GM Restructuring

Does the President of The United States of America really know what's best for the auto industry or more specifically GM?  I suspect he does not, nor does his appointed Auto Task Force, but that's not stopping him from taking control and throwing more weight around in the free market than I feel is justified.  It's a difficult political stance to take in the face of growing government and strong liberal support, but I say, let them fail.  But let's take a look at what it means to let domestic car manufacturers, like GM, go under.

The first argument always brought up is the threat of losing so many jobs at one time.  GM, not too long ago was one of the largest employers in the world and going under inevitably meant thousands of lost jobs.  However, this seems to be a misguided opinion on the face of what bankrupt means in the US.  Just because GM may file for some chapter of bankruptcy, does not mean they will stop making cars.  What bankrupt means in the US, is that they will be allowed to restructure, renegotiate, and hopefully get the company moving in the right direction again.

Most important to GM's potential restructuring plan would be the ability to renegotiate their Union contracts.  It's been proven for years that the payout to GM employees per hour is far above what competitors are paying, yet still satisfactory wages.  Pile this unnecessary expense on top of the money they spend on pensions and it spells a huge disaster in a failed auto market.

These are just a few examples of what could potentially happen with GM failing and I don't think it means closing doors and never making cars.  But what kind of impact will Barack Obama have on GM at a time when the automotive market is as unpredictable as ever.  Contrary to popular belief, not everyone is buying little hybrid cars.  So what will the Auto Task Force appointed by Barack Obama instruct GM to do?

For starters, as part of the bail out, CEO Rick Wagoner will be required to step down from his position.  The COO Frederick Henderson will be assuming the CEO's vacated position.  But since Barack Obama specifically asks for Rick's resignment, who really is the CEO of GM if everyone answers to Barack?

Tags: Auto Task Force, bailout, Barack Obama, GM

Automotive article was posted on Wednesday, April 1st, 2009 at 7:20 am and is filed under Featured, Industry. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.