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"Too Big To Fail" = "Too Big To Exist." Here's how to bail out GM the right way:

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Pab Sungenis Donating Member (1000+ posts) Send PM | Profile | Ignore Fri Nov-21-08 03:57 PM
Original message
"Too Big To Fail" = "Too Big To Exist." Here's how to bail out GM the right way:
1. Instead of just plunging money into GM, Obama's Treasury Secretary would be authorized to purchase all outstanding shares of General Motors and place it into receivership. Since the stock is currently going for under $5.00 a share, that would be a bargain.

2. The receiver, appointed by the Secretary and answerable to Congress, would borrow a specific amount to cover current debts of GM, repayable under the same terms as the current bailout plan would have it.

3. The receiver breaks GM up into smaller, independent corporations for Buick, GMC, Chevrolet, Saturn, Cadillac, etc. Each share of GM is converted into one share each of the "Baby GM" companies.

4. The receiver names new management teams for each of the new companies.

5. After two years, and a hopeful return to profitability, the government can re-sell its shares in the new resulting companies on the open market, hopefully at a profit.

This way, all of GM's suppliers will still get paid and still get GM's business. All of GM's employees will still be employed. And hopefully the new, smaller companies will be more innovative and more competitive.
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KamaAina Donating Member (1000+ posts) Send PM | Profile | Ignore Fri Nov-21-08 04:02 PM
Response to Original message
1. Shades of Rockefeller's Standard Oil
which begat Exxon(Mobil), Amoco, and others.
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CTyankee Donating Member (1000+ posts) Send PM | Profile | Ignore Fri Nov-21-08 04:02 PM
Response to Original message
2. How would this work for folks like me with "preferred stock" which is paying me
like a bond? I am currently getting 7.5%, better than any traditional bond I hold. Losing my GM preferred stock would mean a chunk of my retirement money gone. Could I get my investment back and take it elsewhere to invest?

There are us retirees out there depending to some extent or another on this kind of investment. And we are not rich...
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Kolesar Donating Member (1000+ posts) Send PM | Profile | Ignore Fri Nov-21-08 04:07 PM
Response to Original message
3. It sounds like a plan to break up a monopoly, not a plan to help a major employer
eom
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Donnachaidh Donating Member (1000+ posts) Send PM | Profile | Ignore Fri Nov-21-08 04:20 PM
Response to Reply #3
6. they stopped being a major employer when they took jobs across the border
Break them up. That way different resolution plans for each division can be applied. And if one division is too bloated and backward, let it fail.
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Gidney N Cloyd Donating Member (1000+ posts) Send PM | Profile | Ignore Fri Nov-21-08 04:13 PM
Response to Original message
4. How independent could Buick, GMC, Chevrolet, Saturn, Cadillac (and Pontiac) be?
They all just sell the same line of cars with different nameplates glued on.
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TahitiNut Donating Member (1000+ posts) Send PM | Profile | Ignore Fri Nov-21-08 04:20 PM
Response to Reply #4
7. That's not quite true ... but almost. The form factors are standardized but ...
... materials and specifications (other than form factors for assembly) vary according to the target market sector.

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TahitiNut Donating Member (1000+ posts) Send PM | Profile | Ignore Fri Nov-21-08 04:17 PM
Response to Original message
5. GM reorganized internally in the 80s to prevent just such an action.
Historically, GM operated as a collection of competing car lines, each with a degree of autonomy and their own facilities. Over the last 70 years, certain combined operations and combined overhead functions were established where it both made economic sense and didn't materially erode divisional agility. Then, starting about 30 years ago and accelerating in the 80s, similar operations were combined in a new functional 'divisionalization' - combining all car lines into a horizontally integrated corporation. Thus, GM adopted 'standardization' of components in a way that served anti-breakup strategies instead of mere economic efficiencies. This is, in large part, what causes the projected "retooling" costs to be so high.
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Esra Star Donating Member (1000+ posts) Send PM | Profile | Ignore Fri Nov-21-08 06:07 PM
Response to Original message
8. Pab, your plan sound like a good starting point.
I like the general thrust, but I'm sure you would welcome refinements.
Nice work.
Good to see you back in the loop. Are you out of the woods yet?
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