What was the problem the Obama administration had with the General Motors plan to restructure the company? What was the plan GM CEO brought to the government that resulted in his ouster from the company?
Jim and I were discussing this last night, and the Sound Off Sister deserves the credit for getting us thinking. This post may be appended with comments from Jim and the Sound Off Sister, so stay tuned.
Last night, we questioned why General Motors CEO Rick Wagoner was kicked out. The assumption is that the plan was not good enough for the Obama administration. He failed at his task so he was tossed under the bus.
What if Wagoner wanted to go the straight Chapter 11 route? This would allow the car not-so-giant to restructure while keeping operations rolling, stay protected from creditors, and allow the company to specifically rework union contracts.
Our guess – after the review of the facts to find out more about bankruptcy and of Obama’s statement yesterday – it has become clear that this will not be a straight Chapter 11 bankruptcy, but a more modern union-friendly version using specific parts of the bankruptcy law to avoid having to renegotiate the union contracts. If Obama let GM go full Chapter 11, to say the United Auto Workers would be ticked off at The One could be the biggest understatement of the decade. But maybe Wagoner understands that one of the key issues is current union contracts that are unsustainable in the current marketplace.
Can’t have that, so Rick… meet bus.
From Obama’s statement yesterday, with my emphasis added.
Now, while Chrysler and GM are very different companies with very different paths forward, both need a fresh start to implement the restructuring plan they develop. That may mean using our bankruptcy code as a mechanism to help them restructure quickly and emerge stronger. Now, I want everybody to be clear about this. I know that when people hear the word “bankruptcy” it can be unsettling, so let me explain exactly what I mean. What I’m talking about is using our existing legal structure as a tool that, with the backing of the U.S. government, can make it easier for General Motors and Chrysler to quickly clear away old debts that are weighing them down so that they can get back on their feet and onto a path to success; a tool that we can use, even as workers staying on the job building cars that are being sold. …
While the steps I’m taking will have an impact on all Americans, some of our fellow citizens will be affected more than others. So I’d like to speak directly to all those men and women who work in the auto industry or live in countless communities that depend on it. Many of you have been going through tough times for longer than you care to remember. And I won’t pretend that the tough times are over. I can’t promise you there isn’t more difficulty to come.
But what I can promise you is this: I will fight for you. You’re the reason I’m here today. I got my start fighting for working families in the shadows of a shuttered steel plant. I wake up every single day asking myself what can I do to give you and working people all across this country a fair shot at the American Dream.
FYI: no mention of concern for shareholders who own the company.
For those interested, I’ve included the full video from the Obama statement posted by the White House Press Office (18 minutes).