General Motors Death Watch 60: Bankruptcy is Good for the Soul

Robert Farago
by Robert Farago
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general motors death watch 60 bankruptcy is good for the soul

It's official: bankruptcy is good for GM. In their recent ass-covering exercise for the Securities and Exchange Commission (SEC), The Ford Motor Company listed 'adverse effects from the bankruptcy or insolvency of a major competitor' as a significant risk to its financial future. Translation: if GM goes bankrupt, The General will slough off its excessive labor costs and become… wait for it… competitive. So competitive, in fact, that Ford reckons GM's products would gain an important price advantage. Well how about that?

Obviously, there's more to it than that. Ford's SEC filing also alerts investors that GM's Chapter 11 could destroy The Blue Oval's supply chain. Both automakers share a large number of mission critical parts suppliers; if GM's submersion sucks vital parts makers into bankruptcy– which it most assuredly would– Ford will lose access to the bits and pieces it needs to build Fords. In fact, it's hard to see how Ford could survive a GM bankruptcy. Or why it would want to. The automotive community is slowly (and quietly) beginning to conclude that bankruptcy is both the only thing and the BEST thing that can happen to GM, and, by extension, Ford.

To review: GM can't build competitive vehicles at a profit. It's got too many models, brands and dealers. Too much bureaucracy, waste and inefficiency. Its labor costs are too high, its capital investment is too low and its supply chain is about to snap. And GM can't change a thing. The United Auto Workers' contract prevents any wage or benefits cuts, and precludes any alteration to their Byzantine working practices. Legal obligations also stop GM from trimming its distended dealer network or euthanizing fatally wounded brands. To survive, GM needs to lower its costs and revamp its business. And it can't do that without Chapter 11.

Oh, OK, it could, if everyone pulled together: investors, management, unions, dealers, suppliers and customers. But they won't. It's not in their nature. And even if it was, GM CEO Rabid Rick Wagoner is singularly incapable of tackling this monumental leadership challenge. And even if Rabid Rick could unify all the negatively charged particles in the GM universe, it's too late. The General doesn't have enough cash to weather the turbulence between business-as-usual and the end result of a difficult and dangerous overhaul. Nobody's going to give them the extra money– at least until The General declares bankruptcy. As Ford publicly acknowledged, only bankruptcy can give GM the wiggle room it needs to implement necessary changes to the way it goes about its business.

So be it. As I said at the beginning of this odious odyssey, GM will emerge from this multi-decade debacle a smaller, leaner and better automaker or, preferably, automakers. And that's why Ford's worried. Of course, they're not the only ones. The prospect of revolutionary change is making everyone involved a little, well, crazy. We're already seeing some strange behavior emerge from GM World: a public pledge to end national incentives followed by the announcement of a "March madness" sale, exciting new cars playing one-two-three green light, red light, green light; a Board Member and Car Czar squabbling over a moribund Swedish car brand, etc. It's the End of Days, Detroit style.

As GM's fate reaches its terrifying conclusion, workers will get all the attention. The moment the axe falls, whether by a slow strike or a lightning default, the spotlight will shift to "the little guy." Needless to say, the media will depict them as victims. They'll highlight the most desperate cases and blame their fate on management incompetence, outsourcing, the Japanese, the Chinese, foreign trade policy, currency manipulation, oil prices, George W. Bush, the anti-GM press, anyone and anything other than the workers themselves. Never mind that a huge number of these workers performed two hours work for eight hours pay. Never mind that thousands were willing to receive full pay and benefits for doing nothing whatsoever. It will always be someone else's fault.

Understand this: GM's workers are no better or worse than any of the other players in this sad saga. All of them work for a company where personal responsibility doesn't exist. Where everyone thinks they deserve to be well-paid, no matter what they or the company does, or doesn't do. Yes, there are plenty of good people within GM. And here's the kicker: most of them can't wait for the company to file. They want to see an end to the waste, laziness, greed, corruption, inequality and stupidity they see around them. When GM becomes the world's largest bankrupt, these good men and women will be satisfied, knowing that there is justice in the world. And they'll be hopeful; that something good will replace something bad.

