GM, Chrysler bankruptcy may be only way to get bailout

If they go bankrupt, the only way to lure people back to their brands are huge discount and exceptional quality & performance. Now, I am not a scientist or an economist, but I pretty sure if they can build cars cheaper and better than everyone out there, they won't be in this water in the first place.

It's all about engineering overhead and labor. Too many brands with too many offerings riding on too many different chassis combinations. The competition has been engineering chassis capable of right and left hand drive that can be stretched or narrowed. The kind of engineering saves alot of money. Mercury, GMC, Pontiac, and Saturn need to offer some differing products or die. As far as labor goes, if unions want their companies to survive, they have to work with the company rather than against them. Times changes and therefore labor practices, wages, and benefits options need to change as well. While much of the Not-so-big 3's problem are self-inflicted from being slow to adapt, the UAW has also been slow to adapt. Long ago, they needed to start saying "What can we do to help?". It's a much better alternative than everyone losing their jobs at once.

Declaring bankruptcy will also allow them to address the sticky dealer franchises (and crippling franchise laws), which has also been a huge problem for GM and others.

I'd like to see a complete overhaul of the executives and higher-ups, especially at GM and starting with Rick Wagoner. Send them packing, without millions in severance pay.

*high fives Flic*

Yes, as we all learned from The Office, just screaming "I DECLARE BANKRUPTCY" means all your financial problems just go away and you're free to start fresh. Pesky things like getting people to buy your product when they insist they won't buy from a bankrupt company and getting credit in an entirely credit-deprived economy just don't matter at all. They just have to declare bankruptcy and everything will be all better. Right...

Who the heck said everything will just "be all better"?!? I don't recall ANYONE saying that.

Unfortunately, the problem is that we don't have any credit. It's that we have TOO MUCH credit. Why do you think people are foreclosing on their homes? Lenders are STILL lending to those who can't afford to borrow money. And now the Fed is going to lower interest rates?!? What's with that? What are they trying to say? Do they want MORE of us to live in indebtedness? Because that's exactly what it sounds like they're saying.

No, the problem is that there are too many people with credit. The Fed needs to raise interest rates, if anything. No amount of "jump starting" will work for the economy. Economics don't work that way.

Please. Read Hazlitt, von Mises, or Rothbard.

Edit: First line of the second paragraph in my last comment should read "...the problem ISN'T that we don't have any credit."

The Edmunds team needs to get on this edit button thing.

The idea that our economy is 'credit deprived' has been manufactured for political reasons. But it is bogus. The people who can't get credit now are the ones who were poor or marginal credit risks in the past, yet many lenders were still willing to extend credit to them with subprime rates and terms. But now that they've gotten so badly burned, they're being more cautious on those types of risks.

I could get credit on an auto loan or other type of loan today if I wanted. But I don't want it because I don't need at this time.

The problem with a loan is that you have to pay it back. That is my philosophy. Thus, I don't borrow what I'm not willing or able to pay back.

I should have clarified - when I said credit, I meant financing at the corporate level, not consumers. Simply put, most of the companies who used to finance bankruptcy aren't there anymore, and those that are still around are, like other financial institutions, likely to hold that money pretty tight.

I agree that this consumer credit contraction, though painful, is probably better long term for our economy and way of life. Just like a diet, it isn't fun now, but it will improve our health. The immediate benefit is those qualifying for loans now aren't as risky as yesterday's subprime borrowers with no proof of income, etc.

My points with bankruptcy were: 1) auto sales hurt now with the credit contraction, and those buyers who are left WILL NOT buy from a bankrupt manufacturer. 2) Bankrupt corporations need to be financed through the process and the funds to finance a huge corporation going through bankruptcy just aren't there.