GM: A Drive of a Lifetime

The very fact that GM declared bankruptcy this morning and the Dow surged 229 points, (or 2.6 percent) means one of two things, or even both. First, it could be that we have come to the point in economic globalization where a collapse of one of the constituent parts does not necessarily send the rest of the structure crumbling. That could be the case, and if so, no one can argue that the Chrysler/ FIAT merger haven’t given us a new template in high powered mergers and acquisitions.
The other possibility (the painful one that most of us will pray it isn’t so) is that General Motors became obsolete a long time ago, and the quintessential American thing to do is to throw money at it and pretend the problem will go away. That possibility is not a nice one, not my personal favorite of the two, but of course it’s a real one. It is no secret that the foreign manufacturers have taken over and in fact led the way in technological advances to much of our dismay. It is as if General Motors’ game plan never went beyond Flint, Michigan, especially in an ever changing world when you know that the day of reckoning will eventually show up.
So, on this bright and beautiful Monday morning, General Motors filed for bankruptcy protection. Two months ago, anyone would have suggested that no way GM will bail out with a Chapter 11.
The tricky fact is that when it comes to the economic timeline, two months is eternity. The fact that Chrysler threw itself under the bus, and is still surviving, is enough impetus for President Obama and just about any level headed American to suggest that GM follow their lead. Of course, GM is a whole different beast because of its international entanglements. A beasts is a beast nonetheless, and the American taxpayer wasn’t going to foot a bill to an investment it has absolutely no idea on how it will recoup its investment. So this morning, the Dow Jones Industrial dropped GM off the list. Shocker! After 8 decades of business, not in my wildest imaginations did I see that coming. Nothing spells ‘changing times’ than United Auto Workers’ union eager to make concessions after concessions to save American jobs. Of course even if GM’s top guys show up next month and tout some funky numbers at the rest of us clueless bunch, we know that it will take a long time for them to completely emerge from the bankruptcy’s impact. The Obama government will ‘pour’ an additional $30 billion into GM to fund operations during its reorganization. Pouring sounds like the perfect word here, because that is a 60 percent stake that we may never see again (worse case scenario).
I hate to sound like the end–of-days prophet on television so I have to add that there were some good signs also . . . The fact that the governments of Canada and Germany (according to Obama’s press conference this morning) are chipping in some cash to relieve the pain seems to suggest that the recent global crisis has taught us all a valuable lesson; that which affects one, affects us all. Well, back in 1908 (somewhere in that vicinity) GM said it was the cornerstone of America’s success and it may have been true for the past 8 decades. Pardon my cynicism, I think the world is changed a lot since 1908, and America too. All of us would have been wailing today if the GM bankruptcy sent the Dow 229 points the other direction. The point here is, be thankful the recession happened when it did, and at least for Obama’s lucky breaks (I know republicans will chew my neck off if I dare say Obama’s ingenuity and guts)

Pontiac, Saturn, Hummer and Saab brands are gone bye-bye. Pontiac and Saturn’s, well I can live without them. Hummer, I thought that car was completely useless and borderline idiotic. Saab, I like Saab. The next year will see more job losses and dealerships shutting down, but we can only hope that the collapse of GM (to some degree) would imply a resurrection of another, probably Ford, to absorb the heat. After all this is a God-believing country where we say when one door closes, another opens. GM just shut a bunch of its doors, and only time will tell what happens next. Of course this is the one instance that even the anti-God folks will let me slide with this thought. That is another story for another day. So there is the pain for workers, the drama for the 650,000 retirees and their family members who depend on the company for health insurance and many more suppliers down the line goes on.
Now what?
The endgame is that GM Emerges leaner and meaner (better that is). The new GM will have only Chevrolet, Cadillac, GMC and Buick. Honestly, I can do without the Buick and the corny Tiger Woods commercials also. The new GM will have only $17 billion in debt, which is much better than $54.4 billion it owed as of March 31. So you see, its not all bad news.
Where it goes from here is a story that no one knows the ending yet. What we know for a fact is that once upon a time, where GM went, America went. The times has certainly changed and that probably is a memo to every business corporation in America (as well as all my rich buddies) that the idea or longevity and staying power is not as sexy as it used to be a century ago.