General Motors has produced its reorganization plan:
The submission of the recovery plans was required under terms of the U.S. loans the auto makers received in early January.
GM said it now plans to phase out its Hummer brand this year and Saturn in 2011 if no alternatives arise. Earlier, it said it was trying to sell Hummer and was re-evaluating the future of Saturn. The company also is scaling back Pontiac and trying to sell Saab, its Swedish brand.
GM also said it will shut five more factories on top of the closures it had already planned. In addition, it plans to eliminate thousands of dealerships and slash 47,000 jobs this year around the world, leaving it with a work force of about 200,000.
And their plan for saving the company is to announce ahead of time that cars they’re trying to sell now will soon go out of production, which means the companies won’t be making spare parts for them, which means no one who isn’t an idiot will buy one of them.
Further, if the idea is to cut costs and they’ve figured out that the Aspen, Durango, and PT Cruiser are unprofitable why not stop making them now?
Explain again why we didn’t just let the companies declare bankrupcy and do this restructuring without taxpayer money?
That’s not the half of it. As of this morning GM’s total stock valuation is $1.33 billion. The estimated value of GM’s assets is something like $30 billion. GM is literally worth more dead than alive.
If the objective is saving the jobs of GM’s workforce, here are two alternatives. GM’s 181,000 U. S. employees could buy the company. That’s something like $7,500 per employee. Or maybe some sort of debt for equity swap could be arranged. Heck, I think the U. S. government should lend GM’s employees the money to buy the company, perhaps on a need basis. Then if GM’s workforce think they can do a better job than GM’s current management they could do anything they cared to.
Or if you think that the federal government could do a better job, let the federal government buy it.
If you can come up with a coherent argument for fronting GM hundreds of billions of dollars, I’d certainly like to hear it.
I’ve wondered about this myself. Like the other big car companies, GM had an ESOP but liquidated it in the late eighties in order to take advantage of a measly one-year tax exemption. I think that was a short-sighted move that the company (and the union) is still paying for. But even now, an ESOP could help the company raise much-needed capital while protecting jobs and moving along an unavoidable reorganization.
That said, I’m sure there’s a lot of dynamics in Detroit that I’ll just never understand.
A very sound idea Dave.