I've never pretended that I have a deep understanding of how corporate bankruptcy really works. But after seeing what has been happening of late -- two of the big three automotive manufacturers, plus going through it with my own employer -- I've come to question the purpose, the fairness, and the ramifications of the process.
In golf they call it a "mulligan". That's when you hit a tee shot you don't particularly care for and just decide to hit another one that you will like better. Don't count the bad one against your score that you are ultimately judged on, just pretend like it never happened. There seems to be similarities in the Chapter 11 reorganization bankruptcy process. Don't worry if you have made bad decisions, engaged in contractual obligations that have not turned out well, or lacked the vision to invest for the future. Just press the "11" button, flush it away, and start with a clean slate.
With the automakers, it seems like they had to turn to the courts to get them to do what they were unable to do for years regarding unfavorable union contracts. The courts get to be the bad cop? In the meantime, how many little suppliers end up recouping pennies on the dollar of their receivable balances, thus jeopardizing their own future. What about people like the man who lost his wife and mother of his kids in a horrific accident where she burned to death after the gas tank exploded? The product liability lawsuit?.... sorry, dismissed with a bankruptcy filing. Pretty heartless mulligan.
I always assumed that the word "bankruptcy" had dire consequences. Once filed, the company would have trouble securing funding, keeping paying customers, acquiring new ones. But what I have seen lately makes me wonder if the downside to filing is anywhere near as dire. When you hear that automakers might emerge after only a month or two as a newer, leaner organization built for success, or when my employer plans for a quick turnaround into a bigger, better, stronger, faster, organization, it makes you wonder why more folks don't jump on the old Mulligan train rather than have to make all those difficult and unpleasant decisions.
In golf they call it a "mulligan". That's when you hit a tee shot you don't particularly care for and just decide to hit another one that you will like better. Don't count the bad one against your score that you are ultimately judged on, just pretend like it never happened. There seems to be similarities in the Chapter 11 reorganization bankruptcy process. Don't worry if you have made bad decisions, engaged in contractual obligations that have not turned out well, or lacked the vision to invest for the future. Just press the "11" button, flush it away, and start with a clean slate.
With the automakers, it seems like they had to turn to the courts to get them to do what they were unable to do for years regarding unfavorable union contracts. The courts get to be the bad cop? In the meantime, how many little suppliers end up recouping pennies on the dollar of their receivable balances, thus jeopardizing their own future. What about people like the man who lost his wife and mother of his kids in a horrific accident where she burned to death after the gas tank exploded? The product liability lawsuit?.... sorry, dismissed with a bankruptcy filing. Pretty heartless mulligan.
I always assumed that the word "bankruptcy" had dire consequences. Once filed, the company would have trouble securing funding, keeping paying customers, acquiring new ones. But what I have seen lately makes me wonder if the downside to filing is anywhere near as dire. When you hear that automakers might emerge after only a month or two as a newer, leaner organization built for success, or when my employer plans for a quick turnaround into a bigger, better, stronger, faster, organization, it makes you wonder why more folks don't jump on the old Mulligan train rather than have to make all those difficult and unpleasant decisions.
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