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As GM and Chrysler idle plants and facilities, more employees are laid off the employee related liabilities of GM/Chrysler will increase by hundreds of millions. Since GM and Chrysler are insolvent, who will pay these increased costs? Can any of these costs be avoided in a Chapter 11 case of Chrysler or GM?
The Truth About Cars | Why the GM/Cerberus/Chrysler Bailout is bad for taxpayers and doomed to fail without the benefits of a Chapter 11 filing for both Chrysler and GM
Part of an analysis sent TTAC by "... a New York City bankruptcy lawyer who wishes to remain anonymous," the above editorial argues for GM and Chrysler to file for Chapter 11 bankruptcy before they and the dubious Cerberus Capital inflict further damage the U.S. economy.
The assessment is logical but, bearing Delphi in mind, why Chapter 11? These companies, kept alive by a sentiment worthy of Hallmark, are finished.
The Delphi case is raised by a commenter. It's well worth reading.
Chapter 11 calls on management to bargain with unions in good faith to reduce costs, but also permits management to petition the court to void labor contracts and substitute whatever terms it chooses. Properly stage-managed and set in motion, the restructuring process can steamroll the union, peel away retiree benefits and dump pension obligations onto the PBGC.
That's exactly what happened during Miller's 19-month tenure as chief executive of Bethlehem Steel. Some 95,000 retirees and dependents lost their health-care plan in 2003 when the bankruptcy judge sold the company's assets to International Steel Group, a company controlled by billionaire financier Wilbur L. Ross.
Mark Reutter | How Chapter 11 is demolishing Employee Expectations
Read that again. Yep ... Chapter 11 is the Fat Cat's Bailout or Exit Strategy. Employees get stiffed. And, in Detroit, with the UAW's motives being called into question, the Venture Vultures and their hitmen are circling.
Should the remains of GM and Chrysler approach the courts with a view to a merger, Chapter 11 (meaning 35,000 layoffs translating to 5 times as many jobs in the broader economy) should not be allowed on the table.
These are not companies "too big to fail." They have failed. And should file for Chapter 7. At least the many hundreds of thousands then laid off — rather than the bloated members of management — retain some claim on their retiree health care benefits and severance packages.
Mark Reutter's site lends great weight to Naomi Klein's words:
Now that the election has been won, this movement's new missions should be clear: loudly holding Obama to his campaign promises, and letting the Democrats know that there will be consequences for betrayal.
Naomi Klein | Real Change Depends on Stopping the Bailout Profiteers
So, go ahead. Force their hand.
