"The unions and the auto companies have been unable to put a deal together that fundamentally restructures the industry. It needs to get done. The only way it's really going to get done is in bankruptcy court. They should have done it six months ago they should do it now"
About this Quote
Tim Pawlenty frames the automaker crisis as a failure of voluntary bargaining between management and unions to deliver transformative change. Bankruptcy, he argues, is the venue that can impose what negotiations could not: cutting debt through cramdowns, rewriting or rejecting costly contracts, closing excess plants and dealers, and shedding legacy obligations for retiree health care and pensions. The staccato urgency of lines like "It needs to get done" and "they should do it now" insists that delay only burns cash, erodes bargaining power, and shrinks what can be saved.
The context is the 2008-2009 freefall in auto sales, when GM and Chrysler teetered and sought federal lifelines. Washington debated whether bridge loans plus incremental concessions would suffice, or whether a swift, court-supervised restructuring with government debtor-in-possession financing was necessary. Pawlenty lands firmly with the latter camp, a view prevalent among many Republicans: resist open-ended bailouts, use the discipline of Chapter 11 to spread losses across stakeholders, and give the companies a clean start.
Saying the only way it is really going to get done is in bankruptcy court is not just rhetoric. Chapter 11 uniquely empowers a judge to bind dissenting creditors, reject labor and dealer agreements, and reallocate losses to shareholders, bondholders, and retirees. Those powers come with real human costs: job cuts, reduced benefits, and community disruption, along with fears that bankruptcy would scare off consumers and destabilize suppliers. Yet within months the Obama administration orchestrated managed bankruptcies for Chrysler and GM that accomplished many of these steps. The firms emerged smaller and more solvent; the UAW accepted concessions and took equity via a retiree health trust.
The statement captures a crisis-management philosophy: when incrementalism fails, decisive restructuring through formal legal process becomes the only credible path, and waiting only makes the cure harsher.
The context is the 2008-2009 freefall in auto sales, when GM and Chrysler teetered and sought federal lifelines. Washington debated whether bridge loans plus incremental concessions would suffice, or whether a swift, court-supervised restructuring with government debtor-in-possession financing was necessary. Pawlenty lands firmly with the latter camp, a view prevalent among many Republicans: resist open-ended bailouts, use the discipline of Chapter 11 to spread losses across stakeholders, and give the companies a clean start.
Saying the only way it is really going to get done is in bankruptcy court is not just rhetoric. Chapter 11 uniquely empowers a judge to bind dissenting creditors, reject labor and dealer agreements, and reallocate losses to shareholders, bondholders, and retirees. Those powers come with real human costs: job cuts, reduced benefits, and community disruption, along with fears that bankruptcy would scare off consumers and destabilize suppliers. Yet within months the Obama administration orchestrated managed bankruptcies for Chrysler and GM that accomplished many of these steps. The firms emerged smaller and more solvent; the UAW accepted concessions and took equity via a retiree health trust.
The statement captures a crisis-management philosophy: when incrementalism fails, decisive restructuring through formal legal process becomes the only credible path, and waiting only makes the cure harsher.
Quote Details
| Topic | Business |
|---|
More Quotes by Tim
Add to List
