Crystal ball? Are you actually implying that nobody could see this coming?
Recall ... late 2005 early 2006 .... was there anyone suggesting bankruptcy then? Even using words like "certitude"? Try CNN Money, Fortune, Moody's, Standard & Poor's, the Cato Institute and others... How did they all have a "Crystal Ball" while Wagoner and GM did not?
GM wasn't looking for the "exact right time" to file. From the beginning, they were calling any bankruptcy filing (Chapter 11 included) "out of the question" well into 2009, because, according to them, it would be "catastrophic". (catastrophic to Wagoner's legacy perhaps?) -- "I have this little sort of burden of history. I'm not going to be the guy that doesn't get this company going in the right direction." At that time, quixotic CEO Rick Wagoner was calling GM's liquidity "strong"!
Fortune - Feburary 2006
http://money.cnn.com/magazines/fortune/fortune_archive/2006/02/20/8369111/index.htm
"Rick Wagoner...may say.. "I know that things will turn around." But he cannot know that. He may not, deep down, even believe it himself."
"Bankruptcy isn't going to occur next week. But down the road--say, past 2006 --its probability is high."
"In recent months both Moody's and Standard & Poor's have made increasingly grim statements, bald in their talk of bankruptcy"
"... the evidence points, with increasing certitude, to bankruptcy."
"Its product mix in the U.S., heavily weighted toward trucks, pickups, and SUVs, is on the wrong side of gas prices"
"The union's leverage over GM affects everything that the company tries to do in cost cutting."
"Such an enterprise probably cannot escape bankruptcy."
"In January (2006), Kerkorian's (Tracinda Corp's 10% owner of GM stock) advisor Jerry York, a turnaround veteran himself (at Iacocca's Chrysler and Lou Gerstner's IBM)... accused GM's executives of lacking "urgency" and "sense of purpose."
"A boost to GM's liquidity could be gained by the company's embracing what Jerry York has labeled "equality of sacrifice"--that is, compensation cuts..."
"York also wants GM's executives to cut their pay. Around headquarters in Detroit, there is muttering about this..."
"There is the big question, naturally, of whether some sort of extraordinary intervention might save GM from bankruptcy. Should it care to make the effort, the UAW would have the means: massive givebacks. Does that sound likely? No."
"I can't really believe," he says, "that the people who got GM into this mess are going to be the people who can get GM out."
Wow! They all must have had a Crystal Ball.
I didn't say that it was wise or not but rather that it would have been more sensible earlier rather than later.
Yes, who indeed would suggest such a crazy thing as a merger between GM and that "zombie operation" Chrysler? They would have to be a complete fool, especially to try it at the end of 2008 of all things. After all, sufficient funding had dried up by...when did you say? 3rd/4th quarter of 2007 .... late Q3 2008?...
William C. Repko - Senior Managing Director with Evercore Group L.L.C - Financial advisor to GM - Affidavit to the United States Bankruptcy Court Southern District of New York (a very, very, very, very, late - May 31, 2009) Declaration in Support of D.I.P. Financing.
"28. Evercore continued to work closely with GM as it pursued negotiations with Chrysler between September and early November of 2008. By early November 2008, however, two critical facts led GM to suspend its merger talks with Chrysler: (i) lenders were unwilling to provide sufficient incremental liquidity to the proposed merged company, and (ii) the business environment and GM’s operating performance had continued to decline severely such that GM may have exhausted its liquidity prior to the consummation of the contemplated transaction."
Read it again..I said..."By December 2008............. the Government was tossing around the idea of D.I.P. funding ..."
The Economist - November 2008
http://www.economist.com/research/articlesBySubject/PrinterFriendly.cfm?story_id=12597500
"One idea making the rounds is for the companies to file for bankruptcy protection and the federal government to provide them with “debtor in possession” financing to keep operating while they restructure themselves into smaller, leaner companies. But the companies are opposed to a bankruptcy filing, and with their time running out and both Congress and Mr Obama sympathetic to their pleas, Mr Paulson may yet again have to recognise that the facts have changed."
GM was opposed to Chapter 11 as they had been from the beginning with or without government backing. The Obama administration demanded radical restructuring and insisted that if it doesn't happen, a Chapter 11 filing would likely be GM's only option. Initially the U.S. Government was sympathetic because GM was promising it could make the necessary concessions on its own without needing to file (and thus utilize Section 1113 of the bankruptcy code to reform its labor contracts). GM kept asking for a "loan" but was unwilling / unable to come up with an acceptable restructuring plan to justify it. Patience and options ran out.
In 2009, the Obama Administration kept sending GM back to the negotiating table.
The concessions and restructuring plans were much too little and much too late.
Is your false dilemma similar to the one offered by GM years ago when they should have made the difficult decisions but did not? Forcefully asserting that bankruptcy was "not an option", they claimed that catastrophe was inevitable unless support in the form of loans was offered. Catastrophe was not inevitable.
Or is it that you have a different and novel concept of inevitability. If so, here is another notion you may find interesting:
--> There is nothing that can be done about fatal airline crashes. All of them are "necessary" and "inevitable." (in the period following impact)
(informative?)
I do understand your point about the government stepping in at the late stage of 2009, but it needn't have come to that point. As Jerry York, Carol Loomis, and others recognized, there was enough information years ago to create a greater sense of urgency. GM did not exhibit this needed sense of urgency. GM had options but did not utilize them. They greatly underestimated the difficult sacrifices that needed to be made (immediately) and the degree of concessions that would need to be elicited from the UAW and what it would take to accomplish that. As Carol Loomis rightly predicted in 2005/2006, "The union's leverage over GM affects everything that the company tries to do in cost cutting." such that GM will almost certainly not be able to avoid bankruptcy. If GM had appreciated this, the taxpayers would not be forced to bear the burden of UAW benefits and GM's failures.
