Fastlane Knows Best

Think bankruptcy might be an option worth exploring for General Motors? Worried that the Volt might have been a tad too ambitious? Clearly you must be sick in the head. Reasonable people just don’t think that way. After all, why listen to bankruptcy lawyers and university researchers when you can get the truth straight from GM. You think those eggheads know more about GM than GM? Think about it. And while you’re suspending your disbelief, head down to GM’s Fastlane blog. You’ll get your facts straightened out faster than you can say “Stockholm Syndrome.”

First up, Fastlane takes on those who suggest that perhaps the responsible legal solution to GM’s problems lies in bankruptcy court. In a post titled “ Why Not Bankruptcy?,” GM’s Tom Wilkinson takes issue with Harvard Professor Mark Roe.

Bankruptcy reorganization takes cash – lots of it. For a company like General Motors to operate in Chapter 11, it would need massive debtor-in-possession loans. With credit markets frozen, there is realistically only one source of such loans – the federal government. We estimate loans needed to reorganize GM in Chapter 11 could top $100 billion, far more than the out-of-court fix envisioned in our restructuring plan.

Yes, but if we keep bailing GM out without addressing major issues that can not be resolved outside of bankruptcy court (debt, labor, dealers), then we’ll just have to pay that money eventually anyway.

Wilkinson also brings up the “nobody will buy from a bankrupt automaker” canard, conveniently ignoring GM’s sales free-fall.

While “clearing the decks” sounds refreshing, the reality would be anything but. The bankruptcy process would bring financial hardship to millions who rely on GM – and upon whom GM relies. GM suppliers, already pushed to the edge by the recession and credit crisis, would in many cases follow GM into bankruptcy, jeopardizing the flow of parts GM needs to produce vehicles – and generate revenue. Fewer health care dollars would have a real impact on employees and retirees, as well as on local health care providers.

All of which is already happening, and will continue to happen as long as the government requires “viability” as part of the bailout deal.

Moving on to the Volt, GM’s new car czar, John Lauckner, refutes a recent Carnegie Mellon study that shows the Volt’s 40 mile EV range to be not cost effective. Sort of. Lauckner argues that constant recharging of lower-capacity batteries would be “inconvenient.” As opposed to dropping $40K on a Chevy. Which is awesome.

He also says the Volt’s batteries are cheaper than the study suggests. Again though, if you aren’t making a profit at $40K MSRP, how cheap can the system be?

Finally, Laucknet argues that incrementalism of the kind advocated by the Carnegie Mellon team is the only reason GM isn’t competing with Toyota.

Some years ago, GM didn’t introduce hybrid technology as quickly as we should have because it wasn’t considered ‘cost effective’ at the time – and we aren’t going to make that mistake again.

So never mind the naysayers, set the controls for the heart of the sun. What could possibly go wrong?