Obama’s new GM CEO: You know, bankruptcy looks really good now

posted at 12:55 pm on March 31, 2009 by Ed Morrissey

The man now running General Motors after Barack Obama demanded the resignation of former CEO Rick Wagoner wants to thank America for all the cash.  Really, he does.  Fritz Henderson just doesn’t think it will help, and wants to declare bankruptcy — as conservatives suggested before we spent $14 billion to prop them up:

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 says GM  needs to work faster and go deeper to get more concessions from bondholders and the United Auto Workers union. President Obama has demanded that GM come up with a better restructuring plan in 60 days in order to qualify for more government aid.

Gee, who could have predicted that?  Well, actually, me. As I wrote in November when the automakers demanded and received the bailout, government subsidies would not address the fundamental problems that keep GM from being competitive in the marketplace:

The problem the Big Three face has nothing to do with an inability to get loans, but with a fundamentally flawed business model that ensures that they cannot compete.  They spend too much to produce cars that cost more without any extra added value to the consumer.  Buyers select cars with better value and lower price instead.

Until GM, Ford, and Chrysler fix that problem, they won’t succeed regardless of how much they can borrow from Washington.  Until unions realize that they have created an untenable position, they will put the jobs of their members at continued risk.  Either they will have to become niche manufacturers, producing only high-quality, expensive cars that outperform the less-expensive competition, or they have to figure out a way to lower unit cost while improving quality on lower-cost products.

And the solution I suggested before giving GM $14 billion?

Management needs to change, and the unions need to adapt.  Taxpayers should not subsidize failure out of some notion that private enterprises cannot be allowed to fail.  A good Chapter 11 reorganization is what Detroit needs, and a bailout will only delay the inevitable — and toss taxpayer money down the drain in the meantime.

I hate to say “I told you so,” but … well, actually I don’t.

Now that Wagoner has gotten kicked out, ostensibly to protect the taxpayer investment, Henderson wants to declare bankruptcy and leave taxpayers in the lurch.  Unfortunately, he’s right.  Had we taken a tough-love approach to the problem in November, we could have saved ourselves $14 billion and GM could have already been on its way to fixing their problems in labor and in management.

Jazz Shaw slams bailout backers in both parties who sold taxpayers $14 billion in junk bonds:

Nay nay, we were told! Not only is GM too big to fail, but they are an American icon, right up there with the Statue of Liberty and the original Betsy Ross edition of the Stars and Stripes. All they need is a bit more time and some of our money to reorganize and begin producing lean, green cars that people actually want. …

Now I only have one question for the table here. What happens to the money we already gave them? Do the taxpayers get paid back as part of the bankruptcy reorganization, or does this turn into another lump of debt piled on with the rest, left to us to pay off? “Oh well, you put your money in a bad investment and now it’s gone, just like your 401K.”

And, not to be one of those “we told you so” people, but… couldn’t we have done this last year?

When people say that patriotism is the last refuge of the scoundrel, Jazz describes exactly what they mean.


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