Friday, December 5, 2008
Well, now what. We have been hearing from the big 3 about how important it is to provide the $34B. And we are concerned that this may not be the last. Also there is the issue between lost jobs and the whether the government should be in the business of saving companies from their own mistakes. There is some argument in the government saving the financial companies since it was the government intervention that caused the problem, but did the financial crisis cause the problem with the big 3. I don't think so since they were already in trouble. They went critical almost immediately after the credit market dried up so they had not cushion or spare cash. They need to really renegotiate the labor contracts and gain the union buy-in for total modernization of the factories to reduce the industry high cost of goods sold. If they can reduce the COGS, they become competitive. So can the government loans allow for that. I don't think the government can effectively monitor anything. I wonder if the best solution would be to file a government managed Chapter 11 bankruptcy. This would all the big 3 to renegotiate labor contracts, dealer contracts, and supplier contacts.
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