The Amazing Instant GM Healing Trick
The United Sates government is pretending to have magical powers: A “surgical” bankruptcy will save decaying General Motors right before your very eyes! The truth is, Washington has a potential disaster on its hands.
The surgical bankruptcy illusion is intended to motivate GM’s creditors and the automobile unions.
GM is face to face with bankruptcy. It has been in that position for months, but now the government finally appears ready to take action. According to Washington, GM will apply for Chapter 11 protection by the first of June.
Then all GM’s failing subsidiaries can be peeled away and its billions of dollars in debt simply dissolved. GM can return to full health a bit further down the road – abracadabra! – and reappear to continue the glorious history of previous decades.
This scenario is one thing and one thing only - pure theatrics. Reality looks a good deal different.
As simple and quick as a “surgical bankruptcy” might be portrayed, it just doesn’t exist. Even if GM were to divide itself into a “good company” and a “bad company” and succeeded in including all the various players, the process would take months. General Motors is far too complex, and there is far too much internal opposition for one single incision to be effective. A bankruptcy proceeding would be painful and expensive. Possibly too expensive.
When the government orders GM’s top management to prepare for bankruptcy, it is forcing the unions’ and the creditors’ hands. Both have thus far refused to negotiate away any of their demands on GM. Were they to cave in over the next few weeks, bankruptcy might well be avoided.
The truth is, no one involved really wants a bankruptcy. The already tarnished GM name finally would be dragged completely down, the unions would suffer massive job losses, and hundreds of suppliers would collapse, thus endangering other automobile manufacturers, such as Ford. The creditors would, for the most part, be forced to write off most of their investments.
For President Obama, who owes his election victory in no small part to the support of the unions, a bankruptcy would represent a huge political failure. He promised too often and too loudly to save the domestic auto industry from collapse. But those affected will be unlikely to fall for the illusion of breakup and a surgical procedure: Bankruptcy is bankruptcy.
The surgical bankruptcy illusion is intended to motivate GM’s creditors and the automobile unions.
GM is face to face with bankruptcy. It has been in that position for months, but now the government finally appears ready to take action. According to Washington, GM will apply for Chapter 11 protection by the first of June.
Then all GM’s failing subsidiaries can be peeled away and its billions of dollars in debt simply dissolved. GM can return to full health a bit further down the road – abracadabra! – and reappear to continue the glorious history of previous decades.
This scenario is one thing and one thing only - pure theatrics. Reality looks a good deal different.
As simple and quick as a “surgical bankruptcy” might be portrayed, it just doesn’t exist. Even if GM were to divide itself into a “good company” and a “bad company” and succeeded in including all the various players, the process would take months. General Motors is far too complex, and there is far too much internal opposition for one single incision to be effective. A bankruptcy proceeding would be painful and expensive. Possibly too expensive.
When the government orders GM’s top management to prepare for bankruptcy, it is forcing the unions’ and the creditors’ hands. Both have thus far refused to negotiate away any of their demands on GM. Were they to cave in over the next few weeks, bankruptcy might well be avoided.
The truth is, no one involved really wants a bankruptcy. The already tarnished GM name finally would be dragged completely down, the unions would suffer massive job losses, and hundreds of suppliers would collapse, thus endangering other automobile manufacturers, such as Ford. The creditors would, for the most part, be forced to write off most of their investments.
For President Obama, who owes his election victory in no small part to the support of the unions, a bankruptcy would represent a huge political failure. He promised too often and too loudly to save the domestic auto industry from collapse. But those affected will be unlikely to fall for the illusion of breakup and a surgical procedure: Bankruptcy is bankruptcy.