Originally Posted by Jag_Warrior
Well, there's a key difference between the IRL and GM though. GM has returned to profitability, while the IRL has never turned a profit. GM is actually paying its own way at this stage based on operational revenue and the IRL continues to exist off of the subsidies provided by IMS.
I respect the opinion of those who say that they are against government assistance to private and public companies. As long as they are also against the existence of the Fed and the FDIC, along with R&D grants and loans given to defense contractors, that position is consistent with a pure libertarian philosophy. But in the specific case of GM, there were two options available to the company in mid 2009: Chapter 7 (liquidation) or Chapter 11 (reorganization). If GM had been liquidated, all operations would have ceased. All of the suppliers connected with the business would have ceased to be paid, and any money owed would not have been forthcoming until the court disbursed proceeds from the asset sale - probably months or years into the future. For businesses that had a larger portion of their business with GM, they would have essentially been out of business. No bank would have continued to provide revolving loans based on invoices to a customer in liquidation.
In the case of a Chapter 11 (which is what GM declared), there needs to be financing in order to continue operating the company, while the court decides the who, the what and how much will be paid to various creditors. That's typically called "debtor-in-possession" financing. In 2007, there were at least two dozen firms that could have probably handled a bankruptcy the size of a GM Chapter 11. But by late 2008/early 2009, there were less than half a dozen... and they weren't chomping at the bit to do big deals either. As we should all remember, the credit markets were essentially frozen at that point. Though some may disagree with the tactics used by the administration, the fact remains that the government simply filled the role of debtor-in-possession financier for GM during the accelerated Chapter 11 process. It is impossible to successfully carry through on a Chapter 11 unless financing can be secured. A company can declare Chapter 11, but the judge will convert it to a Chapter 7 liquidation if said financing cannot be secured by a given date.
All it takes for a car not to be salable is a single missing or defective component. I've seen thousands of cars on various holding lots around Detroit and Warren that couldn't be shipped, for reasons that would amaze most people. So if a supplier of bolts to GM fails, and they also supply Toyota, Nissan and Ford with some other fastener, their production also comes to a halt with that supplier's demise. And I've heard people say that the other OEM's could simply move that component to a new supplier. First, a tool move in ideal circumstances can take 6-12 months. And second, if the process is a patented one, only the tools belong to the OEM... not the process itself. So they can take the tools, but they can't (legally) duplicate the process somewhere else if that's the case.
So, three paragraphs to say: an unfunded Chapter 11 by GM would have led to a Chapter 7... and that would have created the biggest cluster #### that this country has seen since the late 1920's.
As for the IRL (though there was a time when I was one of those who wished for it to die), it's all we have now. And unless it gets itself back on the road to popularity, if it dies, there probably won't be anything for fans of AOWR to watch outside of club and vintage racing.
jm2c
