Michael Moore: "You didn't save that!"

[erfalf]

The problem was that there could have been no "normal" bankruptcy, as nobody was willing to put up the necessary DIP and exit financing. You have to remember that the proximate cause of the bankruptcies was the failure of the commercial paper market and consequent almost total credit freeze. GM and Chrysler were certainly on the road to BK years before the crisis hit, but the crisis is what pushed them into bankruptcy at that particular moment.

Fair enough. To be honest the events are something that I have not had the desire to really delve into. However, it seems hard to argue that the "bailout" seems to have favored the administrations supporters far more than a standard bankruptcy would have. Quid pro quo?

[azbadpuppy]

First of all, when the Dems claim that "Obama saved Detroit", they are referring to the US auto industry, not literally the city of Detriot. Kind of like when people refer to the entertainment industry as "Hollywood".

Although Moore's statement may be proven wrong anyway as Detroit's housing market is rebounding rapidly- prices have risen the most of any major market and their unemployment has dropped 2.4 percent in one year. They've still got a very long way to go, but Detroit's economy is moving in the right direction for the first time in years.

http://www.forbes.com/sites/realtorcom/2012/06/14/detroit-real-estate-comeback-kid/

Also, Moore predicted a win for Kerry in 2004, so what the hell does he know?

[nathanm]

However, it seems hard to argue that the "bailout" seems to have favored the administrations supporters far more than a standard bankruptcy would have. Quid pro quo?

Other than that the standard bankruptcy couldn't have happened, not really, as best I can tell. The unions saw pay cuts and pension freezes, so it's not like they came through unscathed. Equity holders were wiped out, and creditors were no less screwed than they would have been in a normal bankruptcy. I suppose it's possible that a private lender would have insisted on even less favorable terms for other stakeholders, but I haven't seen any evidence of that. (not that I've been looking recently)

[erfalf]

Other than that the standard bankruptcy couldn't have happened, not really, as best I can tell. The unions saw pay cuts and pension freezes, so it's not like they came through unscathed. Equity holders were wiped out, and creditors were no less screwed than they would have been in a normal bankruptcy. I suppose it's possible that a private lender would have insisted on even less favorable terms for other stakeholders, but I haven't seen any evidence of that. (not that I've been looking recently)

Um, I believe the employees & the government ended up with a bigger chunk of the companies than did the bond holder, who would have had first dibs in this whole deal. Remember, the company was going bankrupt, it should hurt most everyone involved, no matter how much they may have not deserved it. It is what it is. But you can't seriously say that this didn't favor the union workers of these companies with a straight face.

[nathanm]

That's how bankruptcy usually works. Equity gets wiped out completely, bondholders usually take a big haircut if they get anything at all, as do former suppliers who won't be suppliers going forward. Employees got a share because they agreed to take ultimate responsibility for insurance and other benefits, as in taking on future obligations that would otherwise have been the company's. The company supplies a lump sum and the employees have the hard task of making the numbers add up. Given how much folks were complaining about GM's legacy costs, it seems like a good deal to me.

Former bondholders did get 10% in the new GM, FWIW.

[erfalf]

http://www.nationalreview.com/articles/316379/democrats-gm-fiction-editors

Where is this article off base? I think in general, the lay person thinks that bankruptcy means a company goes out of business. And that government intervention alone kept GM and Chrysler from completely shutting down. Obviously that isn't the case (pretty much every airline has gone through it at some point or another). That's not to say they both definitely would not have shut down had another option been taken, but it doesn't mean they would have either.

I know it is sometimes pointless to argue about what has already happened and the hypotheticals that could never be measured. But it is also important to reflect on decisions made so that when the time comes, that knowledge can be applied.

[Gaspar]

http://www.nationalreview.com/articles/316379/democrats-gm-fiction-editors

Where is this article off base? I think in general, the lay person thinks that bankruptcy means a company goes out of business. And that government intervention alone kept GM and Chrysler from completely shutting down. Obviously that isn't the case (pretty much every airline has gone through it at some point or another). That's not to say they both definitely would not have shut down had another option been taken, but it doesn't mean they would have either.

