No, not this time

November 17, 2008

Boy, couldn’t see this one coming, huh?

Bankruptcy. Red ink. Painful shakeout.

Those terms, normally associated with old-line manufacturing, now are popping up to describe what was seen just three years ago as a sure bet for Indiana: high-tech ethanol plants.

Ethanol producers across the Midwest are being squeezed by falling prices, tight credit, overbuilding and the volatile market for corn. As a result, many have seen their profits shrink and their stock prices fall. Several have slid into bankruptcy and have scrapped deals and projects.

Some of the problems with ethanol were foreseeable (we’re messing with the food supply to fix the fuel supply, after all) and some were not (the financial collapse is hurting everyone). But it was certainly a risk, one that would not even have been possible to take without government subsidies. Why am I scared about the auto bailout? Not because government screws up just about everything it touches. Because people who should know better just keep thinking maybe next time government will get it right. Like a bunch of damn Cubs fans.

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4 Responses to “No, not this time”

  1. Larry Morris Says:

    Help me here, … what I don’t understand about the “probable GM failure and buyout” – if GM files for bankruptcy, plants won’t close and people won’t get laid off – at least not right away and perhaps never. When bankruptcy is filed a company gets to go to court and try to re-structure it’s debt, possibly sell off some parts to other healthy companies, and hopefully come out with a better plan closer to reality. What am I missing ? Some economists have speculated if we don’t let it fail now and go through this process, we’ll just throw money at it and it will probably fail in a couple of years anyway, …

  2. Bob G. Says:

    Sure glad not all that many people read my blog over a YEAR ago when I said ethanol was a “flash in the pan”.

    As for the car companies…they HAD a chance to correct things…oh, say about 35 years ago…
    (obviously weren’t paying all that much attention to the world, were they?)

    Those wishing to hear the obligatory “I told you sos”…the line forms on the LEFT.

    😉

  3. Steve G Says:

    And if you want to see how how well the federal government runs a company, just look at my employer – The Postal Service. A contradiction in terms.

  4. gadfly Says:

    Larry …

    When (not a question) GM files bankruptcy, the issue of continuing operations is resolved as long as operating funds are available to pay currently incurred bills, which is the purpose of tying the hands of past creditors..

    The trick is to generate cash at a rate sufficient to meet the capital demands of the company because low stock price, low-rated bonds and no borrowing power will sink a capital intensive industry faster than anything else.

    GM must first of all blow up the auto workers union because the current contracts guarantee unsustainable future obligations. Chevy, Buick and Cadillac will survive with fewer models and the company will keep a single truck line.

    Pelosi, Reed and Obama may slow the demise of the union but in the end the union will go or GM and the union will go.


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