Ask YC: To save GM or not? • Hacker News Board

Re: Ask YC: To save GM or not?

#51

Post by redrobot5050 » Thu, Nov 13, 2008, 9:00 PM UTC

antiismist wrote: post #9

There is a middle ground between bailout and a liquidation - a bankruptcy reorganization. It would probably wipe out the shareholders and the debt holders, and some jobs and factories, but a lot of GM and its brands and factories would live on.

Opal, their major EU brand, is profitable. Like BMW brought us the mini-cooper, a GM bankruptcy could bring us tiny turbo diesel cars that get 50+ MPG and run forever with non-chintzy interiors.

I know I'm dreaming. This money is going to be spent selling us the hummer H4 until gas hit $8/gallon, but there are entirely profitable segments of GM that could be swallowed up wholesale. The wealth-incinerating assets should simply die.

Re: Ask YC: To save GM or not?

#52

Post by razzmataz » Thu, Nov 13, 2008, 9:01 PM UTC

1.)Slice up the company into smaller companies, based on make (Pontiac, Saturn, Saab, Hummer[!]), and let those fight on.

2.) Any government funds come with strings attached. Things like developing fuel/energy efficient vehicles(say, didn't we already pour 25 billion into the big 2.5 just this year for that?). Or gut middle and upper management.

3.) Trim the 1inch thick agreements between the unions and the big 2.5.

Re: Ask YC: To save GM or not?

#53

Post by redrobot5050 » Thu, Nov 13, 2008, 9:04 PM UTC

bcostlow wrote: post #36

Retric wrote: post #26

Earlier quoted context omitted.

When a company goes bankrupt nobody needs to be fired the next day. A judge can restructure the company and toss out specific contracts such as executive bonuses, union pay, and debts. Look at Delta Air lines as an example of this http://en.wikipedia.org/wiki/Delta_Air_Lines .

Yeah, except GM is so shaky, and credit markets so tight, there is serious concern that they could enter a 'restructuring' bankruptcy, but end up in a liquidation, because they won't be able to secure bridge and exit financing needed operate while in bankruptcy and to actually restructure their debt. http://www.bloomberg.com/apps/news?pid=newsarchive&sid=a...

All the more of an argument to let them fail.

If the "free market" does not think it is a good investment/risk ratio, why let the taxpayers take it?

Re: Ask YC: To save GM or not?

#54

Post by khafra » Thu, Nov 13, 2008, 9:07 PM UTC

biohacker42 wrote: post #41

thrill wrote: post #34

Earlier quoted context omitted.

"Let them die, but don't let them die now, because now things are bad enough as it is." Ah - so let them continue to lose $2000 per car for a couple more years, because that'll make things better - meaning what's eventually left is worth even less to whomever finally buys it (likely the taxpayer it seems).

Sure, it will make things better because in a couple more years the economy is in recovery and can absorb the shock better, It's not like the government isn't planning to extend unemployment benefits because of the economy. If GM goes bust now then more people will be on the dole for longer. The tax payer pays for it one way or another.

I'm not entirely convinced there's a net benefit. Paying GM 25B to continue to use materials and labour inefficiently, creating vehicles that won't sell, provides a reason to give their workers a salary which they'll spend in their local economy, keeping second-order collapses like those that accompany the closing of military bases in isolated areas from happening.

If, on the other hand, we shut down GM and put its former workers on extended unemployment, those with the aptitude and will relocate and find similar jobs; those without retrain and join the economy in a different role. The materials that formerly went into unwanted cars will be obtainable more cheaply for other uses.

The point is debatable, but it seems obvious to me that even if some of the GM workers remain forever unable or unwilling to rejoin the workforce, the cost of supporting them will be lower without the inefficiency of supporting a company on top of them.

I've read, but cannot source at the moment, that when federal aid to farms really took off in the 1930s, they did the math and realized welfare to individuals would be cheaper. For a variety of reasons, they implemented price controls instead, and saddled the economy with a persistent market failure in food production that's now over 70 years old.

Re: Ask YC: To save GM or not?

#55

Post by sethm » Thu, Nov 13, 2008, 9:18 PM UTC

hell no, it's a pension mascarading as a car company, let the market decide.

Re: Ask YC: To save GM or not?

