How devastating would it be to America if even one of the big 3 were to go bankrupt?
Posted February 15th, 2010 in How To Go Bankrupt.
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airlines are not the same as the auto companies; specifically, GM, Ford and Chrysler actually produce automobiles, whereas airlines purchase their planes from companies that manufacture them. the difference really comes down to the supply chain… when a poorly-managed airline goes down, it doesn’t take down an equally large supply sector.
if GM falls, many many supply companies will fold as well. Ford and Chrysler depend on many of the same suppliers, but since GM is more than half of their business many would close even with Ford and Chrysler still living. then where would Ford and Chrysler get parts? if even one required part manufacturer experienced a long stoppage, it could make it impossible to complete cars for the remaining two companies.
dealerships are in the supply chain, too, and they employ more than 700,000 people.
on unions: forget whether or not you like the UAW, or if you agree with them. the reality is that if one of the Big 3 goes through Chapter 11 bankruptcy and attempts to drastically reduce worker compensation, the UAW will stage a huge walkout. this will make it impossible to emerge from bankruptcy, because the company will be unable to continue production.
what about public perception? if you had a choice between buying a car made by a company that just went bankrupt, and one that didn’t, which one would you go with? people will worry about service on the vehicles, warranties, etc. why buy from a dealer that won’t be around next month?
in conclusion, the supply chain and the Big 3 depend upon one another, and taking out a piece as big as GM threatens to take down the whole system. if GM attempts Chapter 11, it will have difficulty re-emerging because of public perception and labor issues. when Congress decided to bail out the financial sector, who jumped for joy and proclaimed that it was a great triumph because the banks deserved it? no one. bailing out the auto industry will be a bitter pill, but not nearly as bitter as the consequences of letting it be destroyed.
February 15th, 2010 at 2:15 amI say we find out. Government needs to stop bailing out private business.
February 15th, 2010 at 2:15 amMaybe they should go under. Maybe they will come up with better cars, more green, fuel efficient, and more affordable.
February 15th, 2010 at 2:15 amIt would be devastating for the entire world.
February 15th, 2010 at 2:15 amImmeasurably less now, than when they fail after going through several rounds of taxpayer bailouts… which is the inevitable result
February 15th, 2010 at 2:15 amIt would be pretty bad I imagine. I doubt most Americans understand just how many industries rely on the automotive manufacturing for their survival.
I will go so far as to say that no one would be left untouched by it.
Nor do I imagine that it would be a good thing.
The automotive industry dwarfs the airlines people.
February 15th, 2010 at 2:15 amAs long as they are able to reorganize under bankruptcy protection I don’t think it would be that devastating.
How devastating was it when airlines either reorganized or went under completely?
Consider the case of GM alone. Look at their recent history. They have been selling businesses for years trying to shore up their cash positions. They have raised billions of dollars by selling suppliers they owned and GMAC. Now they are still running out of cash.
If they are given more cash and continue to do business as usual they will still go under after wasting billions of dollars in taxpayer money.
February 15th, 2010 at 2:15 amIt would mean that a lot of people would lose their jobs…for now. But it would also mean that someone else will probably have to increase their production to meet whatever need there is for cars…so they would have a chance to find work there. However, I suspect that if one car company goes, all of the American car companies will go. It would be tough for a while, but in the long run, when the new car companies start up, I think they will do a far better job of management…including not having union involvement.
February 15th, 2010 at 2:15 amProbably less devastating than the prices they charge for vehicles that they’d build with government subsidies. Let them fall. Better run businesses will fill the niche.
February 15th, 2010 at 2:15 amAirlines go broke every so often and they just keep flying, maybe change the name. Bankruptcy laws allow you to run without fear of debt collection and it just makes it easier to operate and gives you time to find the culprit who caused it.
February 15th, 2010 at 2:15 amVery, while I dont agree with the unions for everything, we will be up a creek in this nation . I dont think people realize justhow much.
Some are hoping if you can imagine that China will take them over! Just what we need, they will be our new dicatator!
No joke, it will be terrible. I hope it does not happen,. I wonder why the oil company does not lend them the money , god only know s they have been making record profits!
February 15th, 2010 at 2:15 amCrappy car companies deserve whatever they get. Same as any other crappy business.
February 15th, 2010 at 2:15 amSeveral air lines filed for bankruptcy. The air lines are all surviving. I suspect those in industry and in government are unwilling to bust the unions. Bankruptcy would allow for canceling all union contracts. The people running the companies figure they would have to face WW III if they went back into production after completing bankruptcy.
February 15th, 2010 at 2:15 amThe airlines do it all the time and they are still in business. Some airlines have folded, but the country survived that.
And if they do file bankruptcy, it will probably be Chapter 11, not Chapter 7. If you know the difference between these two types of bankruptcies, you will know that it is not the "end of the world" that everyone is talking about.
February 15th, 2010 at 2:15 amGeneral Motors should have folded years ago. Due to bad decisions, bad policies. and a very bad pension fund plan.
Over the past 5 years they have forced employees into an opt out plan to keep from having to pay them money that they do not have.
Jun 26, 2006 … Detailed plans are in place to ensure a smooth transition in GM manufacturing plants. Employees who chose to leave the company will retire …
February 15th, 2010 at 2:15 amThey don’t need a bailout. They need to file chapter 11 and reorganize. Get rid of the Unions completely. they may not be able to pay what they use to but they will still be in business.
February 15th, 2010 at 2:15 amCapitalism is the freedom to succeed and with that comes the freedom to fail. For capitalism to work the bankrupt must be allowed to fail. They will still have material assets that have value..another entity will pick those assets up and live will go on.
A lesson gets learned and we all live to fight again.
No failure will ultimately lead to no success. Let them fail.
February 15th, 2010 at 2:15 amNot really devastating at all, a company can continue to operate in bankruptcy, airlines have proved that. What a bankruptcy would do is allow the courts to revise the debts and obligations of the companies to make them more economically viable, which is what needs to be done, the reason they failed in the first place is because they were producing an uncompetitive product and refusing to engage in the research and innovation that might have changed that. Simply giving free money to a failed company doesn’t encourage them to correct their mistakes since as long as they are getting away with it they have no reason so to do.
February 15th, 2010 at 2:15 am