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  • Auto Bailout Not Inevitable?

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    President-elect Barack Obama signaled last week that even if Congress does not bailout Detroit’s Big Three this month, he will push for federal help once he is sworn in. But it appears that at least some Democrats on Capitol Hill are warming to the idea of a much needed bankruptcy for the automakers. The Washington Post reports:

    “Everything is on the table” in a prearranged bankruptcy deal, said a Senate Democratic aide who spoke on condition of anonymity because he was not authorized to speak on behalf of his boss. “That’s one of the big attractions. It provides flexibility that otherwise couldn’t be there.”

    Heritage Senior Legal Policy Analyst Andrew Grossman outlines some of those “flexibility” attractions:

    The benefits of reorganization would begin immediately with the automatic stay obtained at the moment of filing. Once a company has filed for bankruptcy, it may suspend payment of all debts, giving it breathing room to take stock of its assets and situation.
    ….
    The filing company [also gains] the flexibility to reconsider its own contractual obligations, and this may be the major benefit of reorganization for automakers. As described above, many of the Big Three’s legacy problems are manifest in contractual relations governed by unfavorable legal regimes. Among them are excessive and overbearing dealer networks that are nearly impossible to reform because of state franchise laws and unrealistic labor agreements struck under federal labor law. In bank­ruptcy, however, everything is on the table.

    Recognizing the great importance of labor rela­tions, the Bankruptcy Code addresses it specifically. Unlike with other contracts, a business undergoing reorganization cannot simply reject a collective bar­gaining agreement. Instead, it must propose to the union modifications to the agreement that are nec­essary for it to achieve a successful reorganization and that “assure[] that all creditors, the [business] and all of the affected parties are treated fairly and equitably.”[6] In addition, the business must provide the union with relevant financial information so that it is able to evaluate the modified agreement.

    Posted in Economics [slideshow_deploy]

    5 Responses to Auto Bailout Not Inevitable?

    1. TedN, St. Petersburg says:

      The labor contracts are unresonable having significant direct and indirect costs. For example, the health plan Ford subscribes pays for sex changes. Besides being a costly (much less optional) procedure, it sets a tone for the egregious nature of labor contracts and ineptness of management to go along with such nonsense besides creating a public relations liability. There are other examples that explain why it is difficult for these companies to compete by providing the best value to customers with their products that meet or exceed the competition.

      AFA sex change info http://www.afa.net/emails/transform.asp?x=ford_12

    2. Bryan, Washington says:

      Ridiculous bailout proposition – CEOs work for a buck, sell five planes…this is supposed to be a meaningful business plan?

    3. Wilmington,De says:

      Maybe Polosie should get rid of her jet plane. Those News journalist that always conden workers should take a cut in pay many of them take home 6 figures salaries for producing no product . Wall Street didn't have to product a plan to get billions in tax dollars nor report to Congress.

      If Automobile workers aren't worth their contract wage agree, but it's OK for CEO's nation wide to be paid hundred million dollars in salaries while they bankrupt their companies. Newcaster who cry about the auto workers salaries while they take home 6 figures paycheck have gall to condem the workers in the auto industry. Congress, CEO's,Bankers, and Wall Street cause this fiancial chaos in America and they want the automobile workers to be the fall guy. Congress members received big bucks and perks from Fannie Ma and Freddie Max. While CEO's raped the companies cashboxes and walked away with million in benefits in their pockets. They also destroy companies and lost workers their jobs and benefits. Bankers wrote worthless mortgages and packages then and sold them for billions and now the American workers is taxes to pay for these worthless mortgages . Congress,CEO's Bankers and Wall Street got off scot free they didn't lose a thing but Middle Class loss our pensons,jobs,and homes! Money,greed and power buys Congrss,CEO's,Bankers, and Wall Street high rollers with their desire for power,money and greed this is destroying the Middle Class Workers in America!

    4. Maximondo Modificati says:

      Right now who needs more the bailouts are homeowners, who are behind in their mortgages. Since we are offically now in a recession, this ecnomony needs to improve. I suggest each U.S. citizen 21 years of age recieve $10,000 each.
      http://www.maximondoloanmod.org

    5. G.C. HUGHES RICHWOOD says:

      WELL HERE'S WHAT I THINK,

      I'VE BEEN A PAINT AND BODY MAN SINCE 1956.(and still working.)SO PLEASE GIVE ME A LITTLE CONDERATION.

      I'M TIRED OF HEARING ABOUT THE BIG THREE !!

      REMEMBER, PACKARD, HUDSON, STUDEBAKER,?

      THEY CLOSED BECAUSE THEY WERN'T SELLING ENOUGH CARS.! NOT BECAUSE THEY KEPT MAKING PINTO'S AND CHANGING THE NAME EVERY SO OFTEN.

      WE MADE IT WITHOUT THEM AND THEY MADE BETTER CARS THAN ANY OF THE THREE ARE MAKING NOW,SO I SAY LET EM CLOSE, MABEY JUST MABEY SOMEONE WILL COME ALONG AND BUILD A BETTER CAR, WE REALLY NEED ONE!

      LIKE THE 1948 PLYMOUTH,

      AND WITH OVER 50 YEARS IN THE BUSINESS, I AM STILL WAITING ON A CAR THAT EVEN COMES CLOSE TO MATCHING IT,IN ANY AREA. STYLE,DEPENDABILTY,GAS MILAGE,COMFORT, THE DOORS STILL OPEN AND CLOSE,

      THE KEY STILL WORKS THE IGNITION,AND IF IT NEEDS A PART LIKE A THERMOSTAT, $6.00 NOT $157.00

      THANKS FOR THE CHANCE TO UNLOAD !! JERRY

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