My views on GM

So, I’ve been putting a lot of thought into what my old employer, General Motors, should do. I think that they should go through a Chapter 11 bankruptcy, and the Federal Government should guarantee the Debtor-in-Possession financing (DIP financing). I think that this is the best way for GM to go.

Why Chapter 11 bankruptcy? Chapter 11 is a bankruptcy where the debt holders, the DIP lenders and the previous debt holders, assume ownership of the company, restructure it into a going concern, and emerge from bankruptcy where their debt has been converted into equity. Chapter 11 would be better than a Chapter 7 (Liquidation of assets) bankruptcy because the wholesale sell off of GM assets would signal the end of GM. While GM isn’t the mainstay of the GDP that it once was, the 2 to 3 million jobs that depend on the Big 3 (Ford, GM, and Chrysler) area very important.

Chapter 11 would allow the new owners to do things that should have been done 5 years ago: 1) fire top management (who finds it re-the-f@#k-diculous that GM’s CEO says it is the management that got them into the problem that is best to get them out of the problem), 2) have a judge change the UAW contract so that their health benefits are inline with what the average US employee has, 3) fire half of the management employees.

Top management has to go. Rick Wagoner has been the captain that has presided over this shipwreck. He might have inherited an untenable situation; but he has no credibly anymore. Bob Lutz might be a design guru, but there hasn’t been enough cultural change to the way GM designs cars to merit him staying around. I have heard many great things, from varied sources, about the CFO, Fritz Henderson, will probably not survive the new owners.

The UAW needs to understand that they are in the same boat as the rest of us for healthcare. The Big 3 are no longer the cash cows that they once were. The Big 3 can no longer price or produce their way to more cash or profits. The gold-plated benefits the UAW receive can no longer afforded. And, AND, AND! I do not believe the arguement that they have made enough concessions as of recent. $300 a year in premiums for a no co-pay, no out-of-pocket healthcare benefits? They should have to pay the same premiums a month the rest of the workforce has to, have the same co-pays, and the same out of pocket costs. It is time the UAW got its head out of the 1970’s and joined the 2000’s.

GM has WAY too many white collar employees. The plant I worked at went from 1,600 hourly employees and 100 salaried employees at the plant’s peak; to 300 hourly employees and 120 salaried employees. Not only is the increase in salaried employees disgraceful, but the number of senior managers (8th level and above, for those GM savvy among you) went from 6 to 9. From my contacts still at GM, this bloated salaried structure still exists. There is an executive rank employee at GM whose job title is “Executive In-Charge of People Not at Work.” The new owners of GM should wield the sword quickly, and often.

Why should the taxpayer be on the hook for the DIP financing? Here’s why: banks, PE firms, hedge funds, and other lenders of DIP financing are unwilling to give GM the estimated $30 billion it would take to get GM through the bankruptcy. The credit market is too tight for most lenders to take that big of a risk, even with the benefits of DIP financing. (DIP financiers get first dibs on all monies collect if the restructuring fails and the company goes into liquidation) If the taxpayer guarantees the shortfall between the DIP obligation and the liquidation revenue; then a couple of bigger firms would probably be onboard for the DIP financing, due to the upside on exiting bankruptcy successfully.

Giving the Big 3 a bailout would allow the current management and the unions to continue a business model that simply doesn’t work anymore. Both the management and the unions seem determined to do everything in their power to accept reality and update their practices to the current business climate. If GM, Ford, and Chrysler were to continue their failed business model for 5 or 10 more years, that would make the restructuring cost that much more, and kiss the $25 billion in low cost loans, in the current bailout scheme, good by. I enjoyed my time at GM, and by God, I still only drive GM; but the time for emotional, heroic actions is past, and now it's time for GM to painfully reconcile its practices.

Later,

B

A Sad November Day

I am sad. As a big John McCain fan, his loss hurt. I doesn’t just hurt because my side lost, and their side won; but, rather, I am sad because not enough of my countrymen hold in high esteem the values and character that John McCain embodies.

But, that, my friends, is the extent of my sadness. I am lining up behind OUR president. I want him to succeed and I will do my part, as an American, to help this country, and all of my fellow countrymen, be as successful as possible.

In four years, it will be time to duke it out, again, (well, two years and three months, as long as this damn election cycle lasted) but, till then, we are all Americans; and our fortunes are tied together.