Yoshikami: GM Unwound — The New Rules
With General Motors now negotiating with debtors and union leaders for a drastic revision to current agreements, it's time to stand back and reflect on the bigger impact of this drama.
The most obvious impact of an imploding auto industry is the potential loss of hundreds of
thousands of jobs that hang in the balance as GM's fate is determined -- this cannot and should not be underestimated -- GM's bankruptcy will hit workers across America very hard.
But there is another consequence of great importance.
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Let's be clear about the goal of this reorganization: The elimination of significant debt and renegotiation of once sacred union contracts that at one point seemed untouchable.
While it is clear General Motors does not take these obligations lightly, they are going to take action. The Auto Task Force (the U.S. Government) has mandated that change must occur towards viability. This was not a suggestion. It is a requirement for additional funds that the automakers needs to avoid complete collapse.
It was a mandate to be sure, one the Auto Task Force delivered with little ambiguity. There is an important precedent here. The Government is actively involved in extracting concessions from stakeholders.
And what about other industries that take governmental assistance? What are the rules for current contracts and agreements?
Different industries, not just automakers, could very well clamor for changes to be competitive in the global marketplace. What will the government require as they seek to protect taxpayer funds? Will they replace leadership? Thats possible according to a recent interview with Treasury Secretary Geitner.
This is a wake-up call for Corporate America, investors, labor, and all stakeholders. Times have changed and the rules of the game are being rewritten as we speak. Everything is on the table in these difficult economic times. And if a company has a partner in the U.S. Government, any
suggestion might be less of an option and more of a requirement.
Michael A. Yoshikami, Ph.D., CFP®, is Founder, President, and Chief Investment Strategist of YCMNET Advisors, Inc., a registered investment advisory firm (www.ycmnet.com). Michael oversees all investment and research activities of YCMNET. He is a respected lecturer speaking frequently on market issues, tactical asset allocation, and investment strategy. He appears regularly on CNBC and CNBC Asia and can be reached directly at email@example.com.