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June 12, 2009

GM Bankruptcy Could Have Happened Sooner, Cheaper

In looking over the news and actions of General Motors over the past week, it has become clear that bankruptcy or something thereof, before June 1st would have saved the company and taxpayers billions of dollars. In less than 2 weeks since its Chapter 11 filing, GM has sold four of its units.





GM still needs to unload Opel, Pontiac (which may be scrapped), and maybe its foreign units (it has a UK unit, an Australian unit, and GM Daewoo).

Had the bankruptcy been allowed to occur sooner, GM could have raised billions in selling these divisions and lowered its costs at the same time. This would have led to billions in savings for the taxpayer. Instead, we paid for six months to keep operations like Pontiac, Saturn, Saab, Delphi, and Hummer running when they could have been sold off in bankruptcy.

If the same self-righteous union behavior predominates these divisions under new ownership, they will not succeed. In order to successfully turn these divisions into profit centers, costs need to be shed, which means labor must be cut. Also, the distribution channels need to become leaner.

We will see how each of these divisions performs under new management. One thing is for certain, a fragmented American auto industry will benefit this country in the long run.

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