formula79

Lets say GM had the forsight to realize that it would be a bad idea to let the bailout mess extend past last year's election. What if they went to congress and simply said.."We are out of money and have stuctural issues we cannot fix. The paperwork ready to go for a 10/31/2008 filing of bankruptcy unless you have a better plan". Basically they would have had to play brinksmanship with the outgoing Congress....but I think right before an election it may have gotten it done.

The fact of the matter is, the government is an indirect stake holder in GM. Without GM, the government loses tax income, and sees an increase in unemployment filings. The cost of social benifits alone is far greater than any bailout. However, I believe now that Wagoner flying on on a jet, and creating the "bankruptcy is a last option" mentality made the situation not seem serious. The big mistake was taking money from the Bush administration while allowing the rules for repayment and restructuring details to be decided later than the new admistration.

I really feel history will prove that the oversight of GM to secure a fast resolution to the current crisis will go down as a critical mistake.

flowmotion

I just replied to one of your other posts. But yes, I agree that GM didn't really have a "Plan B" in place with a strategy for a quick and efficient bankruptcy. They thought that bankruptcy was going to be toxic, but this limbo state they are in right now is just as bad. (Or worse.)

Some "anti-GM" politicians were open advocating GM to go into Chapter 11 with the government providing DIP financing. However at that point GM simply wasn't prepared. They had no offer for the bondholders, no plan for the dealers, no brand strategy. That's essentially why the outgoing President split the difference by setting a deadline to give them a few more months.

guionM

Branden, you seem to have quickly forgot one little important item.

CONGRESS TURNED DOWN GM'S REQUEST FOR LOANS LAST FALL..... TWICE!!!

It wasn't till President Bush at the last second (when GM was just about to power down January 1st because they ran out of money) directed a portion of TARP funds towards GM and Chrysler that both were able to limp along untill March 31st.


There is no need to play "What If" regarding last fall..

Congress shot GM and Chrysler down.



A game of brinksmanship WAS played..... again, TWICE

General Motors Corperation was about to shut it's doors back in January.

Chrysler would have followed suit by summer.

The feds rejected both Chrysler and GM's plans a second time March 31st.

Chrysler was forced into bankruptcy.

General Motors is headed for the same with the uneviable position of being worth only 1/60 of it's debts.


Again, no need for what if's.

General Motors would be gone (congress STILL would rather not loan US automakers money!). Although Chrysler, amazingly, turned out to be better off than they originally let on, they would certainly be shutting down by now for good.

Route66Wanderer

But aren't you forgetting that a lot of folks were saying that the only real solution to GM and Chrysler's problems was a structured bankruptcy?

Could not the Congress or then President Bush had stepped in with Federally underwritten DIP financing and made such a bankruptcy possible?

And if they had done so back in October or November, it might well be that both would be getting ready to emerge from bankruptcy rather than just entering it?

As much as I believed the bailouts were the wrong answer, what I find most objectionable is that the money has been spent but only seems to have delayed what many through was inevitable all along.

Plague

Would this not have been the case in bankruptcy court? Someone would have had to fund the bankruptcy. The gov't steps in, and now we are back in the same position. That is my understanding, which could very well be wrong.

formula79

The reason congress turned them down was the lack of urgency in the matter. Congress knew if they did nothing, the Bush administration would be a temporary backstop, and then punt this issue to the next president and congress. No one wanted to touch the issue and be the one to give the bail out...but the flipside is no one wanted to be the one to let GM go into bankruptcy. GM tip toed around BK, and it diluted the sense of urgency in the matter. There is a big difference between saying "we need loans...or we may go bankrupt" and saying "Give us money by X date or we are filing...and likely will liquidate"

As for DIP financing...I think most of the creditors and stake holders would realize that a restructured GM would give them a better chance of getting their money back vs. liquidation. That being said, the threat of liquidation and everyone being out of a job was the ace in GM's hand they did not properly play.

My main jest is..had GM forced the issue last fall before the elections..they likely could have secured much more favorable terms than they are getting now.

Caps94ZODG

I just love hoe our ELECTED..officials just sit there and say go BK..just go BK..
well the first round of this wonderful idea is taking place..dealers forced to close..thsoe jobs gone..hundreds out of work..now compact that with the hundreds that relied on those dealerships to be around..those people cutting thier workforce..cutting jobs..people and funds..making a bigger impact..
hundreds of thousands of jobs gone just so that our ..again.."Elected!" officials can stand there and posture and "punt" issues aways since they are in the pockets of foreign companies..conflict of interest I think..and not in the countries best interest..

I think if this happened 20 years ago..we would not be in the "Be like Toyota" mess..