Professor Elam

on talks with GM about reducing future health care liability.  We will take a look at pension obligations this semester in Intermed II. The problem is that GM has more future liability for funding health care costs than it can afford. Please read this article as it focuses on future liabilities. 

Apparently the union thinks that the government will  loan GM the money to do this. It all comes to a head  Tuesday as GM has to show a  viability plan to keep its loans and get more money. Now that I think about it, the government will have to loan GM more money because GM does not have it at present. The alternative is a very very real bankruptcy for GM. In the midst of this recession getting worse every day that would not be pleasant to contemplate. It is hard to imagine what would happen to the tens of thousands employed in the dealerships. Speculation is that if GM took a bankruptcy

most folks would be reluctant to buy a car from GM

all financing would cease, all suppliers would demand cash, suppliers probably would then be on the ropes in a domino falling horror story; since GM could not pay them the suppliers might well be bankrupt making it impossible for Toyota and other auto makers to get their parts

the value of all existing inventory at GM dealers would immediately be worth less money, someone has that inventory floor planed or financed, this would make the debt crisis immediately worse

Oh and, in a bankruptcy the attorneys would get all the money……

So in the face of nationwide job losses, will the Democrats come to the rescue of the UAW which frankly is acting rather badly in the face of imminent disaster.  As thousands of folks are being laid off in other industries.  GM pays its workers more than the southern non union shop auto companies, this is expecting a lot. True the UAW has contributed probably hundreds of millions to Democrat campaigns, I wonder if they wish they had simply kept that money now, gee they could start funding their own plan. 

I have mentioned in class that we are peering into the abyss of a stock market meltdown, we are a scant 300 points on the Dow or about 70 S & P  points from taking out the fall lows. If those lows are broken, well, expect a big drop. Markets hate uncertainty, a GM bankruptcy with the domino effect of default on over $40 B in paper as well as the resulting debt on dealerships, well, the administration will face that first test Joe Biden was talking about.  Barney Frank has said such talk of bankruptcy is just union busting. The stock market is closed Monday and will open Tuesday the same day the plan has to be presented. Frankly this sort of brinksmanship theater should not be happening. 

Congress as I mentioned in a previous post is spending $787 B on all sorts of pet projects, the money to keep GM going is paltry compared to that. Someone is not paying attention here, this problem should have been addressed in the bill the President will sign Monday.