Readers Weigh In On GM Bailout - InformationWeek

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11/25/2008
03:43 PM
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Readers Weigh In On GM Bailout

I recently provided some examples of how the death of GM or another automaker could impact the IT industry. Boy, I hit a nerve. Readers e-mailed me and posted comments at the blog, and their feelings on the topic ranged from the furious to the frightened.

I recently provided some examples of how the death of GM or another automaker could impact the IT industry. Boy, I hit a nerve. Readers e-mailed me and posted comments at the blog, and their feelings on the topic ranged from the furious to the frightened.Some posters stuck to the main topic of the blog, which is the impact on the IT industry if an automaker or two were to fail.

Says Chuck: "Smaller auto manufactures that can respond to customers and our future will help IT / Technology more than large companies that can't adapt to the current business environment!"

Adds a Guest: "The IT companies dependent on the one that fails will be hurt, but the other two [automakers] remaining will be stronger and will probably have to expand their IT, so some will be winners."

Many of the posts and e-mails, however, went far beyond the main blog topic. Quite a few are ticked off by the idea of helping the automakers.

For many, it's about letting free market economics run its course.

From CFM: "Where were all of you when the mainframe was pushed aside? How many cardpunch operators, tape librarians, and Fortran programmers lost their jobs or had to adapt? The Johnson administration wanted to clamp down on automation because of all the jobs that would be lost. It's a shame when hard-working, competent people lose their jobs, but the only way to stop that is to stop progress. By definition, if the government is spending money supporting a failing industry that the market is not willing to support, it is using the money inefficiently and costing the economy jobs. It's just that those jobs aren't as visible as the ones that would be lost from the collapse of an auto giant."

And from CJ Mora: "We need to cut out the cancer (companies that cannot remain viable) and let our economic body heal. Yes, it's going to be painful, but it's the only way we can make sure that the companies which remain are a strong, contributing part of our economy, and not just parasites sucking off the host."

And from another Guest: "There absolutely must be change to produce the products we want at a world-competitive price... It may sound callous, but I actually think we should let one fail, take our lumps now, and get it over with. Easily said, I know, but by not doing this, since I don't personally believe the bailout will work, I think this will be less painful than waiting and suffering the ongoing malaise."

Others feel that to do nothing would destroy our economy. Clare Jarvis, president of Jarvis Software, would directly feel the impact of a failed automaker.

Says Jarvis: "We make approximately 90% of our revenue from automobile dealerships. Our very existence would be in doubt if one of the manufacturers ceased operation. I too have mixed feelings about a bailout, but if they go under then at a minimum my employees will be drawing unemployment. Right now I am doing my best to make life easy for the domestic auto manufacturers."

And Rudy Valenzuela: "The auto industry, as a whole, is a main street cornerstone of this country…[its] impact goes way beyond the billions of dollars spent on IT-related products and services. It affects the lives and livelihoods of millions of Americans in a multitude of markets and industries here and abroad. We're not talking about only providing aid to automakers, we're talking about putting in motion an effort to provide them time to help turn the economy around and help vendors, suppliers and consumers stay afloat, as well. ...The automakers have made mistakes and do need to be held accountable for the mistakes. But, they also need to be given the chance to do their part in the recovery of our economy."

Zimzam says the outrage against automaker CEOs is "laughably misdirected."

From Zimzam: "We behave as if we're suddenly experts at global automotive economics. We're not. Today's problem is that the financial-credit markets changed suddenly and dramatically and the automotive industry got caught flat-footed, compounded by a growing recession. You're outraged about corporate jets. This is a red herring that came out of ridiculous political theatre during the hearings a week ago. ... And as for the idea that bankruptcy is the cure to this solution, you all need to look at what historical reorganizations in various industries have resulted in -- rarely a fix, more often just liquidation, and always at the expense of some class of creditors. The comeuppance for management is typically minor compared to the losses of investors, creditors and the enduring industry involved. It's time to get real. We're all angry, but that is no excuse for foolishness."

