Joshua Rauh and Luigi Zingales University of Chicago Booth School of Business Ultimate Stupidity

Time shows that the predictions of the high esteemed Rauh and his excellency Zingales are piece of garbage and horse manure.

 

 

 

If the US government provides GM with a $25 billion loan that allows it to

continue operating under current conditions for another year or two, the money would

simply be wasted and the problem postponed. GM would still be completely unable to

survive in the long term. We are very sympathetic towards the pain of the hundreds of

thousands of workers whose jobs are at stake. It is precisely because we are concerned

about their long term welfare that we oppose a bailout. Throwing money at a drug addict

only enables the addict to continue abusing drugs and ultimately shortens his life.

Similarly, government money aimed at a company that needs restructuring enables it to

avoid taking responsibility of its future, condemning it to a certain death.

Unfortunately, in this case the transformation of part of the debt into equity, as

proposed by one of us for banks, is not a solution either. GM’s problem is not a shortterm

liquidity crisis. A debt-for-equity swap would provide temporary relief from GM’s

short term obligations, but at the cost of continuing the bleeding and delaying the

restructuring. GM would just continue to run down the value of its assets. The only

difference with respect to a government bailout would be that investor money instead of

taxpayer money would be wasted.

We believe that a Chapter 11 bankruptcy filing for GM is the only possible

 

 

solution. However, we recognize that in the current environment, there are several likely

inefficiencies associated with the bankruptcy process. In particular, if we do nothing and

wait for GM to file for bankruptcy, which would likely happen in a month or so, we

would risk a bad outcome of the proceedings, namely an inefficient liquidation of the

company and a substantial amount of social disruption from the sudden loss of jobs. We

therefore propose that the government oversee a prepackaged bankruptcy for GM that

would give the company the restructuring it badly needs and avoid

Joshua Rauh and Luigi Zingales

University of Chicago Booth School of Business

Business Opportunity Issues

ELEMENT PERFORMANCE CRITERIA


1 . Identify trends and opportunities in the financial services industry 1.Information on current and emerging needs of the market and the organisation is analysed in consultation with others to identify marketing opportunities



2.The business plan is reviewed to identify organisational objectives



3.Emerging trends and external influences on the financial services industry are identified



4.Opportunities to enter, shape or influence current and/or potential markets are identified and researched



5.Potential new products are identified and researched



6.Entrepreneurial, innovative approaches and creative ideas are explored for their potential business application and contribution to the business



2 . Investigate marketing and product development opportunities 1.Opportunities are identified and analysed in terms of their likely fit with the organisation's goals and capabilities



2.Opportunities are evaluated to determine its impact on current business and customer base



3.An assessment of external factors, costs, benefits, risks and opportunities is used to determine the financial viability of each marketing opportunity



4.Probable returns on investment and potential competitors are determined



5.Marketing opportunities are described and ranked in terms of their viability and likely contribution to the business



3 . Assess legislative compliance of marketing opportunities 1.Legislative and regulatory guidelines applicable to marketing opportunities are identified



2.Marketing opportunities are examined for compliance with relevant legislation



3.Marketing opportunities not meeting compliance requirements are rejected or modified accordingly



4.Marketing proposals clearly define relevant legislative compliance issues



4 . Evaluate required changes to current operations 1.Changes needed to current operations to take advantage of viable marketing opportunities are identified and documented



2.Organisational changes which manage an increased/different customer base include provision for continued quality of service to existing customers



3.Resource requirements for changed operations are identified



4.The viability of making changes to current operations is determined and communicated to key stakeholders



5 . Develop marketing proposals 1.Marketing concepts are clearly described and defined



2.Viability assessments for marketing concepts are provided



3.Marketing strategy is detailed



4.Proposals are prepared in a manner that assists in the decision making process for marketing development



5.Additional information is provided to support marketing proposals as required