Now that the Republican Scrooges in Congress have denied GM and Chrysler a $14 billion Christmas present, perhaps it is time to step back and ask what lessons we can learn from this mess.
Lesson 1: When you’re running out of cash, don’t advertise the fact. Now that GM and Chrysler have said that they can only last another month or two, who is going to buy their cars? Surely those cars will be cheaper after they file Chapter 11. What about suppliers? Will they continue to extend credit? Employees? Wouldn’t any who had sufficient skills to find a job on the open market already be packing up their desks?
Lesson 2: When traveling to Washington to ask for taxpayer funds, share one Gulfstream or learn how to use Travelocity or Expedia to book an airline seat on one of the many daily non-stop flights from Detroit to Washington, D.C. It may be painful to buckle a seatbelt that hasn’t been gold-plated, but we all have to make adjustments in these tough times. (Save the bizjets for when you’re visiting a supplier or factory in an obscure town that lacks commercial airline service.)
In the history of American business, it is tough to find an example of any company that managed its own demise this badly. Most management teams keep up a cheerful patter right until the morning that the Chapter 11 filing lands in the bankruptcy court’s lap. Customers and suppliers are the last to know and employees get hints at best.
Realistically, how can taxpayers help companies that can’t even go bankrupt competently?
People see through the fallacy that there will no aftermarket service or warranty if the big 3 go Chapter 11. Nonsense; there are any number of third party servicers that would jump at the chance to offer coverage – they have been salivating for years and have lobbied to get a chance to pry the monopolistic fingers of the big 3 off of the cherry.
Innovation, alternative drive trains, partnerships with small R&D shops? They laughed. On one video of a GM engineering pitch meeting with an AC propulsion startup seeking to license to GM, the tape kept running. Overheard after the visitors had wrapped up the pitch and left the room? “What a bunch of A-holes!”
This is the kind of folks that are asking for money from us. They blew every chance.
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“Most management teams keep up a cheerful patter right until the morning that the Chapter 11 filing lands in the bankruptcy court’s lap.”
This is the big give-away here. Most normal companies in trouble want to make things look as good as possible to retain the faith of their customers, creditors, suppliers, etc. These guys want to make things look as bad as possible to precipitate political action. The big three and their attendant unions are more political entities than capitalist ones. The actual car-making business has been a sort of a loss-leader for one or more decades, with things like financing, service contracts, etc. making up the bulk of the profits. Given the decree of “too big to fail” all the incentives here are to try to get the biggest bailout possible and hope the too big thing sticks.
One prediction I’m sure we’ll see come to pass,”you know, if these companies didn’t have to pay for their workers’ and retirees’ health care, they’d be a lot closer to viable. Obama Administration: Wellll, we had been considering this anyways, you think it’ll help?”