GM Engine Overhaul

Never fear for Rick Wagoner. He’s walking away from GM with a $23 million pension. It’s the rank-and-file GM worker who is more likely to suffer.

Stupid Alert: David Brooks today argues that restructuring doesn’t work. The automakers have been “restructuring” for years, he says. He prophesies that


What should happen? Brooks says,


Let’s go back to what the Anonymous Liberal wrote yesterday:

When a company files for bankruptcy under Chapter 11 of Bankruptcy Code, it doesn’t just disappear into a puff of smoke. The goal of a Chapter 11 bankruptcy is a reorganization of the company, and that reorganization process is overseen at every step by the government. Upon filing of the Chapter 11 petition, a federal bankruptcy judge takes jurisdiction and all important decisions from that point forward must by approved by the court. The officers and executives of the company are often replaced. Sometimes a trustee is appointed to run things. All sorts of business issues get litigated during the process. Eventually, if things go according to plan, a plan of reorganization is approved by the judge and the reorganized company emerges from bankruptcy.

In other words, bankruptcy is a process by which a company relinquishes ultimate control of its destiny and its operations to the government in exchange for protection from its creditors. It gives the government a veto power over everything. What the Obama administration is doing right now is no different in principle from what a bankruptcy judge does; they’re just trying to do it outside of the formal bankruptcy process because they believe that doing so will minimize the harm to GM and the overall economy.

As I understand it, the concern is that if a big automaker actually did go into formal bankruptcy, consumers would be frightened away from buying the products. The other concern is that, at the moment, the automaker would be unlikely to get the loans needed to continue operations while the bankruptcy was in process.

Brooks insists that GM already was “restructuring” and had been for some time. I assume Brooks defines “restructuring” as “trying to wriggle out of Union contracts,” because that’s about all I saw the old GM management doing. Brooks continues,


I’m not sure if he thinks that what the Obama Administration is doing amounts to corporate welfare, or if just shoveling money at Detroit while the old management floundered is corporate welfare.

Wingnut hysteria to the contrary, I don’t think President Obama or anyone else in Washington really wants to be running a car company right now. My interpretation is that the administration is putting GM through the steps of a bankruptcy while reducing the risk that GM will fail completely.