any unprofitable ventures as research expenses for science and pay a pittance for the rights to the technology. Just as an FYI if you want to get big federal dollars flowing right now the key words to use in combination are “BIG DATA” and “BIG SCIENCE.” Put them together in a slick marketing pitch and you’ll be on your way to your own little slice of Solyndra-like Heaven.

  • SKPeterson

    Joe @ 18 – Don’t forget the batteries are crap, lose power over time and have to be replaced in about 4 to 5 years at a (current) cost of about $7000 and you’ve got a real money losing venture.

  • SKPeterson

    Joe @ 18 – Don’t forget the batteries are crap, lose power over time and have to be replaced in about 4 to 5 years at a (current) cost of about $7000 and you’ve got a real money losing venture.

  • http://www.toddstadler.com/ tODD

    SK (@20) said:

    Don’t forget the batteries are crap, lose power over time and have to be replaced in about 4 to 5 years at a (current) cost of about $7000 and you’ve got a real money losing venture.

    Except that I found a Motor Trend article that notes that batteries in both the Chevy Volt and the Nissan Leaf are “warrantied for 8 years and 100,000 miles”. Which makes me wonder about the accuracy of everything else in your statement there.

    I know we live in different parts of the country, but there certainly are more than a few “no ones” in Portland who own electric vehicles — heck, two of my friends do! I think they’re both Nissan Leafs, though. But then, I ride the bus, so I don’t really pay attention to what people are driving. No clue if Volts in particular are popular out here. But EVs certainly have their niche. You can even charge them for free in a few places (I think a few outlets run by the city, and my former employer — Intel — also set some up).

  • http://www.toddstadler.com/ tODD

    SK (@20) said:

    Don’t forget the batteries are crap, lose power over time and have to be replaced in about 4 to 5 years at a (current) cost of about $7000 and you’ve got a real money losing venture.

    Except that I found a Motor Trend article that notes that batteries in both the Chevy Volt and the Nissan Leaf are “warrantied for 8 years and 100,000 miles”. Which makes me wonder about the accuracy of everything else in your statement there.

    I know we live in different parts of the country, but there certainly are more than a few “no ones” in Portland who own electric vehicles — heck, two of my friends do! I think they’re both Nissan Leafs, though. But then, I ride the bus, so I don’t really pay attention to what people are driving. No clue if Volts in particular are popular out here. But EVs certainly have their niche. You can even charge them for free in a few places (I think a few outlets run by the city, and my former employer — Intel — also set some up).

  • http://www.bikebubba.blogspot.com bike bubba

    Regarding the Volt; it’s a $40,000 Chevy Cruze, more or less. Now the Cruze is a great car for $17,000, but the fact of the matter is that it’s not a $40,000 car like a BMW 3 series, Audi A6, Cadillac CTS, or Lexus ES.

    And the $1.2 billion spent on developing it could have, in a free market, been spent making the new Malibu into a world beater. Instead, it’s not even as good as the old one–and if you guessed that government regulations had something to do with it, you guessed right. Here’s the Forbes article.

    http://www.forbes.com/sites/louiswoodhill/2012/08/15/general-motors-is-headed-for-bankruptcy-again/

    Yes, GM’s got some good cars–I’m a fan of their big family cars like the Traverse and the Suburban. However, until they shed the UAW tax and get a way to get top notch white collar employees, they’re always going to be playing catch-up with VW.

  • http://www.bikebubba.blogspot.com bike bubba

    Regarding the Volt; it’s a $40,000 Chevy Cruze, more or less. Now the Cruze is a great car for $17,000, but the fact of the matter is that it’s not a $40,000 car like a BMW 3 series, Audi A6, Cadillac CTS, or Lexus ES.

    And the $1.2 billion spent on developing it could have, in a free market, been spent making the new Malibu into a world beater. Instead, it’s not even as good as the old one–and if you guessed that government regulations had something to do with it, you guessed right. Here’s the Forbes article.

    http://www.forbes.com/sites/louiswoodhill/2012/08/15/general-motors-is-headed-for-bankruptcy-again/

    Yes, GM’s got some good cars–I’m a fan of their big family cars like the Traverse and the Suburban. However, until they shed the UAW tax and get a way to get top notch white collar employees, they’re always going to be playing catch-up with VW.

  • Cincinnatus

    bike bubba:

    Since when has GM ever played catch-up with Volkswagen? VW, with its (historically) overpriced and overengineered vanity cars, lags far behind GM in sales numbers. And they aren’t renowned for their reliability either. VW’s plan of late has, in fact, been to win their game of catch-up with GM.

  • Cincinnatus

    bike bubba:

    Since when has GM ever played catch-up with Volkswagen? VW, with its (historically) overpriced and overengineered vanity cars, lags far behind GM in sales numbers. And they aren’t renowned for their reliability either. VW’s plan of late has, in fact, been to win their game of catch-up with GM.

