CrackedWorld

The Obama administration announced today that the leading possibility for a restructuring plan for General Motors (GM) and Chrysler is Bankruptcy.  The key factor in this plan is to get the UAW

to agree to an all new labor contract. This will be a very difficult task for GM to pull off as they have been in contract talks for some time and have not met an agreement. All of this comes about on the heels of General Motors’ CEO Rick Wagoner essentially being fired by President Obama.

Bankruptcy, seeming the only feasible option to most advisers  including the President, would split both automakers into “good” and “bad” elements.

The move would in essence split both companies into their “good” and “bad” components. The government would like to see the “good” GM to be a standalone company, according to an administration official. The “good” Chrysler would be sold to Fiat SpA, assuming that deal is completed, this person said.

This Yin and Yang approach seems is the preference of The Obama Administration as The Wall Street Journal points out:

GM looks increasingly like it will be forced into filing for bankruptcy protection, sometime in mid-to-late May, in a plan where the automaker breaks into two companies, the surviving entity a “new GM” that maintains key brands such as Chevy and Cadillac and some international units, say several people familiar with the situation.

Stakes in this new GM could be given to creditors and UAW members. It is also possible the new company could be sold whole or in parts to investors.

Hopefully President Obama will have some pull with his friends at the UAW as the auto makers will need all the help they can get in negotiating a new contract. Under this Yin and Yang Plan the good GM would not have to oblige tens of billions of dollars in retiree and health care expenditures. Those obligations would be held by the other GM element made up of the less attractive parts of GM like Hummer and Saturn as well as other entities such as under performing plants. This element, the bad element would remain in bankruptcy most likely until a buyer is found for it.

Proceeds from the bad GM sale would go towards paying creditors and GM retirees.

Chrysler’s plan is largely centered around the alliance with Fiat and a new labor contract with the UAW and the reworking of debt deals with its’ creditors.

President Obama went on to say that the failure of the auto industry was due to a lack of leadership in Detroit and in Washington that has gone on for decades. In other words he blamed every one that came before him.

I also find it hypocritical that Mr. Wagoner was fired by the President while the UAW President Ron Gettlefinger was left in his position. What about the CEO of AIG? I don’t even know his name, that says something considering today’s media.

It is foolish for any one to believe for even a moment that the United Auto Workers Union isn’t as much to

The United Auto Workers Union

blame for financial failures over the past decade or two. We have all heard the stories of the Jobs bank program sapping millions from the corporation every year. The insane benefits workers and retirees receive, and their overblown wages.

President Obama also blundered when he stated “We cannot, we must not, and we will not let our auto industry simply vanish,”  and then a few moments later stated that every one was going to have to bite the bullet: The Unions, the workers, the companies and the creditors were all going to have to make sacrifices, and if they held out indefinitely their may be no more government bailouts.

He just said, “We cannot, we must not, and we will not let our auto industry simply vanish.”  No one is going to believe that the auto industry would be allowed to fail. GM and Chrysler were also given several months to devise a plan that would make them viable again or they would have to give the money back; so what happens? They were given more time after their plans fell short of expectations today.

And why is it so easy for AIG to receive $160 billion in bailout money but the auto industry has to jump through so many hoops to please Washington before they are awarded such a small fraction of the average Wall Street bailout? Maybe its a matter of campaign contributions. Lets face it, GM and Chrysler employ a lot more people than AIG does. There is a lot more to loose in the auto industry than in the financial sector job wise.

When the American people allow The President to fire executives from private sector firms and install such belligerent hypocrisy in policies toward one group over another it is a sign of a Cracked World.

Tags: Auto Industry, Economy, Politics