No bailouts for GM and Ford without reorganization

[marco86]

I hate to say write your congressman but we need to stop them from throwing money away on worthless stock or junior debt. I tend to agree that we bail them out, but we need to be keep an eye on who is getting bailed out.

These are the book values of Ford and GM. They are both insolvent.

GM Net tangible assets (38.16 billion) negative
Ford Net Tangible assets (3.7 billion ) negative

If you throw billions at the auto companies in exchange for junior debt, or preferred stock, the money is gone forever. It may be time to force these companies into Chapter 11, and wipe the shareholder equity out. Next step would be to determine liquidation value of the assets and wipe out debt-holders that are unsecured and to the extent their secured debt exceeds liquidation value. Then and only then could we put money into keeping them going. It is going to be a long road ahead for the auto industry and it is not clear whether they make it or not, but we can’t just throw money at it without securing greater rights than current creditors.

Remember. We bailout companies because of the net benefit to the economy. We should not bailout shareholders and/or creditors of companies. It is time to get tougher on these bailouts, actually get better stakes in the companies, and insist on reductions in pay for at least all executives of companies receiving assistance.

Bailouts are to keep the economy moving, not to save investors.

[rubberducky]

1. How many were screaming for "re-organization" when the money was going to walll street?

We bail out wall street with NO strings attached, but when it comes to the big three (and those evil union workers), we want them completely on thier knees. I do not disagree with cleaning out a very top heavy manufacturing company, but where is the outrage at the financial institutions?? So many very real people depend on the "big three industry", but we send billions to Iraq and wall street. Have we demanded accountability from all of those dollars?? IMHO, when it comes to supporting our fellow man (who earns union wages), we suddenly demand accountability. Seems to me that some people would much rather see auto workers making third world wages. Third world wages would bring sympathy, union wages bring jealously and intense dislike. I`m ssssooo very sad at what I`m reading on this "progressive" board.

[Raschel]

3. My sentiments exactly.

[marco86]

4. I was demanding a modified bankruptcy for Wall Street

To not disrupt the credit markets further.
Why would you object to reorganization as suggested?

[sjdnb]

2. Given the 'trickle down' effect of GM going belly up

lost jobs (9.5m) and the effect on the secondary markets, etc. I tend to prefer this bailout over the one for banks and WS - PROVIDED ....

The executive compensation is renegotiated and brought back to reasonable levels;
The automakers agree to discontinue manufacturing automobiles dependent on fossil fuels (over a reasonable period of time - sooner not later) and invest a significant portion of the moneys in developing flex and new fuel automobiles to be made available at competitive prices;
The automakers agree to honoring their salary and benefit commitments to blue collar workers.

I believe this is an opportunity to beat the Europeans and Asians in this market IF the government makes these corporations implement the technology they've already 'discovered' instead of defaulting to the path of quickest profit. In the end, the US could re-emerge as a great technology/manufacturing powerhouse.

[marco86]

5. nobody is suggesting here to let them go belly up

[SammyWinstonJack]

6. !!!

:thumbsup:

[marco86]

7. agreed

that we need to force change on the industry and now is the time to do it

[Thothmes]

8. My guess is many of those creditors are the businesses

that supply the raw materials, parts and sub assemblies to the auto manufactureres. Burn them, and how do you propose to manufacture automobiles with out the raw materials, parts, and sub assemblies.