Better Heads Than Mine (Which Is Most of You), Speak!

Posted by CPMariner , Tue, Nov 18, 2008, 12:50:27 Post Reply Reviews by CPMarinerFirst Amendment Message BoardMain BigDoggie.net site
Having gone 'round and 'round with the proposed GM bailout during the past week or so, I have more questions than answers.

I lived and worked through the partial destruction of the Federal S & L industry back in the late '70s and early '80s, and caught on pretty fast to the concept that a financial can't borrow short and lend long indefinitely, and that when the yield curve inverts, saving money on #2 pencils and paper clips isn't going to help much. But even during those days of decline, the Feds of the RTC concentrated incessantly on a single issue: "What's your plan to avoid insolvency?"

Likewise, during a time when things looked bleak for my investment advisery firm, my partners and I burned the midnight oil for weeks on end to develop a plan for contraction. We'd begun putting it into effect -first by cutting the partners' salaries in half- when we caught a couple of breaks, landed a few institutional accounts turned to expansion.

But what's going on with GM? I've read (numbers may be off, just general) that GM sold 16 million units last year, but expects to sell only 12 million in the coming year, so they want some money. A lot of it. But "what's the plan"? They can argue that it's not management's fault but rather a lagging economy that's at the heart of it, but regardless of that, "what's the plan"? Bailout money isn't going to make sales jump 4 million units. If GM had $25 billion or even $50 billion stashed in cash reserves, do you think they'd just muddle along as they are, maintaining current staffing and allowing idle capacity to stagnate until somehow things get better? I don't.

I think they'd be contracting like all get-out. Right now! (Maybe they are. Does anyone here know?) It's not easy. I know that from direct experience, but if I'm a Congressman I want to know "the plan". Shutdowns and layoffs are in the cards anyway if you're looking at a 25% reduction in sales, bailout or no bailout. So, assuming "appropriate" layoffs, is the requested $25-50 billion just to service debt and keep the machines from rusting in idle plant capacity?

What's the damn plan, Mr. Wagoner?

CP




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