An Orderly …

The Bush Administration is considering a orderly bankruptcy for GM and Chrysler. By the end of this they may need an orderly to wheel them out of the room.

The auto industry is sick. The car-makers have made extravagant promises to their unions regarding pay, pensions, and health-care. Even in the best of times, those promises made it hard for the Big Three to sell cars profitably. With the economy in recession, those contracts almost guarantee that the companies will lose money.

But this is old news. GM, Ford, and Chrysler have been unprofitable for over a decade. Differing ownership hasn’t helped. New and better car-models haven’t done it. Even an economic expansion and consumer spending boom didn’t get them going. Now the tonic of choice is “reorganization.” But if the auto companies don’t want to leave the room feet-first, they need to get their costs down.

Whether it’s a judge, Congress, or the unions, someone has to help these firms stop the bleeding. Because every day lost is another day’s worth of losses. And at the end of the road is a place where no one wants to go.

Douglas R. Tengdin, CFA
Chief Investment Officer
Hit reply if you have any questions—I read them all!

Follow me on Twitter @GlobalMarketUpd

direct: 603-252-6509
reception: 603-224-1350 • •

Leave a Reply

Your email address will not be published. Required fields are marked *