The New York Times has published the definitive piece on the General Motors situation this morning. In it, Andrew Ross Sorkin has laid out the case for a Chapter 11 bankruptcy proceeding and, in my opinion, laid the foundation for the bridge President-elect Obama referenced in his 60 Minutes interview. No constituency including shareholders, management, and the UAW is spared in this piece. In fact, Sorkin argues that the only way to save GM and Chrysler is for all of these constituencies to feel immense pain. His recommendations:
1. Management must go. He’s right. The fact that GM CEO Rick Wagoner admits to not preparing for Chapter 11 in a different article in today’s NYT demonstrates the magnitude of his incompetence.
2. It’s over for the UAW long-term benefits and pension package. This union has definitely contributed to the downfall of the American auto industry. The leadership has done a great disservice to its membership by spending every ounce of energy hanging on and very little of it figuring out what the bridge for these workers should be.
3. Shareholders including Chrysler’s Cereberus need to be wiped out and the government needs to be first in line with is money in a debtor-in-possession financing. Look, shareholders are free to buy and sell their ownership in a company based on their perspective on management’s ability to grow the company. These shareholders bet incorrectly. The government needs to set precedent here. If we bail companies out, it so to stabilize the economy, not to give shareholders or debtholders a “get out of jail” ticket.
I had floated Chapter 11 as the appropriate way for GM to emerge from this process last week. But Sorkin spent his whole week thinking through his immensely important column. That column will be read by the most influential people in the decision-making process and I really believe that the NYT has played a constructive role in articulating and synthesizing the case for the restructuring in a way that everybody can share.
It’s heartbreaking to read stories like the recent ones in Silicon Alley Insider. The NYT is in financial trouble. Sure, they can probably navigate the short-term issues by selling off assets, but long-term their business is deeply threatened and sooner or later they will have to make broad newsroom cuts. This is bad for New York and the rest of the country. The burden is on entrepreneurs to help figure out how we can charge for certain services on the internet.
Maybe the NYT should cut a deal with Tipjoy. I would tip the great newspaper and one of the top five brands in my life $100 today.