Bankruptcy May Be a Better Deal for Automakers

A serious message for the Unions is coming; the Corporate trough is going to run dry and hopefully they will pay heed before the public trough does too. One of the big 3 automakers is going down, with or without government funds, stranding many Union employees and pensioners. Bankruptcy is coming to one of the big three; the writing is on the wall so why not stop the bleeding and do it now. Ch. 11 is now an accepted form of business restructuring and allows a company to work its way out with dignity than the current embarrasment of begging that we are witnessing before Congress. 

No doubt this will be a bad situation but it is always better to have that operation sooner than later if you want to survive. Begging for a government bailout only delays the inevitable; when a company is burning $5,000,000,000 a month, they shouldn't be saved no matter how revered they are. It will be much cheaper for the taxpayer to help those workers and pensioners who are stranded by a bankruptcy filing than to fear the filing and throw good money after bad. The workers will be given unemployment and other government compensation, benefits will be turned over to the Pension Benefits Guaranty Fund and this one of the three (most-likely GM) will be forced to revamp and retool the company. 

Most importantly, the company will be able to re-negotiate debt and employment contracts and shed its pension and healthcare obligations and most of all change its dinosaur management structure. This company will then emerge leaner and meaner and on par to seriously compete with foreign carmakers who are not crippled by legacy costs and who can manuever through this economic downturn because they are already on the road to the cars of the future. In fact, Congress approved $25,000,000,000 in September to fund energy-efficient vehicle research and manufacturing. So the first car company to choose Ch. 11 and restructure will have access to plenty of development cash to get going. 

Simultaneously, the Unions will get the message loud and clear, the playing field has to be leveled; any identifiable reasons for Union members to be overly compensated and overly benefitted more than any other American worker have long since evaporated. They have managed to hang on and bleed their hosts dry but they need to adapt to survive just like everybody else. They are stronger and more organized but if their host runs out of money, everyone will lose. If they are willing to renegotiate their contracts to be more in line with the type of environment in which most of us work and contribute more to their healthcare and retirement plans in particular then their host and themselves may survive. 

All the Unions have to stand up and come into the 21st century where most of us have been toiling for a decade. There is no such thing as a free lunch. Alan Greenspan stated this fall that he was surprised at the meltdown; he didn't see it coming because he believed in the ability of markets to self-regulate; companies would always protect their shareholders by delivering real profits and accountability. Unfortunately when the greedy get going; there is a stampede. Everyone has to reign in excess including the Unions.