Yesterday at 5pm GM and Chrysler submitted their turnaround plans required as a result of accepting a partial bailout (oh, sorry, "loans") from the government several weeks ago.
additional $21.6 billion in federal loans between them because of
worsening demand for their cars and trucks.
The two firms, in
documents submitted to the Treasury Department, also detailed plans to
cut 50,000 jobs worldwide by the end of the year. GM said it plans to close five more plants in the next few years and confirmed it will drop some of its weaker brands.
A newly-appointed auto panel will review both plans and determine by
March 31 if GM and Chrysler can be viable in the long run.
Specifically, the Treasury Department is looking for details about the
progress of negotiations with creditors and the UAW.
spokesman Robert Gibbs issued a statement late Tuesday saying that the
panel would be reviewing the plans and that "We appreciate the effort
that these companies and their stakeholders have made."
Egads. And dream on if you think that's really all it will take. Evan Newmark has another option, one we've occasionally promoted ourselves.
chance to do the right thing. Forget about throwing billions more of
taxpayer money at Motown. It’s time for you to destroy Detroit, so that the rest of America can live. Mr. President, it’s time for the bankruptcy of GM and Chrysler.
Now that may seem harsh. But you really have no choice. Look around
you. Everybody in America has his hand out — California and the movie
industry, New York and Wall Street, homebuilders and the millions of
You need to send a message to all America — and fast. No more Mr.
Nice Guy and no more money. Reinventing America doesn’t mean bailing
everyone out. It means stopping those things that just don’t work
anymore. And Detroit makes a great showpiece.
Harsh? Perhaps. And it will be expensive. But not as expensive as ongoing and increasing subsidies. However there's another player now in the picture, a guy by the name of Ron Bloom.
President Barack Obama's administration appeared to be turning up the
pressure on GM and Chrysler to carry out tough restructuring measures,
possibly through the use of the bankruptcy court. The administration stepped back over the weekend from naming a "car
czar," as it had planned, to oversee the restructuring. But according
to people familiar with the task force, it named former Lazard Freres
& Co. investment banker Ron Bloom a key adviser.
Mr. Bloom is no ordinary investment banker.
Mr. Bloom, who made a name advising U.S. steelworkers to accept
major concessions in several bankruptcy cases, is expected to take the
task force's lead role, a senior U.S. Treasury official says.
People who know Mr. Bloom expect him to be tough on the auto makers,
the United Auto Workers and other parties involved in their
restructuring. "The management of the Big Three are probably not going to like what
Ron Bloom has to say; the UAW is not going to like what Ron Bloom has
to say; and certainly the stockholders and creditors will not like what
he has to say," said Michael Psaros.
That's not all.
Mr. Bloom, a Harvard Business School graduate who spent 10 years at
investment banks before joining a team advising the steelworkers union,
is seen as one of the chief architects of a consolidation of the steel
industry that has involved about 35 bankruptcies over several decades.
He's known as a blunt communicator.
In a 2006 speech at a corporate turnaround conference in Scottsdale,
Ariz., he described his approach to restructuring as "dentist-chair
bargaining," in which the patient "grabs the dentist by the b — and
says, 'Now let's not hurt each other.'"
security and benefits in a bid to help the industry recover. In some
cases, thousands of steelworker jobs were lost when union leadership
agreed to large-scale reductions in restructured companies.
So what is he likely to do? Here's a hint:
Ross, a billionaire investor who worked closely with Mr. Bloom in
restructuring the steel industry, credits him with being tough on
companies without being destructive. He "probably saved the jobs of
100,000 steelworkers," Mr. Ross said, while also saying Mr. Bloom
"negotiated a totally different contract that simplified work rules"
and other union provisions.
Exactly. We talked about the arcane and costly work rules in a post several weeks ago.
eliminating the secret ballot, that is bound to get worse. The big
impact of unions is not pay, it's work rules. Rules that favor
seniority over real experience and knowledge, and rules that often
overwhelm common sense. These nonsensical rules are what kill
productivity and create inefficiency, making the Detroit 3
uncompetitive. Implementing real lean manufacturing in an environment
with strict and narrow functional boundaries is basically a non-starter. To put it bluntly, the UAW takes the hard earned money of the best
workers and spends it defending the very worst workers while tying up
the industry with thousands of pages of work rules that make it
impossible to be competitive.
More money is not going to solve the problems in Detroit, only prolong the pain to those companies and especially the taxpayers. And those auto companies simply cannot change while hamstrung by ridiculous work rules.
It's time for much more fundamental change. A managed bankruptcy, albeit painful, may be the only way.