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Corvette plant safe?

Rob

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Corvette plant safe?

Economists at WKU say even if GM files bankruptcy, sports car’s future probably safe

By JENNA MINK, The Bowling Green Daily News, jmink@bgdailynews.com/783-3246
Friday, November 21, 2008 11:32 AM CST


As a government loan for troubled automakers stalls in Congress, some experts say filing bankruptcy would be the best option for General Motors and the local assembly plant.

And no matter what the fate of GM, the Corvette will likely survive, they said.

General Motors warns that if it does not receive government aid, the company could lack enough cash to operate by the end of the year. If that happens, the company would likely file chapter 11 bankruptcy, which would allow the company to renegotiate contracts and deals with suppliers, dealers and labor workers.

“Filing for bankruptcy does not mean they will shut their doors and not operate,” said Dennis Wilson, economics professor at Western Kentucky University. “The critical thing (is) it gives them an opportunity to renegotiate their labor contracts.”

Still, bankruptcy would result in major production and job cuts and probably some plant closures. But the local plant would likely survive a bankruptcy, experts say.

“My best guess is because the Corvette is a niche market, it has the best chance of a smooth transition during a chapter 11,” said William Davis, chairman of the economics department at WKU. “The reduction in work force could be relatively minor ... the Corvette brand is not at risk of disappearing.”

Still, some experts say the company must restructure its operation in order to survive, and the best way to do that is through bankruptcy.

“All things considered, I think the best solution is chapter 11,” Davis said.

Bankruptcy will allow General Motors to renegotiate contracts and write off bad debt. Without a bankruptcy filing, “it will be enormously costly to get out,” Davis said.

“When you begin to look at the details of unwinding out of (contracts) in an orderly fashion, it seems unlikely in the absence of a chapter 11 situation. That’s what those laws are designed to do,” he said.

Along with a souring economy and credit crunch, the companies’ contracts with the United Auto Workers labor union have left the company tied to costly pensions, retiree benefits and high wages, Wilson said.

“The UAW did exactly what they should do for their members, and very, very effectively,” he said. “But what they did was tie a really tight rope around the company.”

Bankruptcy would allow the company to void those labor contracts and renegotiate, Wilson said.

The UAW recently reworked its contract with GM, which resulted in lower pay for new employees. Adjusting those wages was tough for workers, and renegotiations would likely further slice workers’ starting wages, said Eldon Renaud, local UAW president.

“I don’t see any room for renegotiations at all,” he said. “People work on the assembly line every day and suffer through colds and illnesses ... they’re putting their bodies at risk every day; they’re wearing their bodies out. And I don’t want to be the person that would take away their earnings, because they’ve deserved them.”

Quickly filing bankruptcy and renegotiating those contracts would not help the company or the economy, said Brian Sullivan, management professor at WKU.

“So many auto workers make good wages, good salaries,” he said. “Is this the time to be cutting people with jobs? Is this the time to lose people who have the ability to purchase goods?”

The U.S. auto industry needs funds to make crucial changes, which is why government funding is critical, Sullivan said.

“If you’re a ship, you need to be moving to steer a course,” he said. “If (bailing out banks) was a good idea, I think this would be a better idea. You would be shoring up the middle class purchasing power.”

By giving the automakers a helping hand, the government might restore some confidence to worried consumers, said Zubair Mohomad, chairman of the management department at WKU.

“It’s better to give them a hand to restore the confidence,” he said.

But, with or without government loans, the company must make major changes to stay afloat. If the company files bankruptcy and cannot renegotiate contracts, other options would include selling assets or merging with other troubled auto giants - but the Corvette would likely survive both scenarios, Wilson said.

Because the Corvette is a unique, iconic car, a merged auto industry would likely continue to produce the sports car, and foreign auto makers would jump at the chance to produce the Corvette, he said.

“The plant out here is an asset,” Wilson said. “Would other automakers be interested? Absolutely. There will be somebody willing to make Corvettes.”
 

Jetboy

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Rob,

I don't think we tell you enough what a good job you do of keeping this site updated. :worship: I appreciate you finding and posting these articles. may not agree with them all but they are interesting and relevant.
 
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Rob

Seasoned Member
Staff member
Site Administrator
Joined
Oct 7, 2006
Messages
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New Hampshire
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Not yet!
Rob,

I don't think we tell you enough what a good job you do of keeping this site updated. :worship: I appreciate you finding and posting these articles. may not agree with them all but they are interesting and relevant.
Thank you. I may not agree with some of them either, but I think it's important that we remain informed of all perspectives and/or opinions regarding what's happening with the economy and GM.
 

standby-V

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Now if only someone can tell me if my money is safe in the mattress. Good job Rob. I read them all and I'm as confused as ever.:pat:
Thank you. I may not agree with some of them either, but I think it's important that we remain informed of all perspectives and/or opinions regarding what's happening with the economy and GM.
 

Jetboy

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Joined
Oct 5, 2007
Messages
339
Location
Phoenix
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2005 Blue Steel XLR
Now if only someone can tell me if my money is safe in the mattress. Good job Rob. I read them all and I'm as confused as ever.:pat:
Home invasions are up way more than bank failures. I would keep it in the bank :dunno:
 

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