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Some ideas on how to bail out GM

Posted Nov 17 2008, 10:09 AM by Kim Peterson
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Congress is still debating if, not when, the government should bail out General Motors. Newsweek's Robert Samuelson offers a reasonable look at how to bail out Detroit with a tough love approach.

One study estimates that 2.5 million jobs would be lost in the first year if GM declared bankruptcy. In a booming economy, a bankruptcy might be tolerable, even useful, Samuelson writes. But in this economy, a bankrupt GM wouldn't be able to get the loans it needs to move forward. And a bankruptcy will only make the nation's 6.5%-and-growing unemployment rate worse.

GM has dug itself into a very difficult hole, and now it wants a bailout. Here's what needs to happen for a bailout to succeed, according to Samuelson:

1. Cut labor costs. GM paid employees $71 an hour in wages plus fringe benefits last year, Samuelson writes. That compares with $47 for Toyota. At this rate, the bailout is going to become union welfare.

2. Carmakers need to write down the debts on their books. GM has $48 billion of debt, and it will be overburdened and remain on a path to bankruptcy if it doesn't do something about it. GM will have to shut down some of its assembly plants as well.

3. Congress needs to raise gas taxes. That will encourage people to buy fuel-efficient vehicles. Wild swings in fuel prices have crippled the industry, Samuelson writes.  Some people want to buy an SUV, but then gas spikes and they can't dump them soon enough. Raising gas taxes will spur automakers to adopt a consistent energy policy.

Related reading:

White House rebuffs criticism of its auto-aid plan

Automakers ask for bailout to keep wheels turning

A government bailout won't help GM

Should GM just file for bankruptcy?

Comments

 

No one has heard from the UAW Hierarchy--what can they offer the tax payers-They need to step up to the Plate NOW!!!They have a responsibility to their rank & file as well as to all of us who will be living with this depressed economy and it's consequences .They need to work as a TEAM . This goes for Ford as well as Chrysler. Please get rid of the JOB BANK--a terrible Union idea. Let's not put another nail in the coffin.Let's work together!

Let them go bankrupt, dump the union which has put them partly in this situation.

Reorganize as a smaller car company with fewer NON union employees and build only 2 or 3 model cars focusing on what Americans will buy, striving for fuel efficiancy of 50 mpg or better. ( it can be done).  Bailing them out will only last a few months, as we taxpayers cannot afford to buy the junk they are building now anyway, so they will be back at the money trough very quickly, and our liberal worthless political congress and senate will put this country in a full blown depression if at all possible bailing companies out,

We baby boomers would have bought more rear wheel drive Impalas, probably law enforcement would also. The Monte Carlo should be rear wheel drive and not look like a bumper car. The Colorado is a nerd truck with backwards wheel wells and a 5 cylinder engine.

$71.00 an hour outrageous--with unemployment going sky high we should continue to pay that--what makes them wort that kind of money. oh yah, they can demand that dollar or strike--who cares don't we have a glut of cars--enough is enough. we go check to check and thank god we have a job, now we are to bail them out and continue to pay them $71.00--forget it--go belly up-reopen asap --no union.

hard worker & not living on $71.00 an hour

vet of viet nam

The major unions, thru strike threats, have forced wage benefits for their  subjects that makes the product end cost more than most of us can afford. Let them work for wages the product they produce will support. It is absurd for them to ask us to "give" them part of our 14 dollar package so they can maintain and grow their 71dollar an hour or more package and for government to force it.

The government needs to let them bite the bullet and let them adjust to reality.

Look ! Disparitys between the highest paid and lowest paid is certianly a problem in America, regardless if ones affiliated corporation, profession, non-union or unioniized. Also, the trade agreements ( out sourcing Jobs) our Government created killed the middle class and the loss of millions of jobs. If we don't radicaly change thoose trade agreements we will be in bigger trouble. The service sector will not create the incomes required to  live at a fair standard of living.And that has been the area of greter job growth. The middle class needs to be revived to sustain economic growth in America, and compete abroad. The congress can, cut back there wages and perks to show America they really care about you ! Corporate CEO's can Stop the big Bonus, Salary and Stock option game now. It is out of control ! Union Salaries of 40.00 per hour can be cut to 22.50 per hour but it all has to be fair accross the board. The middle class and small businesses have taken a beating for the last 40 years and with out honest a fair leadership in Labor and Government, don't expect any change that is going to favor you !

Forget about raising gas prices to make gm make small cars, just make a written contract to do  it. A smaller car and good gas prices is even better for the 12.00 per hr. workers.Why not have  THE BIG 3 bring their cars they have overseas home and let americans do the work-----Fire the unions!!!!!!!!!

1.) Merged GM, Ford & Chrysler

2.) Drastically scale back union influence.

3.) Renegiotiate salaries/benefits to current realities.

4.) Reinstitute protective tarrifs on nations not importing/exporting on a level playing field.

5.) Cut the fat. No cash bonuses for executives. Future bonuses paid in stock when profitable.

6.) Aggressive profit sharing plan to all employees after an across the board vestment time period (both labor & management).

7.) Loan them the money to ride this out.

8.) Loan them the money to aggressively pursue a realistic alternative energy option.

9.) Pray.

As long as AMERICANS keep buying IMPORTS and GM,FORD,CHRYSLER keep building gas guzzlers NOTHING will change. Why dont they build more vehicles that burn LNG (NATURAL GAS).?- JOHN B.

They have put temselves in the hole to begin with. Everytime you think about looking at a new car the price tags changes your mind real quick. I hate to say this but there are two makers of autos that aren't asking for a dime and that would be Toyota & Honda. They know how to manage their money. Mercedes Benz cut back to a four day work week and no mention of needing money to bail them out of a situation that they would have put themselves in to begin with.

It makes me sick to thin that someone is making $71.00 per hour and when someone ask them to do something outside of their job they file a grievance. You ever visit a auto plant and you won't see anyone sweating. Pay me $25 per hour and I will perform equal to if not better that the belly achers. Come on Congress let them deal with it just like every other American company has to deal staying in business. NOTE: Jnitors at the truck plant in Louisville are making $1300-$1400 a week trying to clean restrooms. And from what I hear that can't even do that.

OH YEA BY THE WAY I HAVE BEEN UNEMPLOYED SINCE JUNE AND HAVE BEGGED FOR WORK AND NO ONE IS HELPING ME GET A JOB. I HAVE 14 YEARS IN THE JANITORIAL BUSINESS AND TO THIS DAY HAVEN'T DRAWN UNEMPLOYMENT. I JUST NEED A JOB WHICH PAYS A LOT LESS THAN $71 PER HOUR.

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