  • Klasie Kraalogies

    Cincinnatus @ 23: I looked into various reliability indexes, being skeptical of your claim, and you are quite right.

    The UK reliability index is one – http://www.reliabilityindex.com/manufacturer . The top 12 are all Asian (Japanese & Korean), except Ford, Smart (German) and Peugeot.

  • Klasie Kraalogies

    Cincinnatus @ 23: I looked into various reliability indexes, being skeptical of your claim, and you are quite right.

    The UK reliability index is one – http://www.reliabilityindex.com/manufacturer . The top 12 are all Asian (Japanese & Korean), except Ford, Smart (German) and Peugeot.

  • Cincinnatus

    KK@24:

    I’m a bit of a nerd when it comes to cars–or is that an oxymoron? Anyway, I subscribe to Car and Driver and Consumer Reports, and I watch Top Gear if that counts for anything.

    Among folks my age in America, there’s a prejudice that Volkswagens are awesome, reliable cars. I have no idea whence this myth derives. Not only are they mechanically dubious (as all my friends who own them have discovered), my father-in-law, who is an auto-body mechanic, routinely complains that Volkswagens are way overengineered–which is no better than being under-engineered in terms of reliability and quality.

    There seems to be a mystique in America that “European” cars (even if they aren’t made in Europe) are high-quality. As your chart demonstrates, this isn’t true. It hasn’t been true for many years. They’re expensive, but not necessarily better (if reliability if your metric).

    Good Lord, even Vauxhall–a GM marque selling rebranded Chevrolets and Opels–beats VW for reliability. Hahaha. GM cars, until maybe last year, were almost uniformly terrible, so this is hilarious to me.

  • Cincinnatus

    KK@24:

    I’m a bit of a nerd when it comes to cars–or is that an oxymoron? Anyway, I subscribe to Car and Driver and Consumer Reports, and I watch Top Gear if that counts for anything.

    Among folks my age in America, there’s a prejudice that Volkswagens are awesome, reliable cars. I have no idea whence this myth derives. Not only are they mechanically dubious (as all my friends who own them have discovered), my father-in-law, who is an auto-body mechanic, routinely complains that Volkswagens are way overengineered–which is no better than being under-engineered in terms of reliability and quality.

    There seems to be a mystique in America that “European” cars (even if they aren’t made in Europe) are high-quality. As your chart demonstrates, this isn’t true. It hasn’t been true for many years. They’re expensive, but not necessarily better (if reliability if your metric).

    Good Lord, even Vauxhall–a GM marque selling rebranded Chevrolets and Opels–beats VW for reliability. Hahaha. GM cars, until maybe last year, were almost uniformly terrible, so this is hilarious to me.

  • SKPeterson

    Todd – I’m going by the auto engineers I work with on my statements about the batteries. A lot of the assumptions of battery life have to do with the “expected” driving behavior which results in the 100K mile lifecycle of 80% of the original charge. Going to use the AC? Knock off some extra battery life. Want to go more than 50 mph? Knock off a little more. Can they be a good alternative? Yes. I’ll admit it. But, the cost-benefit ratio is iffy in many instances. Hence, their impact will be limited until battery technology improves. It’s getting there, but I’m not seeing huge gains on the horizon (but maybe I’m missing something).

  • SKPeterson

    Todd – I’m going by the auto engineers I work with on my statements about the batteries. A lot of the assumptions of battery life have to do with the “expected” driving behavior which results in the 100K mile lifecycle of 80% of the original charge. Going to use the AC? Knock off some extra battery life. Want to go more than 50 mph? Knock off a little more. Can they be a good alternative? Yes. I’ll admit it. But, the cost-benefit ratio is iffy in many instances. Hence, their impact will be limited until battery technology improves. It’s getting there, but I’m not seeing huge gains on the horizon (but maybe I’m missing something).

  • SKPeterson

    I would like to chime in with the UK reliability index and say that Honda rating is spot on. I have a 1993 Honda Accord and it still runs like a charm. Gas mileage is actually comparable with most of the cars being sold today, and I’ve only had need of a few minor repairs (or did until my son slid off the road a month back and I need to get some body work done).

  • SKPeterson

    I would like to chime in with the UK reliability index and say that Honda rating is spot on. I have a 1993 Honda Accord and it still runs like a charm. Gas mileage is actually comparable with most of the cars being sold today, and I’ve only had need of a few minor repairs (or did until my son slid off the road a month back and I need to get some body work done).

  • http://www.toddstadler.com/ tODD

    SK (@26), sure. And, you know, not everyone achieves posted mileage ratings, either.

    But my point (@21) was that, given that it appears to be the case that batteries are covered by the warranty for eight years, it cannot also be true that batteries “have to be replaced in about 4 to 5 years at a (current) cost of about $7000″ (@20).