Some support financial aid, but emphasize that automakers must change their ways:

Says Jim F: "Should we make sure we have the big 3 left, or at least the big 2 (bye-bye Chrysler) - yes! Should they not be required to decide how they have to change to live on? No, no, no. The rebirth of personal responsibility could be the saving grace of the economic collapse -- without it, another generation of fat-cat Americans could have wiped it out."

And Former GM Customer adds: "First, these crybabies aren't going to fail. They will go through the downsizing that is needed, drop some union bullies from their payrolls, and maybe wise up in the process. If the government wants to really have an impact on these idiots, they should demand, yes, demand, that all contracts be renegotiated to a level that will be competitive on the world market."

There are a number who feel Chapter 11 bankruptcy protection is the answer.

Says Rick Berg: "Let them go into Chapter 11 and learn the hard way. Yes, this can affect a huge number of people, most who do not deserve it. [Automakers] need to control their costs and look to other IT areas to cut cost like open source."

Adds Phil: "If you let the Big 3 go Chapter 11 it will force the management team and the UAW to the bankruptcy judge's table. Currently GM's shop floor cost for wages and benefits is $70.00 per hour whereas the shop floor cost for the U.S. plants of Honda and Toyota is $40.00 per hour. And of course all of the top management of the Big 3 should be paid $1.00 per year for every year they are in reorganization. If the unions and management don't like the deal... toss out the union contract and fire the management team."

There were quite a few comments about overpaid union workers. Weren't union contracts for younger autoworkers renegotiated in recent years to be far less generous than soon-to-be retiring union workers? And has anyone ever met a high-living union autoworker, young or old? Just askin.' Anyway, another Guest had this to add:

"GM's death would indeed hurt the IT industry, and the tool and die industry and many, many more. That's not a good reason to artificially prop up a bad model. The auto industry needs to get re-worked to provide products that the world consumer is looking for, and at the same time get rid of all of the drags on its profitability. Chapter 11 ... will allow these companies to reorganize and restructure the bad parts of their companies and reenter the market with a profitable model."

Some, however, say Chapter 11 would be disastrous. I found a post from Null interesting; sounds like he/she has some experience in this business.

From Null: "The problem with Chapter 11 bankruptcy is that the companies that supply services to GM and other automakers would not be able to collect on their billables without the approval of the bankruptcy court. Many suppliers to automotive industry, including the IT contractors, are on slim margins as it is and would most certainly go out of business waiting to get paid. In the past 5 years the automakers have been pressing suppliers relentlessly to lower their prices, which have dramatically reduced the margins the companies make on services and products sold to the big three. And with the credit markets as tight as they are it's not like they can go out and get a loan to tide them over. Only the biggest suppliers with deep pockets can weather this storm."

Finally, the creativity award goes to those who think that if the government is dishing out any money, it should go to We The People.

From Tony A: "By my calculation, the $700G financial bailout alone comes to $2,500 for every man, woman and child in the U.S.A., or about $10,000 for a family of four. Stick that in your economy in the form of jobs, housing subsidies, education, health care and tax relief and see what happens."

Another Guest even devised a whole process for this strategy: "How about bailing out the guy who pays the bills, has some credit card dept, college loans, car loans and home mortgage payments. Rather than just dump money to the big 3 or any other company, use it for vouchers, tax incentives, tax rebates. Allow credit card interest as a deduction on taxes. Put the money back into the economy to stimulate jobs and "trickle UP" the money. People could deposit the vouchers in a bank account, which gets cash from the government. Then use the money to purchase cars, pay the mortgage, pay health care insurance premiums, pay, and put some into the stock market. Vouchers would be paid back to the government at a 2% interest rate. And if used to employ contractors to make your home energy efficient (solar, heat pump, insulation) or purchase hybrid cars, then no pay back for the amount used."

Among the 50 or so posts and e-mails I received, I'd say readers were fairly split on whether the government should provide financial aid to the automakers, with a slight edge toward those who say no bailout.

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