Other than that, I don't see how Chapter 11 will help GM or Chrysler. Does anybody really think that these companies can somehow recover? How can they suddenly start making cars that American's want to buy rather than a Toyota or Honda? Even in good times GM had been loosing market share - and I don't see how they are going to get more market share back again in Chapter 11 even with reduced overhead.
We already covered this. GM is the number one car manufacture in the world. Even in the US, as we speak, it still is in second place. That's a ton of cars.
The question is not, nor has been, can they produce cars people want to buy. Clearly they are producing cars people want to buy.
The question is only, can they produce cars people want to buy, profitably. The answer right now is... no.
It's so strange that people here think that the issue is making cars people want to buy. That is not the issue. Look at the numbers. GM car are selling.
Then people act like, if only they made cars like the imports. Some of GMs cars are nearly carbon copies of imports, or imports are carbon copies of them. Compare a Malibu with a Camry. Same features, same cost, same horse power, same gas milage, same look, same size, same nearly everything. Minor differences yes, but generally the same.
Neither of these are the problem. The problem is simply this. The cost of labor is too high to sell the cars profitably. If GM doubled the amount of cars it sold, it still would be losing money because the cost of labor is too high. If GM somehow were to make their cars even more like imports, it still would be losing money because the cost of labor is too high.
The bottom line is this. GM pays $70 per hour of labor, compared to $40 some whatever that imports pay per hour of labor.
So what would filing Chapter 11 do for GM? It would allow them to force the unions to renegotiate their contract. Right now GM is contractually required to pay these higher prices for labor. To this point, UAW has refused to let them out of this contract.
By filing chapter 11, GM can either force the Unions to make new contracts, or simply close down plants, lay everyone off, and open them again later with new hires that are not unionized.
The Detroit automakers should have changed directions back in the 1990's - like consolidating into one brand and and going to the wall with the UAW. Remember how Reagan handled the airport traffic control workers? Close down everything until the UAW finally cried "Uncle".
I agree with everything but the consolidation. GM's successful history comes from having different company brands that were independent. When Chevy was crashing, Pontiac was doing well. When Cadillac was slumping, Buick was doing well. When Oldmobile was slow, Chevy was doing well.
This sparked innovation between different name plates because each was to make or break on it's own. It's sort of like having your eggs in multiple baskets. Unfortunately, since GM has taken direct control of each nameplate, we now have Buick looking Chevys, Chevy look GMCs, Pontiac looking Buicks. They need to actually undo some of their consolidation.
But those opportunities are lost and gone. Now it's Chapter 7 - and we wait until the next generation of American entrepreneurs figure out how to out-compete the foreign automakers.
Sadly, I don't think they will. The regulations, restrictions, controls, mandates and millions of miles of red tape, are nearly impossible for a startup company to be able to handle. That's why after the regulation boom of the 60s and 70s hit, most all independent car companies vanished, while the mega corporations like Ford, GM, and Chrysler survived.
It's actually an ironic twist of fate that the support for many regulations was to prevent supposedly out of control mega corporations, had the effect that only out of control mega corporations could exist. The regulations meant to restrict these massive businesses, actually gave them uncontested control of the market by hindering small businesses that have no way to get around the government controls.
I have some personal experience in this. There was (not sure if they still operate) an independent car maker in Ohio not even 10 years ago. They had a contract with the dealership I was working for service. We serviced these really neat luxury cars they built. In talking with the guy from that company, I wondered if they would become a large company and he explained that it would never happen because they only produce X number of cars a year, and that's it. If they produce more, they have to start complying with all the federal regulations that would put them out of business.
Granted that's one example and I have absolutely no proof whatsoever, and I admit it now. I looked high and low for any evidence of the car company and have found nothing. I know they exist cause I worked on them.
Anyway, the point I'm making is this. Unless regulations and controls are reduced, there is no way a young startup company will be able to survive the federal gauntlet of rules and regulations. Of course, if someone dares to propose such a thing, undoubtedly the idiots on the left will blame everything wrong in the universe on it. Just look at Top Guns post where a completely unrelated deregulation bill is blamed for sub-prime loans, which it had zero effect on.