    Anyhow, I don’t think anyone is arguing that EVs can or should replace all cars. They’re not even necessarily an environmental plus, depending on where your electricity comes from. But for people who live in (note: not near) a big city, it’s quite possible the benefits pencil out.

  • http://www.toddstadler.com/ tODD

    SK (@26), sure. And, you know, not everyone achieves posted mileage ratings, either.

    But my point (@21) was that, given that it appears to be the case that batteries are covered by the warranty for eight years, it cannot also be true that batteries “have to be replaced in about 4 to 5 years at a (current) cost of about $7000″ (@20).

    Anyhow, I don’t think anyone is arguing that EVs can or should replace all cars. They’re not even necessarily an environmental plus, depending on where your electricity comes from. But for people who live in (note: not near) a big city, it’s quite possible the benefits pencil out.

  • Klasie Kraalogies

    The ultimate test for reliability is Third World conditions (or near-Arctic conditions, like here :) ). In 2001 I was in West Africa, and found the vehicles driving on the road quite fascinating. It was one of the less developed countries – Guinea. So, other than the occasional government official driving some expensive vehicle, the rest of the vehicles were generally either Toyota’s or Peugeot’s. Some of those were very old, had obviously taken a beating, but could still careen down the road, stacked twice its’ height and then some, at a quite a speed.

  • Klasie Kraalogies

    The ultimate test for reliability is Third World conditions (or near-Arctic conditions, like here :) ). In 2001 I was in West Africa, and found the vehicles driving on the road quite fascinating. It was one of the less developed countries – Guinea. So, other than the occasional government official driving some expensive vehicle, the rest of the vehicles were generally either Toyota’s or Peugeot’s. Some of those were very old, had obviously taken a beating, but could still careen down the road, stacked twice its’ height and then some, at a quite a speed.

  • Klasie Kraalogies

    Cincinnatus – the VW thing comes from thew old Beetles or VW buses, and the early Jettas, I think.

  • Klasie Kraalogies

    Cincinnatus – the VW thing comes from thew old Beetles or VW buses, and the early Jettas, I think.

  • Joanna

    I find this debate so interesting, as a former Michigan girl with tons of relatives in Detroit. Here’s a thought from someone who is running two businesses for past many years and counsels many, many businesses. at one point or another, i have seen each and every business reach a point where cash is low and they are at point where they can: close the doors, go to a bank or find a cash infusion somewhere. I have seen plenty of businesses that i believe would have survived long term go out of business, just b/c receivables were down for a couple of months or a key family business owner died, etc. I hate to see going concerns go out of business when jobs are at stake. (obviously there are business models that just are not viable and should fold; i am not talking about those folks). so, there is nothing unusual about a business needing cash infusions to survive. Now, if you borrow money from a bank, you live by their rules. If you accept a cash infusion from an investor in exchange for equity, it presumably comes with strings that affect how you run your business. Here, the auto industry was powerful enough to go to congress and get that money when banks had decided they were a bad risk. So, those executives accept the gov’t rules that come with it. Including caps on compensation. live with it, or pay off the debt if you don’t like it.

    If the gov’t took a high risk deal that banks declined, they should get a much better pay off, under the risk reward ratio. The gov’t very logically should not agree to a cheap buy out of stock. Personally, i think a managed bankruptcy would have been a bad idea; to me, that sounds like an excellent way to make sure all the smaller business auto suppliers get screwed. just my two cents!

  • Joanna

    I find this debate so interesting, as a former Michigan girl with tons of relatives in Detroit. Here’s a thought from someone who is running two businesses for past many years and counsels many, many businesses. at one point or another, i have seen each and every business reach a point where cash is low and they are at point where they can: close the doors, go to a bank or find a cash infusion somewhere. I have seen plenty of businesses that i believe would have survived long term go out of business, just b/c receivables were down for a couple of months or a key family business owner died, etc. I hate to see going concerns go out of business when jobs are at stake. (obviously there are business models that just are not viable and should fold; i am not talking about those folks). so, there is nothing unusual about a business needing cash infusions to survive. Now, if you borrow money from a bank, you live by their rules. If you accept a cash infusion from an investor in exchange for equity, it presumably comes with strings that affect how you run your business. Here, the auto industry was powerful enough to go to congress and get that money when banks had decided they were a bad risk. So, those executives accept the gov’t rules that come with it. Including caps on compensation. live with it, or pay off the debt if you don’t like it.

    If the gov’t took a high risk deal that banks declined, they should get a much better pay off, under the risk reward ratio. The gov’t very logically should not agree to a cheap buy out of stock. Personally, i think a managed bankruptcy would have been a bad idea; to me, that sounds like an excellent way to make sure all the smaller business auto suppliers get screwed. just my two cents!


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