Some big events this week when both Chrysler and GM were denied any long term bailout money unless they come up with better restructuring plans. The US and Canadian governments have not given up on them however since both companies were given short term cash to continue operations. I thought it was pretty interesting that the governments didn’t just rubberstamp the recent deals that GM and Chrysler came up with to improve their operations.
I agree with Obama that the threat of bankruptcy is necessary to get a proper restructuring deal. The problem with the government just giving these companies more money is that when any tough negotiations have to take place, such as between the CAW and GM – the government ends up being the third party in the negotiations and the union and car company are more inclined to bargain just hard enough to get the bailout money. This was evidenced by the recent sweetheart deal reached with GM and the CAW.
Bankruptcy will be a tough road but when an industry is so far over capacity and has different parties (companies, unions, pensions) then it might be the best way to get the fairest deal for everyone. It’s kind of like locking 12 people in a room for a day and a half and demanding that they come up with an agreement on something. That happened to me several years ago on jury duty and I can tell you that although nobody was happy with the final outcome – an agreement was reached. Ok, it wasn’t really a day and a half – we were allowed out for dinner at a very expensive restaurant (courtesy of the taxpayer) and for sleeping overnight at a hotel.
Homer: Well, Marge, it was horrible. Everyone was against me in that
jury room. But I stood by the courage of my convictions and I
prevailed. And that’s why we had chinese food for lunch.
Should Wagoner have been fired?
I originally thought that the Wagoner – the head of GM was rightfully fired as CEO because the company had gone pretty far downhill under his lead. However, after a brief discussion with Jim from Bargaineering.com on Twitter – I realized that maybe replacing him wouldn’t be that easy since he does know the company. I also read that under his leadership the company went from 177,000 employees to 92,000 today which is an impressive feat. Now, I think that he should have been kept on – it appears to me that he had the company on the right track but given the conditions of the last couple of years (high gas prices, recession) the goalposts kept moving on him which made it impossible to get the company to the right size quick enough to prevent it’s current situation. Don’t forget that the pressures to downsize that exist today were not present in their current form before a couple of years ago. Given that GM needs fixing asap – I’m not sure that he wasn’t the best person.
What’s up with Lewenza?
I wrote about Ken Lewenza – head of the CAW a while ago after he got a pretty sweet deal with GM. This guy does a lot of negotiation through the media and I’m really starting to think that he sounds a bit like the Iraqi Information Minister who reached some fame during the Iraqi invasion. It doesn’t seem to matter how bad things get for the car companies he still says things like
The message from the Saturday meetings was “almost unanimous that the pattern agreement struck at General Motors must be the objective of the union,” Mr. Lewenza said in a phone interview Saturday.
when talking about ongoing negotiations with Chrysler.
After the government said that GM must come up with a better deal with the union, Lewenza said the union will not reopen talks with GM. Ok, Ken – good luck with that.