Monday, June 1, 2009

Government Motors

Get it? GM? Government Motors? Hi-larious.

Even though it has been national news for most of the day, it is still surprising to me how little is being made of today's bankruptcy filing by GM. And not just because I am a bankruptcy lawyer and this is the kind of thing that I see every day. But because one of the most recognizable and iconic corporations in American history, a bedrock of American capitalism for the last 100 years, now needs permission from a bankruptcy judge to take a whiz (well, maybe not, but they do need court authority to pay wages, take out a loan or sell the company - all of which they are doing).

Lots will be written about the rise and fall of GM by people who know a lot more about it than me and who care a lot more about it than me, but two things stand out in my mind.

1). Elections have consequences. John McCain never, and I mean never, would have let this go down the way it has gone down. I am not passing judgment here - time will tell if active government intervention in the auto industry saved it, screwed it, or neither. I just think this is perhaps one of the most stark differences between what an Obama administration looks like and what a McCain administration would have looked like. I am not sure what a President McCain would have done, maybe smaller scale investment, or an orderly liquidation, but nothing of this scope requiring this level of governmental participation. I am not calling the guy a socialist (and, for my part, letting GM fail would have been a mistake, just as it was a mistake to let Lehman go down), but he is certainly an activist.

2). The world has changed. (No shit). Returning somewhat to my original observation, a GM bankruptcy filing would have been unthinkable 20, 10, 5 and probably even 2 years ago. The company had its problems (and frequently kicked the can down the road rather than addressing them), but was one of a handful of distinctly "American" companies (like GE) that were considered "bankruptcy-proof." That Lehman Brothers, Chrysler and GM could all succumb to bankruptcy within less than 12 months of each other is staggering, and would have been laughable even in the beginning of 2008.


Open Bar said...

Your GM post makes me want to take a BM. LOL!

Side Bar said...


ChuckJerry said...

GM has not had a viable business model for the past 40 years. It was inevitable that they would go bankrupt.

Something on the order of 60% of their expenses go towards things that have nothing to do with making cars like health care payments and pensions.

The union threw them over the barrel 50 years ago when the shortsighted managers of the company agreed to let workers retire at 50 years of age and get health care and pensions. It was an enormously short sighted agreement by the management.

The only way, the only way, GM can remain viable is if the union gives up literally everything they have agreed to and they rewrite their collective bargaining agreement from scratch.