I know it is sometimes pointless to argue about what has already happened and the hypotheticals that could never be measured. But it is also important to reflect on decisions made so that when the time comes, that knowledge can be applied.

You are arguing with the wrong people.  All of the lessons, medicare, social security, the post office, GM, Solyndra, and many more loom in front of them, but they still feel that government is always the answer and government can rescue businesses.  When they fail, and they always do, they attempt to fictionalize success, and shed blame.  When GM ends up back in the shi++er, it and the tax payer's investment is gone, it will be your fault, or management's fault, or Europe, or China.  They will never consider the fact that government is not nimble enough to manage business.  Government does not anticipate or react to market forces with any degree of speed or efficiency. Government is force, and by it's very nature slow and clumsy.  Government's only advantage is that it is big.  It's a bully with little restraint, fueled with everyone else's lunch money.

Reminds me of Dr. Barbara Bellar's comments on Obamacare:

Let me get this straight. We're to be gifted with a healthcare plan that we're forced to purchase and fined if we don't, which purportedly covers at least 10 million more people without adding a single doctor but provides for 16,000 new IRS agents, written by a committee whose chairman says he doesn't understand it, passed by a Congress that didn't read it but exempted themselves from it, and signed by a President who smokes, with funding administered by a Treasury chief who didn't pay his taxes, for which we will be taxed for four years before any benefits take effect, by a government that has already bankrupted Social Security and Medicare, all to be overseen by a Surgeon General who is obese and finally, financed by a country that's broke. -Dr. Barbara Bellar

[carltonplace]

The government is not running GM. In fact GM is barely running GM.

[Gaspar]

The government is not running GM. In fact GM is barely running GM.

GM is the product of what happens when Government plays favorites.  Posponed failure.  Had they been allowed to go into a structured bankruptcy they may well be on their way to health now without the taxpayer liability.  There is no leadership left at GM.  They have been used as a poster-child, sitting in the dirt with flies around their eyes.  Feed the unions.

When you buy someone a Chevy, they just don't appreciate it as much as if they had purchased it for themselves.   

http://www.reuters.com/article/2012/09/10/us-generalmotors-autos-volt-idUSBRE88904J20120910

[nathanm]

Where is this article off base?

The article is off base because GM and Chrysler had been looking for someone to provide BK financing and could not find it. If you run out of money, you shut down. The article also argues that the government is somehow running GM, when that is not the case. Treasury still owns part of it, but they're a silent investor. There's a reason Ford, who saw nothing from it other than continued competition, was in favor of the government financed bankruptcies.

Gaspar, what part of frozen credit market do you not understand?

[erfalf]

The article is off base because GM and Chrysler had been looking for someone to provide BK financing and could not find it. If you run out of money, you shut down. The article also argues that the government is somehow running GM, when that is not the case. Treasury still owns part of it, but they're a silent investor. There's a reason Ford, who saw nothing from it other than continued competition, was in favor of the government financed bankruptcies.

Gaspar, what part of frozen credit market do you not understand?

First, I don't think anyone is saying that it necessarily shouldn't have been done. Just that it was done in a very shady way.

If GM was so out of money, how did they pay back their loan to the government so fast? Why did the UAW get such a sweetheart deal (in comparison to what they would have gotten otherwise that is)? Why did they get to carry forward their losses on their taxes? While the alternative may have hurt Ford, the current model may hurt them as well, just somewhat less maybe. I understand the credit wasn't there, and I wouldn't have had a problem with the government stepping in and taking the place of BK financing, however, that's not what happened. GM appears to have gotten far more than a hand up. You know, that helping out the rich that most of you can't stand when it has anything to do with every other company. In the end it doesn't seem to be making a difference as GM may end up right where it started. Bankrupt. They just aren't making autos that people want as well as their competitors.

http://www.forbes.com/sites/louiswoodhill/2012/08/15/general-motors-is-headed-for-bankruptcy-again/