Our mission at Marketplace is to raise the economic intelligence of the country. Marketplace helps you understand it all, will fact-based, approachable, and unbiased reporting. Generous support from listeners and readers is what powers our nonprofit news—and your donation today will help provide this essential service. Skip to content. Divided Decade. Mitchell Hartman Nov 13, Share Now on:. From left, G. Richard Wagoner Jr. Share Now:. Stories You Might Like How auto industry towns are faring a decade after the bailout.
The Trump administration considers ways to help the travel industry. Why American auto companies no longer want to sell actual cars. Farm country wants to get back to business. Also Included in. Having kept GMDAT afloat for years with billions in Korea Development Bank loans, Koreans now find themselves swallowing bitter layoffs and preparing for likely plant closures. But American taxpayers should be aware that years of public assistance from the Australian government and Korean Development Bank did not prevent GM from moving development and production jobs to China.
With a new United Auto Workers contract raising US wages and an expected Federal Reserve rate hike potentially raising the value of the dollar, Chinese imports will only become more cost competitive. Though GM may never become a fully Chinese company on paper, it will continue to integrate with and be eclipsed by its erstwhile Chinese protege.
Having relied on the guanxi of a Chinese partner while in a position of desperation, GM could be repaying the favor forever. And until the US market can offer the growth opportunities China does, our investment in GM may never pay off anywhere near as handsomely. By providing your email, you agree to the Quartz Privacy Policy. Skip to navigation Skip to content.
Moreover, in the absence of taxpayer-supplied cash to GM, those who support the government-led bailout suggest the likelihood of a severe cascade.
Moreover, this line of reasoning suggests that normal Chapter 11 would have provided GM with more flexibility in dealing with labor contracts, thereby avoiding an expropriation of much bondholder wealth, unrecoverable billions in taxpayer funds, and the transfer of stock ownership from individuals and their pension funds to Canadian and U.
UAW pensions, health care benefits, and other bargaining causes, as well as GM ownership. So, the essential disputation for this line of argument pivots around the wisdom of setting legal precedents for government intervention prior to formal bankruptcy, particularly in dealing with troubled firms in the private sector. In normal times, in a competitive market system, the purely economic case for bankruptcy is straightforward and compelling. Because during normal times, economic solutions and financial options based on hundreds of actual examples of companies facing bankruptcy and progressing through court claims and protections has worked quite well.
Within the past generation alone, Chapter 11 filings and workouts have improved the long-run effectiveness of many major industries: Telecommunications, energy, entertainment, education, finance, steel, aerospace, health care, and the legal industry, to name a few. There are common threads in bankruptcy filings.
Struggling firms confront both short- and long-term challenges. In the short term, transitioning from financial chaos and decay to stability and profitability typically presents a period of employment upheaval, personnel displacement, and serious emotional disorientation.
The longer-term adjustments embody equally significant — but somewhat more positive — dynamics, particularly in instances of survival and successful emergence from bankruptcy. Some companies enter Chapter 11 protection and return to market operations considerably strengthened.
Some die and are liquidated. In liquidation, any remaining land, physical assets, or intellectual property is sold or auctioned off. In nearly all cases of liquidation firms unable to emerge from bankruptcy , the common denominator is the disappearance of market demand for a particular product s.
Computers have pretty much replaced typewriters, just as cell phones now threaten land-line phone installations. But economic failure was not the threat confronting GM. Consequently, where existing managements prove flexible enough to adapt to competitive challenges or hire more qualified leadership in quick order, chances are the firm will avoid liquidation — assuming it can access financial capital, either from internally generated profits and cash flow or, temporarily, from external sources such as bank loans and capital markets.
GM estimates that repairs to the And that doesn't include any legal costs, fines or victim payouts that it will face. GM has admitted that its employees knew of an ignition switch problem in millions of its cars about a decade before it ordered a recall in February of this year. The flaw has been tied to at least 13 deaths , though government safety regulators expect that death toll will rise once the investigation is complete. Critics of the GM bailout say the deal should have been structured so that a portion of future profits would go to repay taxpayers.
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