According to the Dallas Daily News, Jody Grant, the recently retired chairman of the Dallas-based Texas Capital Bancshares Inc. says that General Motors Corp shouldn’t get a “no questions asked” $25 billion bailout.
“You can’t just hand General Motors a $25 billion or $50 billion check and not have them make major, major, major changes in the way they do things,” Mr. Grant says. “A bailout has to have many of the characteristics of a prepackaged bankruptcy, with [U.S. Treasury Secretary] Hank Paulson or his replacement as the ‘bankruptcy judge’ – similar to the rescue of AIG.”
His position is that a General Motors bankruptcy with or without government financial assistance is the only long-term solution for the automotive giant. Why? Well, according to Grant, GM is facing financial collapse and is in need of bankruptcy because it makes cars that can’t compete in the global marketplace and have employees whose pay outstrips profits.
The average GM worker earns $78.21 an hour in wages and benefits and even new employees earn around $26.65 an hour. With strong labor contracts, GM needs a traditional bankruptcy which would allow them to cancel labor union contracts and greatly reduce production costs.
I can understand Mr. Grant’s position; but cutting employee salaries will definitely add to an already financially stressed consumer. Most American employees depend on every cent of their paycheck to pay for the rising costs of housing, food and healthcare. The GM situation is definitely lose-lose and a bankruptcy for GM will definitely mean more personal bankruptcy for GM employees.