GM and Chrysler

Using the taxpayers' money to temporary bail out GM and Chrysler will be a classic moral hazard. Anway, even if they lend out the money, they will eventually ask for more money again. Looking at AIG will tell you what will be the outcome of bailouts.

This time should be a time to cut loss and minimise damage. Be realistic, not all jobs can be saved. Instead of letting it bankrupt and have a million of loss of jobs, minimise the number of job losses to maybe half a million. It is painful but at least half will get to keep their job.

Next, there should be a possibility to merge the 2 frail giants together. The purpose is not to cut down on the general workers. The purpose is to cut the high cost of management. If a CEO pay is $20 million, cutting them by one will decrease the number of workers made redundant. This is to ensure that the people still receive cash flow. The main objective is to ensure that everyone still gets to have a shelter and have meals.

I can assure that those executives will argue that top management create value more than what they get paid. But at this point of time, due to macro conditions, they can do little to add value. Besides, they were slacking for the past few years while Toyota and Honda gained market share. Shame on you GM and Chrysler management.

All existing management should have their bonuses kept unpaid and into prepaid accounts so that when they really perform, the huge chunk of bonuses will then be paid out. The purpose is not to pursue short term profits but maximise the firm's value.

The management have been incentivised by the potential government intervention so much that they create publicity about the impact of them going bankrupt. They really did a great job on this because most people around the world roughly knows the impact of them failing and creating lots of Hoo Ha. If only they did this in running the business. It would have been brilliant.

At this point of time, unions shouldn't go on strike, because times are bad. They should strike in good times rather than in bad times. Mutual understanding makes everyone better off.