President Obama has a huge political debt to the unions and that’s why he’s avoiding the obvious solution to the auto crisis.
GM is in deep trouble mostly because the United Auto Workers have festooned the company with rigid work rules and extravagant costs.
Historically, failing American companies like GM have entered bankruptcy. In bankruptcy, they either liquidate or, if the firm is worth saving, reorganize.
Bankruptcy reorganizations are painful for stakeholders. Hard-nosed judges give workers, managers and debtors severe haircuts in order to reshape a firm into a new organism that can thrive again. But bankruptcy can work. Most everyone has flown on an airline that has emerged from a successful bankruptcy.This economic crisis is unique in history in that troubled firms have sought protection from politicians, rather than bankruptcy courts. Why? Because if you’re politically connected, you can expect a much better deal from politicians than you would ever get from a worldly and experienced bankruptcy judge.
More Here
GM is in deep trouble mostly because the United Auto Workers have festooned the company with rigid work rules and extravagant costs.
Historically, failing American companies like GM have entered bankruptcy. In bankruptcy, they either liquidate or, if the firm is worth saving, reorganize.
Bankruptcy reorganizations are painful for stakeholders. Hard-nosed judges give workers, managers and debtors severe haircuts in order to reshape a firm into a new organism that can thrive again. But bankruptcy can work. Most everyone has flown on an airline that has emerged from a successful bankruptcy.This economic crisis is unique in history in that troubled firms have sought protection from politicians, rather than bankruptcy courts. Why? Because if you’re politically connected, you can expect a much better deal from politicians than you would ever get from a worldly and experienced bankruptcy judge.
More Here
