Friday, December 5, 2008

I Know! Let's Let GM Stiff Their Contractors! That's a Good Solution!

What people don't seem to realize is, GM doesn't build cars. They ASSEMBLE cars. Tons of their parts and electronics and computers are made by thousands of third party contractors around the country. My uncle, for instance, lives in St. Petersberg Florida and makes motherboards for Cisco in California who then makes car components and software for car computers which are sent off to a GM plant.

When GM files for Bankruptcy, suddenly they are protected from debt.

Let's say you're a small business owner in, say, Texas, who makes widgets for GM who currently has an outstanding bill with your company for half a million bux. Suddenly people around the country start chanting that GM should have debt protection. Suddenly people are actually begging GM to stiff you. They all think it's the right thing to do because those darn union guys get too much money for pushing a button and besides GM made crappy, fuel sucking cars.

Lucky GM, they get to file for bankruptcy and restructure. You? You're not getting that half mil for a loooooong time even though you've got a quarter mil of expenses into the production. So you file for bankruptcy and close your doors and start dusting off your resume along with your fifty or so employees.

Uh oh! So now Honda wants to buy parts from you like they usually do because you sub-contract to all the auto companies. But you're not in business anymore. Oh no! Where is Honda going to get its widgets? They go from small manufacturer to small manufacturer and find that an alarming number of them have gone under and the rest are either on the ropes or are over extended.

But that's only the beginning of the problem. The price of steel has collapsed from a dramatic drop in demand, which is initially pretty sweet, but suddenly the steel companies can't make ends meet, so refineries close up and then the price of steel skyrockets from a combination of lack of production and the economies of scale for shipping steel aren't there anymore.

Not that it matters anyway. From all the mom and pop manufacturing companies around the country shutting down, there's a rash of unemployment, so nobody can buy Hondas anyway

In summary, we shouldn't loan money to GM and should let them file for bankruptcy. That'll show 'em and the greedy Unions what for.