Tuesday, March 31, 2009

Call the Bluff

General Motors new CEO Fritz Henderson (the replacement for the now dispatched-at-the-behest-of-President-Obama Jeff Wagoner) now says that the company may face bankruptcy despite the multibillion dollar bailout.
General Motors’s new chief executive told CNBC that filing for Bankruptcy may be the best option for the struggling automaker.

In a taped interview to be aired tonight on NBC Nightly News, Fritz Henderson said that because of greater demands from the Obama administration to restructure, GM is considering the bankruptcy option. The auto giant previously had ruled out such a move, saying it would discourage people from buying GM cars.

Henderson’s comments came after President Obama bluntly rejected turnaround plans by GM and Chrysler and demanded that both companies make fresh concessions in order to get more federal aid.

Henderson, who was GM’s president and chief operating officer, was named the new CEO after the government forced the resignation of CEO Rick Wagoner on Sunday. GM’s board is also being restructured.

Henderson told reporters that the company would still prefer to restructure outside of court, but the level of support Washington is offering would help the company quickly restructure through bankruptcy.
The company has had months to deal with the unions and restructure contracts under the bailout and has failed to accomplish anything. During Wagoner's term, the company shed tens of thousands of jobs and still faces a massive pension and benefits cost that tacks on unsustainable costs of every vehicle.

Henderson says bankruptcy is coming? Is this a threat or a promise, because either way, it is coming. The government wasted billions delaying the inevitable, and we may see billions more wasted to save a company that could not make the tough decisions.

Let them carry through on the threat.

Bankruptcy is the one thing that will save these companies from the structural failures to date, not the wasted tens of billions that the government has thrown at them. President Bush was wrong to start with a bailout, and President Obama was wrong to continue them.

Bankruptcy forces hard choices to be made and allows the companies to get a clean start. The bailouts only delayed the inevitable.

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