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June 01, 2021

Will GM emerge leaner, meaner after bankruptcy?

By Jason Buckland, Sympatico / MSN Finance

In Rocky III, reeling from Mickey’s death and having been hammered by Clubber Lang in their first fight, Rocky Balboa suddenly finds himself at a crossroads.

His world turned upside down, he must choose whether to fight or fold, accept honour or defeat. With Apollo Creed by his side, he has a decision to make.

While the stakes are different and the physiques noticeably inferior, this is pretty much where we stand now with General Motors. After a bankruptcy filing has now culminated its almost historic corporate downfall, the auto maker finds itself at the defining point of its legacy.

It isn’t, surely, tough to find the sceptics. Open your front door and you can hear the calls for GM’s head, one angry armchair politician after another fed up with the “corporate greed” and “inflated wage and benefit packages” that finally sent the North American institution into Chapter 11.

But, listen closely, and there are voices who say GM is more likely to come out of bankruptcy leaner, healthier and largely freed of the burden of its massive debt. There is even talk GM could begin to see profit again this  year.

There’s perhaps no more vehement support for GM’s resurrection than that of David Olive’s piece in yesterday’s Toronto Star, one that suggests a “humbled” GM can learn from bankruptcy and bounce back much like Fiat SpA did similarly five years ago.

Fiat, of course, has now been rumoured to be Chrysler’s saviour, yet can a shamed and embarrassed GM – after losing the crown of world’s biggest auto maker to Toyota after a 77-year sit on the throne – really wash its sins clean and make amends?

According to Olive, you bet. To support the argument, he points out that GM remains the U.S.’s largest manufacturer and still offers engineering and technological breakthroughs – like the much-hyped Chevy Volt, which is expected to be the messiah of eco-friendly cars.

There are other positive signs for the embattled GM, too. It will emerge from bankruptcy, so says the Star, with only about one-quarter of its corporate debt and has been able to offload “the burden of active and retiree health-care costs that have added an average $1,500 or so to the cost of each vehicle GM produces.”

Indeed, the unions have made tremendous concessions and GM’s front office has reason to be confident. Now finding himself a controlling partner in the auto maker’s dealings, U.S. President Barack Obama has been a proud advocate that GM can rebound. A marketing consultant the Star interviewed made sure to note how important Obama’s endorsement of the restructured General Motors will be in its potential to turn things around.

It certainly seems as if there is an infrastructure in place to ensure GM does rebound, but it’s also worthy to note – amid any forecast of its redemption – just how majestic was the corporation's fall.

Over the past four years, shareholder value has disappeared from $30 billion to just $702 million and now much of the company is owned, for lack of a better word, by North American governments. I don’t think it’s much of a stretch to call it an awesome stroke of irony that GM, a beacon of modern capitalism and what was possible without oppressive government interference, now answers to the very bureaucracy it excelled despite.

Regardless, the groundwork has been laid for GM to work its way back to the top and, as CEO Fritz Henderson reminded us recently, auto companies rarely die.

Will General Motors make good on its quest for atonement? That, I don’t know. All I know is that, with Apollo in his corner, when Rocky faced Clubber Lang again in the rematch, he knocked him out.



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Gordon PowersGordon Powers

A long-time fund company executive, Gordon Powers now heads up the Affinity Group, a financial services consulting firm. Gordon was a personal finance columnist for the Globe & Mail for many years, has taught retirement planning...

James HaversJames Havers

James is the senior editor of MSN Money living in Toronto. He has worked for the Nikkei Shimbun (Tokyo),,, Canadian Business and other publications. Havers turned to journalism after teaching overseas.

Jason BucklandJason Buckland

The modern-day MC Hammer of money, Jason can often be seen spending cash that isn’t his with the efficiency of a Wilt Chamberlain first date. After cutting his teeth as a reporter for the Toronto Sun, he joined the MSN Money team with...