General Motors

This was today's New York Times article on GM's new restructuring plan that was revealed today. GM will become a drastically smaller company than America has come to know. It will be 50% owned by the US Government. A mix of bondholders, creditors, and union interests will make up the 40%. The remaining 10% will be left to the currently shareholders. These are historic times when the single American corporation that symbolized the manufacturing might and industrial ingenuity of the United States for decades is brought to its knees and its survival is in the hands of the government.

How did it come to this? How did GM, the once leader of automobile manufacturing, the 50% US auto market dominating, the industrial engine that led America to victory in World War II, the company that raised a generation of middle-class America, how could a legendary company come to a defeating end such as this. GM did not fall overnight. It was a fate that was destined over decades of neglect, ignorance, and poor decisions.

There is plenty of blame to go around starting with GM executives, all of GM's executives from the post-WWII period. It was not Rick Wagoner alone. He just happened to be in the wrong position, at the wrong place, at the wrong time. All those predecessors are to blame because as I said, GM's problems were decades in the making, decades of neglect, ignorance, and poor decisions. Every decision to lobby congress to tariff cheap imported cars was a poor decision. Every decision to fight greater fuel efficiency standards was a poor decision. Every decision to produce gas guzzling SUV's because they produced greater short-term profit in the short run was a poor decision. All of GM's past executives who were more concerned about short-term profitability instead of the long-term viability and sustainability of GM are to blame.

The unions are to blame for GM's downfall and they have in essence, shot themselves in the foot. They have saddled GM with so much legacy cost and impossible hourly wage contracts that GM was being choked to death. What were Union leaders thinking when they forced GM to pay costs and wages that were not sustainable in the mist of cheap foreign competition? When Unions began seeing GM as a piggy bank and ceased to understand it as a business vulnerable to competition, it was game over for both of them.

The shareholders are to blame for GM's failures and they all lost because they were not paying attention to what was going on with GM before it became too late. No owner of a business neglects their business but is always concerned about how the business is doing. Shareholders failed to be vigilant and long-term oriented when it came to dealing with the management of GM. Again, there is no one GM shareholders can blame but themselves for paradoxically neglecting their own business.

GM will now become a very different company than it is now, if it will exist at all. I am deeply pessimistic about what the government can do to change the company. The government has a poor reputation in managing anything. But the country has been cornered into this predicament and there is not good option left. If GM fails, America will never be the same again. Maybe some serious pain is what this country needs to get back on its feet. I do not doubt America's resilience in times of crisis and hardship. It is in those times that America shines brightest and I believe America will do so again, with or without GM.