What is amazing about GM is that in many respects the standards of competence a small startup would be held to are far beyond the expectations we have had for our major auto companies, and particularly GM.
For example, can you imagine a company surprising investors or other stakeholders with the idea that they don’t have enough cash to last the year?
It appears to me that GM management and indeed union leadership, have labored under the belief that there was just no way for the company to fail, and so they made decisions based on that amazingly foolish assumption. The situation is discussed in today’s New York Times, where they quote and discuss Rick Wagoner, Chairman and CEO of GM.
Stoic and unemotional in public, Mr. Wagoner has been rigidly protective of G.M.’s strategy to expand internationally while downsizing its North American operations.
“This is an issue of the whole auto industry, if that becomes under severe pressure, the impact on the whole U.S. economy will be devastating,” Mr. Wagoner said in an appearance Sunday on a television news program in Detroit.
But the killer is Mr. Wagoner being quoted as saying:
Our basis business is in as good a shape as it’s been for 30 or 40 years.
Truly astonishing stuff. A company that has lived for the last six or seven years on the idea of ever larger and more fuel inefficient cars, a company with labor costs so high that before they start making the car they have to add around $2,000 to fund the pensions of retired workers, a company whose Vice Chairman called the Toyota Prius a “publicity stunt”, a company losing $2,000,000,000 per month has a “basis business” that is in as good a shape as its been since the 70’s?
Heaven help us.
What I would like to see is the destruction of GM, but I think it needs to be done without bankruptcy. I’d like to see the component parts sold off. Essentially, I’d like to see a chapter 7 style liquidation without a chapter 7 liquidation. I don’t think that GM can be reorganized under a chapter 11 style revamp. The people running the ship are not sufficiently tapped into reality. And I don’t think that is just senior management. I think it permeates the company and the union. Liquidating the company is the only way of breaking the back of the wacky union clearing the deck of calcified management and starting to rebuild what we can.
Unfortunately, the trauma of a real chapter 7 would, I think be devastating to the psyche of the country at this time, and would have far too many unintended consequences. But on the other hand, GM certainly cannot continue as it is. It is walking dead.
None of this can happen before a new administration comes in and I certainly don’t want to see GM die before a proper plan can be put together, so something, short term must be done. But the long-term plan must be the liquidation of GM into the hands of other smarter automakers.