One of the hardest parts of my practice is sitting down with new clients who aren’t quite ready to face the truth. They have, in many cases, worked hard and tried their best but sometimes things just are not going to work out the way they want.
Understandably these clients do not want to have to give up and file bankruptcy. Often they will also have to give up a home and in any case they will have to face the mental burden as well as the credit related burdens of the filing. But in the end it gets them past difficult times and allows them to move on to the future.
I think that it is time for the automakers in Detroit to face up to this same reality and file Chapter 11.
I know that this will be a difficult decision which will cause problems for many people. Union members are understandably reluctant to support this move because it would likely result in a restructuring plan that would reduce pay and benefits. Retired workers would face a similar problem with regard to their retirement and pensions.
On the flip side, investors would face a major loss in their investments, suppliers would be concerned about getting paid for their products and buyers and dealers would wonder about how long warranties would be enforced and how long parts would be available.
Indeed it is quite possible that the restructuring would see some of the troubled companies shut down entirely, or several of them merged into one new corproration. Pain will be spread out around a large group of people.
But the reality is that we are no longer at a point where we really have a choice. We can continue to pour billions of tax dollars into the current companies but the fundamental problems will not go away. Just as people need to restructure to make their budgets work so these companies need to work out their own problems.
I am obviously not a financial expert and I do not pretend to be the one with all the answers. But the auto companies today are like a man with major heart disease trying to resolve his problem by cutting out fast food. In order to survive he has to face the reality of needing surgery. The process is not easy, it is not painless, but in the end it is required.