GM, Speaking before Congress says that filing bankruptcy is “NOT AN OPTION”.
I can only imagine the reason why is because the type of bankruptcy they would file would be
a Chapter 11 (reorganization) and allows the government to see the books and
allows a judge make the decisions about what is cut including the CEO and board wages/benefits.
I do think there are many secrets in those books they do not want to share or have investigated.
In a earlier post, we touched on the fact that they were nearly selling as many cars as they
did before the 4 record setting years and seemed to make money then. Of course now
everyone is too scared to buy anything and that has to hurt everyone including GM.
I found an interesting fact from a non-featured article at Forbes.com that mentioned in later text
that GM, after re-tooling with original taxpayer money (25 billion) the past year, is taking the large equipment
purchase tax write-off in a 1 year write down instead of the normal 7 year depreciation.
This allows them to show no profit/big loss for the year and this increases their bargaining power with labor,
Bond Holders and the like as this makes the books look much more dyer.
It is a bit irritating that I keep hearing a quote of Line Workers at GM making $78 per hour.
Lets set the record straight on this right now as some folks are repeating in a way that gives this
a new meaning. They DO NOT MAKE $78 per hour. The number that everyone seems to be
repeating and not quote the source is a cost of the employee with medical and retirement expenses of both
the current and already retired workers included that GM did not properly fund the pensions of. So if you do as they do, compare this to a worker at a US Toyota plant, keep in mind Toyota does not have “Legacy Retirement Costs” to deal with or at least yet.
Nobody has been there long enough to collect a 20 year funded pension with benefits that would be added on the cost of a current worker. The line worker makes about the same as a Union Iron Worker, where the jobs they do are a bit more dangerous. Reality is they probably do make 15% more wages and benefits than similar industries but please keep in mind they negotiated those benefits so that means GM is also partly to blame for it.
A quote from Forbes.com
“workers at GM make $28 per hour, versus $25 at (nonunion) Toyota plants in the U.S. Benefits and payroll taxes add $33 an hour at GM ($22 at Toyota). Another $17 an hour of compensation at GM (nothing at Toyota) is for health care for current and future retirees”
So it is not a fair comparison but does reflect the need to do something with the rising cost of health care that is a big part of this number
and growing for them and the rest of us.
I don’t see anyone comparing the wages and benefits of the CEO & CFO to Toyota counterparts as the margin is much greater there.
In any case, the UAW at GM will take control of their own Benefits in 2010, taking the burden off GM, but the company is still 10 years overdue for a trim and a new vision of what they want to be in the future, much more than Chrysler did in the 70’s !
In any case this is an attempt to have a bankruptcy without a judge to force cuts on the top end.
Why can’t they just file like anyone else.
I find it most upsetting that companies who have made much foreign investment instead of domestic investment, are now asking me for a hand-out to support their overseas investing !
Chew on that one for a while….