| 777 | Date: Thursday, 28 Oct 2010, 18.36 | Message # 1 |
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User ID: 777
Joined: 18 Oct 2010
Messages: 1035
| No one likes the sound of "Government Motors." Not General Motors executives; not the Bush and Obama administrations, which bailed out Detroit; not the taxpayers who found themselves holding 61 percent of America’s largest automaker.
Now, with GM reporting its most profitable quarter in six years and heading toward an initial public stock offering, the government will begin sloughing off that investment and recouping a chunk of the $50 billion borrowed by GM -- and, eventually, restore the General to its private-company status, along with (hopefully) the consumer good will that the bailout and years of short-sighted management cost GM.
Edward Whitacre, the former AT&T chief handpicked by the Obama administration to lead GM, will step down at year end. He’ll be replaced by Daniel Akerson, another former telecommunications executive who’s currently head of the powerful Carlyle Group’s global buyout division. This makes Akerson the fourth GM CEO in the past 18 months.
Whitacre, who always intended to make GM a short-term assignment, appears to be making a graceful exit. GM, which lost nearly $13 billion in the second quarter last year and a staggering $88 billion between 2005 and its bankruptcy filing last year, actually managed to earn $1.3 billion in the second quarter of 2010. That’s only half the profit Ford earned, but we’ll take it. Auto sales are beginning to recover -- barely, but the signs are there. GM has dramatically trimmed corporate fat in terms of costs, white-elephant brands, inventory and factory capacity. The company is rolling out several well-received and strong-selling products, from the new Chevy Camaro to the Buick LaCrosse. And if GM can make money with auto sales at their worst levels in decades, signs point to a huge bucket of profits when people get back to work and start buying new cars again -- something that is, reliably, the first thing Americans do after a recession.
Granted, unless GM’s IPO knocks everyone’s socks off and the stock reaches unheard-of heights, the government will never get back every dollar it invested. Accounting aside, though, it’s increasingly clear that the bailout was the right thing to do. And that, at least for GM, is working out better than anyone could have hoped. (Chrysler’s long-term recovery still seems more a long shot.)
Detroit’s most vociferous critics almost seem as if they would have preferred that GM and Chrysler go under just to win some ideological brownie points, even if the companies’ dissolution would have thrown millions of middle-class Americans out of work -- not to mention pushed the nation over the cliff into outright depression. Make no mistake: The choices were bailout or bust. Without the federally backed rescue, GM and Chrysler would be out of business today, their factories idled, their workers, suppliers and dealers crowding the unemployment lines. No bank or investor was willing to provide them credit. No other automaker was throwing them a lifeline.
Remember, too, that the bankruptcy and rescue were key to killing the competitive virus that was killing Detroit. Bankruptcy freed GM and Chrysler from financial cement shoes that were dragging it to the bottom: The UAW had retiree pension and health-care costs that, compared with Toyota's worker obligations, added $1,500 to the price of every GM car that rolled off the line. No company can profitably compete on that kind of skewed playing field against a regular competitor, let alone against a powerhouse like Toyota.
GM still isn’t out of the woods, not by a long shot. When you’ve been wandering for decades, it takes years to find your way out. For one, the American auto industry has shed nearly 30 percent of its jobs in the past few years, and that kind of “efficiency” is cold comfort to those thrown out of work. That said, GM does need to get smaller, leaner and meaner to survive. Unless you take some kind of weird pleasure in watching once-great companies and their workers suffer, hoping for Detroit’s comeback -- and its attendant taxpayer payback -- seems the only possible response.
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