Big Three Bailouts

Why the big three? The front page of USA Today on November 17th showed GM canceling its car show and cutting down on office expenses. Let's see, that's approximately two years after the economy started to slow down and it's decades after the last oil shock that would inevitably be repeated and its years after Toyota and Honda were pouring billions of dollars into R&D for more fuel efficient vehicles. In my company, from employees to owners, we started taking pay cuts two years ago to be able to get through the coming tough times. Did we have great foresight? No, as a matter of fact, we were late. How could GM with all its analytical and leadership ability claim that there was a precipitous fall in revenue. Alan Mulally, CEO of Ford, said in the November 27th Seattle Times article, "when you have your sales volume and revenue come down so much, you can't cut costs fast enough to survive." In the car industry, it has been coming for almost forty years, since the last major oil shock. They missed it because of the same reason I missed it for my company (got closer than GM did), because of greed and a hope that things would continue to go up.

Hind sight is 20-20, but what matters is where do we go from here. The big three are too big to disappear, but not too big to fail. They have already failed. Everybody who has anything invested in them should lose every penny that they have invested. Debt holders should get pennies on the dollar for their loans. Management should be sacked and the companies assets (capital and human) should be used as a foundation to rebuild great globally competitive companies. The simple question is what is the best way to execute the above. Is it through the bankruptcy process or through some other government led means. All the hype about "bankruptcy" and "too big too fail" is just political hype. The stark reality is what I've described above. I hope that our government leaders have the wherewithal to execute on it.