The news of G.M. filing for bankruptcy this morning wasn't a huge shock to anyone, but I was floored by the decision that came out of the bankruptcy. We the people, now have a 60% share in the company, which means that for the first time in history our government can now add "business owner" to its list of responsibilities. Setting aside the obvious concerns I have regarding the growth of government and its power, I want to focus in on what "we" just got ourselves into.
G.M. reported in its bankruptcy filing that it had assets totalling $82.3 billion and more than twice that in debt ($172.8 billion to be exact). So how exactly did the U.S. government acquire G.M.? By the Treasury-sponsored sale of G.M.'s assets to a "New G.M."
So how much financial obligation did our Treasury commit into the hands of the tax-payers today? Another $30 billion. Add that to the $20 billion unsuccessful bail-out handed to them recently. So we will invest $50 billion into a company that's $172.8 billion in debt. And we're supposed to produce a leaner, new G.M. which pops out hybrids on U.S. soil?
Dear blog readers, I just don't know how this makes economic sense.
I despise that working-class, blue collar Americans will lose jobs over this (21,000 projected), and plants will shut down. I don't want to be insensitive to that. And President Obama said we really had no choice due to the economic burden of unemploying all of G.M.'s workers, but what about old-fashioned market consequences?
If a market can't support a company at it's current weight, due to lack of demand, then the company needs to lose a few inches. If it doesn't successfully lose the weight quickly, then it's a behemoth, eating up the little food (food in this case is assets) that's left. Eventually starvation is imminent and the only hope for the company is to shut-down. If the demand comes back, smaller, more efficiently run companies will start to pop-up all over the place, and many of those same people can find their way back to employment (I acknowledge that this does not take into account the workers who are not as nimble, i.e. the yard worker who's been doing his job for 35-40 years and has a solidly established skill-set that supports the only job he's ever had. I'm still thinking through how to tackle that dillema). But until then, we have to adjust!
While we are getting behemothic (don't know if that's a word, but I mean "big beyond big") other countries are nimbly meeting the needs of this globalized tech-society.
No, I don't think a good decision was made. I think an easy decision was made for today without taking into account tomorrow.
Here's the thing, I'm so frustrated right now I could call my Papa San to talk about the death of the free market as we know it, but ultimately that does no one any good. So what can I do, especially for these 21,000 people who will lose their jobs? Well, geographically, not a lot. But I will be praying for them. And I will be keeping my eyes peeled to see if social programs (not talking about gov't-funded social programs) step up to the plate. Let's start looking at how we can retrain workers to do other vocations. How can we make sure their kids know about 21st century jobs? How do we work to ensure they can stay in the house they built 30 years ago with their high school sweetheart?
This G.M. news is a wake-up call. We're investing in something so risky it is almost doomed to fail, so let's start looking at the social implications of a "no G.M.". I say we start looking at how we can be better neighbors. Now's when the Second Commandment really can kick-in.
I want to know your thoughts on this.
kiki san
A Cavalier King Charles Spaniel (puppy)
A plane ticket to another country
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