GM "Packaged" Bankruptcy May Have Saved 40,000 Jobs, Untold Losses
Bay City Should Be Glad That The Local Plant is Still Open, Hope Remains
June 4, 2009
By: Dave Rogers
If General Motors had been liquidated, job losses might have been 60,000 rather than 20,000
For a man threatened with beheading, loss of an arm might seem a relief.
Likewise, if General Motors had been liquidated, job losses might have been 60,000 rather than 20,000, according to some auto industry observers.
Although the jury is still out on the Obama administration's packaged bankruptcy, the jurors are buzzing in the halls.
"Without the government financing its bankruptcy, GM would have ended up in liquidation, shedding 60,000 hourly jobs instead of 20,000" and selling assets at fire sale prices," opined The Progress Report website.
The nation's onetime leading automaker, which has received $19.4 billion in government loans and will garner total aid of $50 billion, aims to emerge from Chapter 11 by August.
The City of Bay City is somewhat like that condemned man -- happy that he is still alive but grieving the loss of his arm. In this case, the loss could be up to 90 percent of the tax base from the local GM PowerTrain plant.
Bay City's gain may be that it didn't suffer the plant closing that many communities are suffering through.
Mayor Charles Brunner was a key player in helping keep the plant open, although it's difficult to determine what factored into the corporate decision to keep it open.
Brunner was instrumental in urging the Bay Area Chamber of Commerce to form a task force that began meeting with GM officials a long time ago.
Among arguing points the local group used were the plant's great workforce attendance record, a cooperative union presence and an educational level higher than many auto facilities.
And, the mayor has made several trips to Washington, the last to meet with the national auto "czar" Ed Montgomery.
"As long as the plant is still open, we still have a chance to recoup," hoped one local business leader privately. "If GM comes back, maybe the workers, the payrolls and the tax base will return, too."
The city is in a delicate situation, having by virtue of good business practice to fight the appeal of the request for a reduction in the tax assessment while at the same time wanting to retain good relations with GM.
The New Republic's Jonathan Cohn speculated that if the GM bankruptcy had occurred earlier "the pain wouldn't have stopped there. It would have spread to GM's suppliers and, eventually, to all of the communities where these workers spend money." (Like Bay City and Saginaw, we would add.)
As President Obama said, "GM will be run by a private board of directors and management team with a track record in American manufacturing that reflects a commitment to innovation and quality. They -- and not the government -- will call the shots and make the decisions about how to turn this company around."
Of course it is a massive gamble by the administration, but if it pays off it could help reverse the trend in manufacturing losses in the U.S.
Steve Rattner, head of the Obama administration's auto task force, said that GM's shares will be sold off in a series of transactions over the next 12 to 18 months in order "to maximize the return" for taxpayers. "Obviously we could exit tomorrow if we wanted to by handing out shares at the corner of Pennsylvania and 17th or selling them for a dollar, but we have a huge amount of taxpayer money here," Rattner said. "But while we want to exit as soon as possible, we also want to exit as soon as practicable in terms of being good custodians of the taxpayers' money."
All we can do is keep our fingers crossed and hope for the best in the long run.###