Naked Capitalism Reviewer Performs Triage on GM Models and Plants

I’ve been wanting to (but not quite meaning to) do something similar to what this intrepid Naked Capitalism reader has done for a while, but was a bit intimidated by the work involved (just going down the list of GM’s models would be a chore).  And then sourcing them to their production facilities?

Thank God some people are more industrious than I.

Key quote (please read the post for details):

“Eyeballing it, it looks as we can expect GM to shut down 3/4 of their plants in the US.

That is massive hurt to suppliers, dealers, etc.

Remove the Pickups, and it is even worse.”

Yves Smith, of course, also has her own invaluable contribution to make:

“… With that as context, the proponents of Chapter 11 focus on the potential (in their view) upside, mainly gutting UAW contracts, but also dealer agreements and (in theory) cramming down bondholders. But the flip side is that once a company files, the process is irreversible. And if things do not work out as expected, there is no way to go back.”

If the automakers are not bailed out, they will declare bankruptcy and still require substantial Federal support for debtor-in-possession financing if they declare chapter 11 and continue operating, as opposed to liquidate through chapter 7.  And there is a reasonable chance that the Big Three will come out of their various filings broken up and damaged to the point that they are no longer international players.  Or perhaps a few years away from disappearing entirely.

If they are bailed out, we would be looking at perhaps $5 billion per month in costs for all three (just an estimate based on the early talk of a $14 billion bailout to get them through until March, though I repeatedly see the estimate that GM is bleeding $2b per year), totaling perhaps $60 billion per year that would go towards salaries, pensions, health insurance coverage, and building cars that some consumers still might buy.

And if, over a year’s time (or perhaps more), it becomes clear that negotiations cannot be conducted to make the US automakers more competitive and more environmentally-conscious, then bankruptcy is still an option.  The $5 billion per month would not have been pissed away: most of it would have been injected back into the US economy (and, as the NYT article quoted by Yves Smith notes, “both G.M. and the Ford Motor Company were profitable in Europe last year and in the first half of 2008″, so they might be bringing in some money to America as well).  Consider it a stimulus package.  And, should the ‘trial’ last long enough, the timing would certainly be better to absorb the loss of one (or all) of the Big Three than now.  If we’re dead-set on further stimulus packages and public works projects as the Bush administration and the incoming Obama administration claim to be, why not do so in a manner that also mitigates one potentially disastrous catastrophe or at least delays it for a time when we can better control and estimate it’s fallout?

And, for those committed to this goal, the UAW can still be humbled with the threat of a bankruptcy filing should negotiations not bring the US automakers to a competitive position with the foreign automakers.

Now is not the time to be setting off economic bombs, and there is very little reason to count our pennies (okay, hundreds of billions of pennies) if the economic stimulus chatter is already tossing around the big one-tee.

And if that doesn’t work, we’ll have a post-recession (depression?) liquidation of the automakers.  Is that so much worse than allowing GM to declare bankruptcy at the start of 2009, with Chrysler following shortly after and (I would bet) a Ford bankruptcy by the end of next year?

… and the cow goes moo