Robert Farago
Robert Farago

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  • Spitfire - p.culligan Spitfire - p.culligan on Sep 19, 2009

    wow, the fact that all of this was written more than 3 and a half years ago is impressive. Well done RF

  • Psarhjinian Psarhjinian on Sep 20, 2009

    This one was mostly correct, except that the focus on the plight of the Poor Little Line-worker never happened. Part of this is because the bankruptcy happened in the middle of the recession and thusly goodwill among the general public was lacking (if you got downsized from anyone from Microsoft to Wal-mart, it's hard to feel sorry for a GM lineworker and their severance package), but mostly because one thing GM desperately didn't want people to notice was that the operating costs weren't the problem. What goodwill they have left centers on the their being the victim of circumstance. Start focusing on truth about, well, anything about their business but certainly on their claims about being broken by labour costs and currency manipulation and such and suddenly how badly managed GM has become is instantly apparent. It wasn't the recession. It isn't the Big Bad UAW. It certainly wasn't evil, slant-eyed currency manipulators as Bob Lutz liked to trumpet. It's the generations of corporate aristocrats and the yes-men they float on that brought them down. The other annoying part of this editorial is that, when it was written, I was completely comfortable with GM biting the dust. That they waited and flailed and continued to burn money like gasoline until suddenly letting them fail wasn't an option (well, to some) was either brilliant strategy, or sheer dumb luck on the part of GM management. Going bankrupt during boom-time would have exposed them as the incompetents they were

  • Theflyersfan Some of my extended family have lived in Orange County/Anaheim area since WW2 ended. They were in Anaheim before Disney and when there were actually orange groves. When I lived out there, I battled up from Ventura County down there a few times a month for dinner and ballgames and it was always interesting to hear from the older members about what things were like out there before it all really blew up. And how starting in the 1950s, they could no longer see the mountains anywhere and the sky was frequently this sick brownish haze. And then starting in the late 1990s, when things really started to clean up, they said there were now more days when they could see the mountains again compared to not, and it was really only the Santa Ana winds that brought in the gunk from the Inland Empire into the basin. There's still a long way to go - during the pandemic, it was wild seeing videos of how clean the air got when so many people were working from home, but it shows that even with all of the heavy industry there, it can be done. I know everyone is all over the map when it comes to climate change and causes or if it's happening, but regardless of views on that, I think we can all agree that burning less gasoline and diesel helps everyone breathe a bit easier when we don't have as many smog alert days.
  • Fred It's always someone else's fault. Now where is my bonus?
  • Canam23 I moved to Los Angeles in 1968 and half the time the air was unbreathable. It is 100% better now thanks to the work of the AQMD. If you remember, when the first pollution controls were mandated in the 70's, Detroit said it was impossible to meet them. The Japanese just started working on the problem and just did it. All the tougher laws to mandate air pollution have resulted in not just cleaner air for our children, but also much more efficient engines in our vehicles. So Stellantis, I'm not buying it.
  • Theflyersfan Nope. Has nothing to do with Gladiator sales falling off of a cliff and having 5-figure discounts. Or...YTD 2023 compared to last year:Compass +7%Wrangler -14%Gladiator -31%Cherokee -25%Grand Cherokee +6%Renegade -35%Wagoneer -31%Grand Wagoneer: -14%End of 3Q 2023: 490,106 Jeeps soldEnd of 3Q 2022: 541,297 Jeeps sold490K is still a decent number of expensive SUVs sold, especially Grand Cherokees, but it's still a decline. And people want the 4xe models, so that could reverse the trend if they crank more of them out. But let's blame the government for everything. It'll lead a news cycle on any red hat network.
  • VoGhost California is the reason Dodge and Chrysler were starved of new models for the past decade. OK...