GM: Now They Are Talking Bankruptcy?

[MP-AI-BOT]

Last November, I posted a rather negative view of the proposal to bail out General Motors (“Bail Out GM? No Way”). It wasn’t a good idea for a number of reasons, I said. Keeping the company going with government money is essentially a vote of confidence that the current management team — the one getting the bailout — can return the company to viability. Moreover, GM is a classic case of ‘permanent failure’ in which its importance to key stakeholders (employees, dealers, communities) keeps it going rather than its ability to create a customer.

Well, here we are, five months later, and what have we learned? For one, the shocking collapse in demand for cars has continued, affecting all car companies but particularly GM. Second, the restructuring plan submitted by GM — as we might have predicted — wasn’t far-reaching enough to have a sufficient impact. Finally, we learned that the folks in charge of bringing the company to its current state of non-viability were probably not going to be the ones to turn things around. These are just some of the surprises facing the taxpayers whose money is going toward the bailout.

So the CEO of GM has been asked to leave, and now reliable experts are saying that bankruptcy may be the only option for GM. The sad part is that dragging out the march toward what is looking like almost certain bankruptcy is chewing up even more resources, further weakening the company and undermining confidence in our system’s tools for addressing truly significant problems. Some of these wasted resources could have been used to buffer some of the painful social adjustment costs for those who will really suffer from a bankruptcy — GM’s employees.

Photo credit: vetcw3



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