Instead of developing a plan to save their company, the brainiacs at GM spent their last resources on a huge ad campaign to increase support for their initial bailout. And they are already asking for more money!
If you checked your Gmail or AOL account prior to the first bailout, you might have see ads that looks like this:
In the end, their efforts only served as another reminder that this company is a sinking ship, and the first 17 billion they received only delayed the inevitable. Now they want a second bailout for twice that amount - another $39 billion!
How is GM losing so much money? Well for one thing, their workers currently make about 44 percent more than Toyota workers in the United States. The average worker wages at GM amount to $69 per hour, while American-based Toyota facilities average only $48 per hour. Toyota doesn’t allow unionized labor.
While bailout bargaining, the United Auto Workers have repeatedly said they would be willing to renegotiate their current contracts. But truth be told, all concessions the unions have made are trivial. They’ve only agreed to reduce medical benefits for retired workers by less than 10 percent, and temporarily suspend pay to laid off workers (who previously got 95% of their pay indefinitely). This policy was muscled in by the union and basically made it impossible for GM to cut their payroll. Now the company finally won’t have to pay for workers that aren’t working… Yeah, those union leaders are really bending over backwards.
Fearing that they will lose their power, the unions have also propagated a myth that filing for bankruptcy won’t help GM. In reality, chapter 11 allows companies to restructure their contracts and internal organization. GM would no longer be obligated to provide extravagant benefits to their overpaid employees, and they would not have to fulfill supplier contracts they can’t afford to meet. Just look at United Airlines - they emerged to be an even stronger company after filing for bankruptcy.
Bankruptcy would probably help GM even more than the measly $17 billion band-aid, especially since they lost $39 billion in a single quarter last year.
Still, many are worried about what could happen if GM goes completely out of business. People seem to love bad news, and so the media has been reporting that a total of 2.5 million jobs will be lost if GM disappears. These projections are greatly exaggerated, however. First of all, the derivations assume that all of The Big Three go out of business (not just GM), which is unlikely since Ford has enough cash to last a year and a half.
Additionally, several innovative American car companies have been able to rise in the wake of The Big Three Failures. Carbon Motors, for instance, will have their E7 on production lines this year. This vehicle is essentially a ready-made police car that’s loaded with features and offered at a price that beats the competition. For years, state governments have been purchasing Big Three models only to transform them into police cars and emergency vehicles. So why didn’t GM, Ford, or Chrysler come up with this idea?
