General Motors (NYSE:GM): Let the fat lady sing
Today's Financial News - Posted November 17, 2008
Reckoning day is here for Detroit. Should Washington vote to save General Motors (NYSE:GM) or should it let the company fight for its life in bankruptcy court? No matter what, America has more pain ahead.
By Andrew Snyder, TodaysFinancialNews.com
Baltimore – (TFN): General Motors (NYSE:GM) has become so fat trying to save it would be the equivalent of cutting apart a mobile home to free the monstrously obese women clinging to a bucket of fried chicken inside.
Yes, the federal government can extend a huge bailout to Detroit and the companies that have been sucking at its overweight teats, but sometimes cutting the fat lady out of a trailer does much more harm than good.
Unless you change her eating habits and her over-consuming lifestyle, the weight will not disappear on its own. Who is to say she will not have a heart attack on the way to the hospital or bribe the ambulance driver to stop at McDonalds (NYSE:MCD) for a six-pack of burgers and a chocolate shake?
Corporate liposuction
Just like most of the nation, I too view GM as one of America’s great corporations. The company epitomizes every thing that made this country great, at least over the past few decades. Right now, on the other hand, it represents some of the nation’s greatest problems.
GM, just like its union-fed employees, wants something for nothing. The American taxpayer did not get the automaker into this trouble. Its management and its union concessions did.
You and I are not the ones that promised to pay defined retiree benefits for hundreds of thousands of past workers. We are not the ones that promised to pay wages to a “bank” of workers we no longer need. And we are not the ones that produce inferior products few consumers demand or are proud to own.
We all know, if you or I ran our businesses the way GM is run, we would have been on our butts a long time ago. And most certainly, there would be no congressman pulling strings to hand us huge sums of money to fix our senseless mistakes.
In America, we have two choices that must be made today. We can take the easy route and write a check to Detroit and its supply chain, essentially putting off the auto industry’s problem until the next recession.
Or we can make the hard choice and let GM fight for its life in bankruptcy court, just as the free market is dictating. Yes, this would propel America into a deeper recession and unemployment would almost certainly reach double-digit proportions. But most importantly, it would ensure that 10% unemployment, like Europe has become used to, does not become the accepted norm in America.
Temporary pain, permanent improvement
If we cut GM loose, we will endure a lot of temporary pain, but the nation’s future will be much brighter. The wounds will heal. The job market will rebound. And a new, much more profitable industry will emerge from the ashes.
We already have a huge segment of the nation’s population trapped in the gutter thanks to overly ambitious social welfare. Now America is about to make an even larger mistake and embark on what will essentially be permanent corporate welfare.
It is a mistake that will haunt this country and its growth potential for generations. If Bush signs any legislation into law, the corporate nation will never look the same.
Life support is for bodies that have a chance at healing and getting stronger, not for fat ladies that will continue to eat themselves to death.
It is time to pull the plug on GM and see what happens.
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One Response to “General Motors (NYSE:GM): Let the fat lady sing”
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November 19th, 2008 at 12:21 pm
Andrew Snyder,
You have no clue on as to how long and severe a Big 3 collapse would be. The country will be forever weaker to international influence.
Tax payers will foot a much higher bill if they go under, and they'll continue to foot the bill for the pensions until they die. We can't lose industrial companies, trying to survive as a service based economy will fail, as we need to control products that people use and especially those products that consumer precious resources.
In case you haven't seen the latest reports on the DOW – predictions based upon chart trends point to a near term sharp decline to 6400 – 6700 points. That doesn't include the collapse of the big 3, and the 3 million jobs that will be lost in the United States alone. Which brings up another important point: Opel, Vauxhaul, Holden are owned by GM… considering how much foreign economies are hurting image how many more jobs will be lost around the world, should they collapse.