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Re: GM in Bankruptcy

Francis, you highlight a couple of key points. First, the degree to which the White House is now assuming direct operational control of a formerly private concern is remarkable. The Wall Street Journal supplies this tidbit:

White House officials said Sunday that Mr. Henderson will be the company’s permanent CEO and they believe he can deliver a satisfactory reorganization in a timely manner. On Tuesday, one administration official said Mr. Henderson is CEO “as long as we’re satisfied he’s executing according to the strong wake-up call we gave GM.”

As long as the White House is satisfied? Indeed, if the president can fire one CEO he can fire another (and replace the board, too). One supposes whatever views Henderson has on matters which might affect his company – from healthcare to card check — better be in line with those of his new bosses.

No matter is too small for the White House:

For example, yesterday GM announced a new “Total Confidence” program for consumers that offers a warranty, an OnStar traveler’s assistance system and a promise to pick up as much as $500 a month of car payments for buyers who lose their jobs.

“The government is aware of it, completely supports it,” Mark LaNeve, head of GM’s U.S. field marketing, said yesterday in announcing the program.

The rationale for keeping GM out of bankruptcy was two-fold: no available financing and the potential damage to consumer confidence. But the government is providing financing and is offering to guarantee warranties. So what is the excuse now?

The real motivation is to spare the UAW the fate of seeing its labor agreement shredded and rewritten. The government is now in essence running a bankruptcy minus the key component of labor contract renegotiation. By forcing bondholders, suppliers, and dealers to take a “haircut,” the government hopes to soften the blow on its Big Labor allies. Perhaps it will “work” and GM can operate profitably with labor obligations that exceed those of its competitors. I suppose there is a first for everything. But make no mistake about what is driving the decision-making here: It’s not the survival of GM; it’s the survival of the UAW.


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