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The GM Bankruptcy is a destructive wipeout
Consumer advocate Ralph Nader criticizes the
General Motors bankruptcy
The bankruptcy declaration by General Motors is an avoidable, crude weapon
of mass devastation for workers, dealers, auto suppliers, small businesses
and their depleted communities. For GM's voiceless owners -- the common
shareholders -- it is a wipeout.
The proximate cause of the bankruptcy was supposed to be the inability of GM
and the government's auto task force to reach an accommodation with GM's
bondholders. But the bondholder problem was moving toward
rapid resolution, and was clearly resolvable. Why then are GM and its
multibillion government financier proceeding with bankruptcy?
The bankruptcy and the GM restructuring plan are the product of a secretive,
unaccountable, Wall Street-minded government task force that assumed power
because of a Congressional abdication of historic magnitude. By all rights,
the restructuring plan should have been submitted to Congress for
deliberative review and decision.
There is little doubt that GM's chronic mismanagement and the deep recession
require restructuring and scaling back the auto giant. But the bankruptcy
and restructuring plan appear poised to do so in ways that will needlessly
harm the stakeholders meant to be helped by Washington's rescue of GM?
Many, many jobs will be lost that could be preserved. There is reason to
question whether too many plants and brands are being closed -- a matter
that should have been taken up in Congress. Just the closing of hundreds of
(GM and Chrysler) dealerships will cost more than 100,000 jobs. These
sacrificed jobs will fray communities and impose enormous expenses on
government entities that will have to provide unemployment and social
relief, while suffering lost tax revenues.
The unionized workforce will see the wage and benefit structure slashed --
even though auto manufacturer wages make up less than 10 percent of the cost
of a car -- so that new jobs at GM will no longer be a ticket to the middle
class. This will drag down the wage structure of the entire auto industry --
exactly the wrong direction for the country.
America's manufacturing base will be further eroded, as GM pursues its Grand
China Strategy -- increasing manufacturing outside of the United States, and
increasingly from China, for import back into the United States. Unanswered
questions persist about how GM's valuable operations in China, and un repatriated profits, will be treated in bankruptcy, or excluded from
bankruptcy.
Victims of defective GM products may find themselves with no legal avenue to
pursue justice. In the Chrysler bankruptcy, with complete disregard for the
real human lives involved, the Obama task force and auto company have
maneuvered effectively to extinguish the product liability claims of victims
of defective cars.
In a worst case scenario for the GM bankruptcy -- involving an extended
court proceeding or severe impairment of consumer confidence in the GM brand
-- all of these problems will be magnified. Again, given the path to
resolution with the bondholders, this is an avoidable gamble.
The GM/task force bankruptcy plans appear geared to saving the General
Motors entity -- but at a harsh and often avoidable cost to workers,
communities, suppliers, consumers, dealers, and the nation's manufacturing
capacity. It will also prove to be a complex political nightmare for
President Obama.
With the company entering bankruptcy, the next challenge will be to ensure
that the government exercises its ownership rights to undo and mitigate, to
the extent possible, these damages. Among other measures, this should
involve revisiting the serious drag-down, concessionary wage terms imposed
on the United Auto Workers; demanding a moratorium on GM's outsourcing of
production of cars for sale in the United States; and establishing
successorship liability for the new GM, so that victims of dangerous and
defective GM cars can have their day in court.
SOURCE Ralph Nader, Consumer Advocate
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