Tuesday, February 17, 2009

In Chapter 11 bankruptcy, General Motors will be forced to cut more jobs and close more plants

I covered the federal bankruptcy court in Oklahoma City for 10 years and watched some big companies go through the ringer of reorganization.

General Motors probably will be forced to file for bankruptcy. There is no real public support for a $30 billion loan for bad decision making and union and corporate greed.

Once in bankruptcy, creditors -- for GM, its bond holders -- control the game, and they are going to make the kind of deal that gives them the most immediate and full payback. And the judge will simply follow the bankruptcy code that allows them to do so.

Creditors will not care about communities such as Spring Hill, TN., or others across the country with GM plants. The Spring Hill plant is considered one of GM's most efficient, so that could work in its favor. But the sharp decline in consumer spending -- which is only going to worsen -- makes every plant vulnerable.

GM says it will eliminate 20,000 jobs in the U.S. and close five plants in hopes of wooing Washington to loan it money. You can add another 10,000 jobs in cuts and two more plants if creditors drive the deal in bankruptcy court. And higher wages and benefits will also fly out the window. Bankruptcy law allows for such agreements to be eliminated no matter what workers have voted for.

I believe as Rick Santelli of CNBC. He says there is no prohibition in the U.S. Constitution against a company going under, or a big bank, or an industry. Newspapers are falling, too. Workers who lose their jobs must re-adjust, as must communities. Any work is good work if it brings money in.

Hard times require hard realities, even for auto workers and giants such as General Motors.

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