The media throws around the term Chapter 11 a lot to discuss bankruptcy and what General Motors will go through starting today. See the Wiki for a good snapshot of Chapter 11 filings. Click here.
True bankruptcy is usually in Chapter 7 where a company is liquidated. Boom. Done. It is over.
Chapter 11 is now being positioned as a big mulligan in the sky - a big reboot - a big whoops, sorry - let us start over – for big companies. This is very troubling to me. Chapter 11 is usually a bad thing for a company but now it is starting to be looked at as a good thing and that is a terrible thing.
Guess who gets the worst in Chapter 11 filings? Employees. Vendors. Creditors. True believers. I once started and ran a company that spent a lot of money on behalf of a big client - under contract - who then surprised us all by filing Chapter 11. I got stuck with the bills which I paid. I never got paid by the offending party. They just went their own way in reorganization and the newly organized company a few years later hired one of our competitors on the go forward. They got paid up front. I went to court to try and get 30 cents on the dollar. I remembered thinking “Let no good deed go unpunished” and “I can’t believe Chapter 11 was established for big companies to screw little companies.” I paid my bills to stay in business.
Many times management and customers come out unscathed in this process. They get a second chance to screw it all up again.
I am concerned that the US Government is using Chapter 11 as a positive tool for change for a company. The US Government will ultimately be a partner with General Motors. They are making Chapter 11 filing fashionable and telling consumers not to worry. This isn’t about liquidation. This is about undoing mistakes of the past; fixing cost structures; erasing bad decisions; and letting us all start over. ”No blood, no foul.” The Government won’t let GM fail but it doesn’t matter if there is a bunch of collateral damage along the way.
Employees in the Union; creditors; vendors - you may have to take one for the team but don’t worry. GM will come out of the process stronger and better for it with Government help and aid. Customers should keep buying their cars. Don’t worry. They will be in business to service you and our warranties are good.
I have never liked selected memory. This is where you can trust us - our contracts, like warranties, are sacred - and this is where our contracts aren’t worth the paper they are written upon. We will decide based on what is in our best interest not yours Mr. Partner or employee.
This use of Chapter 11 is dangerous. It shouldn’t be a positive and easy thing to consider. It shouldn’t be encouraged and looked at as a good thing. I own one GM built car. I will now have to reconsider whether I would ever buy another one again. The way this filing is being handled is offensive to me. And I bet to you, too.
Ted -
I couldn’t agree more. Having been on both sides of Chapter 11 filings (as an employee of a big company that filed and another time as an executive of a small company that suffered) Chapter 11 is a lose-lose for all involved. Even customers. I’m personally of the belief that if a company files Chpt 11, then ALL senior management should be relieved of their duties. They don’t get a chance to make bad decisions again. Start fresh and give someone else a shot…if you must. But I think there’s a reason mastodons went extinct.
Well said! This should be published as an op-ed in The New York Times and The Washington Post. It also should be forwarded to the White House.
I will never buy a GM vehicle after this debacle. The fact that the government has chosen sides (the big company gets to screw the smaller one) is pretty sickening as well.
As I watch this, I am curious about how this will affect Ford… Ford should be able to win the PR battle in this thing, but going forward, Ford will not have the US government in the background of every negotiation, whether it be with the union, suppliers, or whoever. On one hand, one would think that there would be some consideration given because of Ford’s refusal to accept bailout money, and avoidance of bankruptcy, but on the other hand it will not have the Obama administration there to make an offer that can’t be refused.
The interconnectedness of this whole thing is frightening.
Learning from mistakes is one thing. I’m rooting for GM, because I have a family member that works for a GM dealer, but I feel like there’s more hope rooting for the Orioles to win the World Series this year. I don’t think GM is learning from their mistakes, and I don’t think they are capable of change. I really don’t like the “bailout,” because it’s delaying the inevitable. Using a past quote you’ve used “if you don’t like change, you will like irrelevancy even less.”
Mr Leonsis,
With the above stated, what if your opinion on the Phoenix Coyotes filing for Chapter 11 in a backdoor attempt to move the team to Hamilton ON before the July deadline for next season’s schedule?