Originally Posted by
GunsOfNavarone
I sure hope AA does not act like GM has post BK.
GM hasn't had a long term recovery. GM, led by its CEO who is a investment banker, is making money the Wall Street way, via financial cash flow and not through its core, manufacturing.
A prime example of this was the purchase last year for 3.5 billion, a sub-prime auto lender. GM has gone back to selling full size SUVs and pickups to people who can't pay for them. GM had to purchase a sub-prime lender to do this, as they were unable to finance car loans to people with bad credit externally. In a few years, thses SUVs will be repoed, and this will cause the resale vaule of GM SUVs to crash again, and the cycle of GM on its way back to BK returns.
GM gets to book the full profit upfront on a SUV sold to a sub-prime borrower, and also book the juice loan origination fee. Makes for huge paper profits in the short term. But over the long term it equates to another trip to BK.
You are really grasping at straws. The US government made a successful loan/investment in the US automakers. It saved the industry, many jobs, and helped avert an even deeper recession. Unless someone is cheering for failure, and some are for political reasons, it is difficult to conclude that this wasn't the right decision.
That said, I don't think US government investment in AA is justified - if they go under or are merged into US/DL, demand would be picked up by other domestic carriers. It would be anti-consumer but the aggregated disruption to the economy would be relatively small particularly since AA is a distant third in market share.
It will be interesting to see what transpires. Best of luck to the affected employees.