Editorial: General Motors Death Watch 210: Abandon Ship

With a bit of luck, I’ll finish this editorial before House Speaker Nancy Pelosi tells America how Washington will save Detroit by spending your tax money on a domestic automobile industry beyond salvation. I doubt it. As we’ve previously reported, our duly elected representatives have already met with the titanic captains of Ford, GM, Chrysler and the U.A.W. in a closed-door session. I’m sure they got their ducks— and our bucks— in a row. Nancy will sing an ode to the working man and pen a paean to the importance of American heavy industry. Grim faces will then face a grim task: figuring out the fastest way to put Ford, GM and Chrysler on federally-funded life support.

GM first, of course. It’s out of money. Today’s third quarter financial report admits that the American automaker doesn’t have enough cash to last until the end of the year (actually next month). While GM’s impending implosion virtually guarantees prompt federal mammary provision, “prompt” may not be good enough. In truth, GM is a breached and rudderless ship slipping into a sea of red ink. If Pelosi and pals don’t get the bailout done in a couple of weeks, the public will see GM’s situation as one that’s beyond repair.

Now that the GM bankruptcy story has “broken,” the mainstream media will start asking the tough questions that TTAC’s been asking for years. Such as, who is this NSFW who’s run GM into an iceberg, and ram it repeatedly? Why was this corporate helmsman paid over $100m in salary and benefits to do so? (Someone might even mention Wagoner’s bankruptcy-proof pension.) Why should we believe a thing he says? And why is he still here?

When Congress doled-out $700b to the financial industry, the average American had no clue what the Hell the money was for, why it was needed and what was going to be done with it. Credit swaps? Sub-what? They revolted. And then the stock market dropped and the bailout bill passed. But cars are a different matter. Cars they know. What are the chances that GM’s going to build a car I want to buy using my tax money? Sure, I want to protect jobs. But I also want to protect my tax money. So… screw it.

GM has but one weapon to counteract this argument: the plug-in hybrid electric – gas Chevrolet Volt. The Volt is a damp squib stuck in development Hell. GM may have fooled the financial community (and itself) with its constant talk of the next Next Big Thing, but with gas prices hovering at $2 a gallon, the wind has gone out of the Volt’s sails (sales?). It’s too much, too late.

Detroit’s bailout backers face another problem: there is an alternative.

Our anonymous contributor’s pro-bankruptcy editorial contains the kernels of a GM bailout backlash, based on sound business principles. Once Ms. Pelosi’s emotional appeal to working class values loses its emotional resonance, pundits will argue against “throwing good money after bad.” The General’s public will cotton-on to the idea that it’s not a case of bailout or die. It’s a case of bailout AND die.

As Bill O’Reilly would say, the bailout bonanza also has an “unresolved problem” segment. Cerberus. Chrysler’s owners are a deep-pocketed private equity firm. If they glom onto a federal bailout– and ChryCo CEO Bob Nardelli was in that room with Pelosi– voters will NOT be happy subsidizing Feinberg’s fat cats. Or, for that matter, the Ford family, who still control The Blue Oval through their special class of stock.

It’s no wonder we’re hearing rumblings that Detroit is willing to consider taking federal bailout bucks with ”strings” attached. They recognize that the PR war– and thus the bailout itself– is not a done deal. They know they need to appear “willing to work” with legislators to “ensure that taxpayers’ money is protected.” Yada yada yada. Just get this thing done. Whatever it takes.

Of course, the truth of the matter is that there’s nothing federal funds can do to “save” Detroit. Chrysler is a basket case, and Ford and GM have no long-term future without a Chapter 11 reorganization.

Under C11 protections, using debtor-in-possession financing, GM and Ford can shed onerous labor contracts, kill brands, terminate dealers and get out from underneath mountainous debt and build something American want to buy. In fact, there’s only one way the feds can help GM and Ford, and the hundreds of thousands of current and former workers who depend on their survival: withhold our money from their coffers.

GM is dead. Chapter 11 is the only method by which a new GM can rise from its ashes.