TTAC Called It: Lutz Admits "Bankruptcy" is BOD's Voldemort
As a website that started a G eneral Motors Death Watch on April 3, 2005, and published its 208th episode this morning, TTAC is no stranger to the idea that GM has been heading for a Chapter 11 bankruptcy for quite some time. We’ve also reported that The General has refused to contemplate the possibility, nay, utter the word “bankruptcy” for lo these many years. About a month ago, we brought this Voldemort problem to our reader’s attention. And now GM Car Czar “Maximum” Bob Lutz brings it to ours [via the Detroit Free Press]. “Bankruptcy for GM certainly is not an option,” Lutz announced at the Public Relations Society of America. “The board has never talked about it… It’s not something that we consider would be constructive or would solve any problems for anyone.” While you’d expect an ex-marine aviator to tell the world “failure is not an option,” the idea that GM’s Board of Bystanders are sleep-walking towards disaster is as predictable as it is lamentable. [thanks to Polishdon for the link]
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The Board of Directors represents the shareholders, and Bankruptcy is not good for them, even if it is Chapter 11. However, for GM as a carmaking entity Bankruptcy is the best choice. Given GM's financial situation I have to agree with dean that the Board is grossly negligent if they are not secretly discussing the best strategy for protecting shareholder equity under Chapter 11 reorganization. If GM goes chapter 11 they may have some amazing cars in five years, if they are bailed out by the government they may not have any cars in five years.
Well the shareholders are ultimately and not so distantly concerned with GM as the car making entity. Bankruptcy isn't a magical thing; you can be bankrupt without declaring bankruptcy (GM is pretty much there).
Perhaps the board is talking about bankruptcy, and for all the right reasons, have not looped in Senor Lutz.
"The Board of Directors represents the shareholders" Only in theory, but not in practice. The Chairman of the Board of GM is the man who drove Eastman Kodak off the cliff for heavens sake! Now he has presided over the destruction of TWO iconic American companies. Shareholders don't even get a say in who is on the slate of candidates for a board. The notion that a board represents the public shareholders is a convenient fiction, and everyone inside the higher levels of corporate America knows it.