GM has not gone out of business, yet. But I don’t see any way that it is not going to happen. The rhetoric coming out of Detroit is defiant, “Bankruptcy is not an option.” Although that sounds bold and courageous it is unrealistic. Companies don’t declare bankruptcy because they want to; they do it because they are forced to.
Let’s review the facts:
GM is burning through over 2 Billion a month in cash, which would make them out of cash, insolvent, and bankrupt sometime in the middle of next year. Now GM is crying for a 25 billion dollar loan from the federal government. Let’s think about this.
GM is losing over 2.5 billion a month is cash, using my super genius math skills I multiply 2.5 by 10, and realize that a 25 BILLION dollar loan to a company will only allow it to survive another ten months, then go bankrupt, and be unable to repay the loan!
GM like every other person and business in the world when faced with decreased income tries to cut costs. One would hope that GM would be able to work with its suppliers and employees to renegotiate deals so that everyone can continue to stay in business.
Instead The United Auto Workers (UAW) states that they will make no more concessions. In other words they are willing to keep wages to their union members as high as possible even if it means destroying their employer and killing the goose that lays the golden eggs.
That article can be found here: http://biz.yahoo.com/ap/081115/auto_bailout_gettelfinger.html , it is no secret that this website has an unfavorable view of unions. This is just another example of why.
What UAW does not tell you is there is a very large and successful American car industry that is non-union. Most of the cars that would be classified as “imports” are in fact built in America, by American non-union labor. These cars are more reliable and better built by workers who get paid less than their union counterparts.
So the question I ask is why do unions still exist in the 21st century?
The idea ‘Companies declare bankruptcy because they are forced to ‘ really says it all.