| This topic is being passionately debated around the | | | | important than ever that the automakers downsize |
| country every day. It's obvious that not everyone can | | | | immediately. |
| agree on the same solution. This is a very complicated | | | | Too Big to Fail? |
| situation, and there are pros and cons to each side of | | | | This phrase gets thrown around a lot too. Many people |
| the debate, for letting GM fail or for government | | | | believe this is true and that the government will do |
| intervention with financial support. It seems that, for | | | | everything they can to keep GM in business. Believe it |
| now, the government has taken the stance that | | | | or not, a well-executed bankruptcy could actually help |
| supporting GM is the best course of action, as long as | | | | them stay alive rather than shut them down |
| they make strong improvements to their business | | | | completely. |
| model with the money. | | | | If GM Fails |
| What Caused This Mess | | | | Hundreds of thousands of workers could lose their |
| There are multiple reasons why the company is in the | | | | jobs, and many of them are paid very well. This |
| current situation. There is the long-term decline in their | | | | includes workers at companies related to the auto |
| sales, due to various reasons, including vehicle quality, | | | | industry, such as parts suppliers. So the loss of so |
| fuel efficiency, and attractiveness to customers. Then | | | | many incomes would directly affect local and national |
| there are the huge labor and "legacy" costs, including | | | | economies. Of course, a restructuring of the company |
| pensions and benefits to current and former | | | | does not mean it ceases to exist and all employees |
| employees. The company and the union have both | | | | are left without jobs. Layoffs are a definite possibility, |
| made poor decisions in the past that helped in the | | | | but without employees a restructured company |
| short-term but is hurting in the long-term, which has | | | | cannot exist. |
| finally caught up to them. This includes paying lower | | | | Should GM go Bankrupt? |
| salaries in exchange for larger, longer-term benefits. | | | | A bankruptcy could help reduce labor and legacy |
| And finally, there is the recent downturn in the global | | | | costs dramatically, including salaries, benefits, pensions, |
| economy, which reduced sales immediately and the | | | | and debt obligations. However, there are important |
| credit crisis, which has reduced sales even further. | | | | consequences. For example, the government |
| Evidence of the slow death of GM can be seen in this | | | | guarantees the pensions via its agency, the Pension |
| fact: the stock price has dropped ninety-five percent in | | | | Benefit Guaranty Corp. That means if GM restructures |
| the last five years! | | | | and cannot pay the pensions anymore, the |
| Many experts have stated that American car | | | | government would be forced to cover some or all of |
| companies are producing way too many cars right | | | | the bill, which would basically come from taxpayer |
| now, so they basically need to shut down some plants | | | | money. Also, consumers would be less likely to buy |
| to trim their expenses. However, the companies have | | | | GM vehicles if the company was near or in |
| proven to be slow to make big changes like that. With | | | | bankruptcy, which would further exacerbate the |
| a huge drop in sales and cash this year, it is more | | | | problem. |