#56

Post by thrill » Thu, Nov 13, 2008, 9:18 PM UTC

redrobot5050 wrote: post #53

bcostlow wrote: post #36

Earlier quoted context omitted.

Yeah, except GM is so shaky, and credit markets so tight, there is serious concern that they could enter a 'restructuring' bankruptcy, but end up in a liquidation, because they won't be able to secure bridge and exit financing needed operate while in bankruptcy and to actually restructure their debt. http://www.bloomberg.com/apps/news?pid=newsarchive&sid=a...

All the more of an argument to let them fail. If the "free market" does not think it is a good investment/risk ratio, why let the taxpayers take it?

"why let the taxpayers take it?"

It buys votes.

Re: Ask YC: To save GM or not?

#57

Post by blackguardx » Thu, Nov 13, 2008, 9:26 PM UTC

redrobot5050 wrote: post #47

blackguardx wrote: post #32

Earlier quoted context omitted.

People latch on to little tidbits and think that they are the reason for GMs downfall. For example, the statement: "GM pays people not to work." Inevitably unions will be blamed somewhere along the line as well. There is more to this story than meets the eye. GM is a factory with a semi-skilled labor force. They produce very expensive goods. Because of this, they don't produce at maximum output all the time. If sales…

The problem is UAW doesn't want to re-negotiate because it knows there's no way it will ever have its standard of living this good ever again. GM and Ford would probably insist on slashing wages by half. Already new hires who are not UAW are put on a different pay and benefit scale to reflect that a machine could do their job. GM has already volunteered 300,000 UAW employees for "early retirement" -- coaxing them to…

The UAW won't exist if the big three fold.

Re: Ask YC: To save GM or not?

#58

Post by mseebach » Thu, Nov 13, 2008, 9:33 PM UTC

vaksel wrote: post #46

mseebach wrote: post #44

Earlier quoted context omitted.

> Startup idea wouldn't really work, it costs way too much money to bring a car to market, and there aren't that many startups in the automotive space, Tesla is pretty much it. I think that I you set up a incubator with $200mln for pre-seed VC, with a priority for potentially labor-intensive and/or automotive businesses, you'd see some significant job creation. Not enough to offset GM layoff overnight, but at least t…

it costs close to 1 billion dollars to setup a factory to produce a single model. The only reason Tesla is able to do it for a 1/4th of that is because they aren't doing mass production, and their vehicles are using Lotus Elise parts. So the 200 mil will be a drop in the bucket in the auto space. And even if they did that, the job creation will do no good to the typical worker whose family worked on the same assembly…

I'm not saying they would be mass-producing cars. I'm saying, creative innovative people will think of something nice to do with 200 mln and 200.000 good pairs of hands.

Re: Ask YC: To save GM or not?

#59

Post by Retric » Thu, Nov 13, 2008, 9:38 PM UTC

bcostlow wrote: post #36

Retric wrote: post #26

Earlier quoted context omitted.

When a company goes bankrupt nobody needs to be fired the next day. A judge can restructure the company and toss out specific contracts such as executive bonuses, union pay, and debts. Look at Delta Air lines as an example of this http://en.wikipedia.org/wiki/Delta_Air_Lines .

Yeah, except GM is so shaky, and credit markets so tight, there is serious concern that they could enter a 'restructuring' bankruptcy, but end up in a liquidation, because they won't be able to secure bridge and exit financing needed operate while in bankruptcy and to actually restructure their debt. http://www.bloomberg.com/apps/news?pid=newsarchive&sid=a...

If they fixed union contracts to become reasonable and limited executive pay then I don't mind government financing as part of that solution, but giving them money when they are as broken as they are now is stupid.

Re: Ask YC: To save GM or not?

#60

Post by hapless » Thu, Nov 13, 2008, 9:49 PM UTC

antiismist wrote: post #9

There is a middle ground between bailout and a liquidation - a bankruptcy reorganization. It would probably wipe out the shareholders and the debt holders, and some jobs and factories, but a lot of GM and its brands and factories would live on.

As stated elsewhere, the great danger is that a reorganization would fail due to tight credit markets.

In a normal economic situation, a GM bankruptcy would be good news. The company could be held in trust, re-organize itself, and become profitable for (some) creditors.

Right now, credit is tight, investors are skittish, and government resources are stretched. It's not that GM is too big to fail. It's that GM is too big to fail right now.