Success without failure is impossible. . .
February 18, 2009
The headlines today read, “GM needs billions to avoid failure.“ Isn’t it plainly obvious that GM has ALREADY failed? When Congress agreed to inject $17.4 billion into the big three it threw a wrench in a system that had served our country well for decades. The critics, including myself, suggested that without an orderly restructuring in bankruptcy it was a certainty that the car companies would be back for more money. Yesterday GM suggested they would need more than $30 billion in government aid - if they don’t get another $2 billion next month they will run out of money in March - and if they don’t get another 2.6 the month after that they will run out of money in April. Do you see the pattern? GM HAS failed.
Bankruptcy is the ultimate reset button. It ensures that the underlying business - i.e. building cars - can continue. This means that consumers get their warranties honored, auto workers keep their jobs and the US can have a healthy auto industry once again. Of course shareholders will be wiped out, the unions will have to accept new contracts and creditors will take a big haircut. Destruction is painful, but often is a necessary part of business just as it is in nature. Forests that are never allowed to burn become unhealthly - forest fires bring new life and new growth.
Our problem now is that our government is changing the rules. No one knows what to do anymore. In the past if your business was insolvent you filed Chapter 7 (liquidation) or Chapter 11 (reorganization) and life went on. Today we have ZOMBIE instituions that should be reorganized, but instead we are simply smothering potential new life with truckloads of fake money we don’t have. We won’t start seeing success and growth in our country until we allow for the possibility of failure. Failure is important to our success - call or email your Congressman and demand they allow companies to liquidate or reorganize when they become insolvent.
