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.
Posted by: GMMAN | Jun 1, 2021 1:05:56 PM
I don't know about the USA but a large part of the big threee's problems came in Canada when our Government signed a trade deal that would allow Asian and Korean car manufacturers to build and sell cars in Canada. On it's own this is not a bad thing however, our North American car companies were not allowed to build and sell cars in these very large Asian and Korean markets in return. This increased the amount of suppliers without increasing access to a larger market which could not fail to decrease the big three's market share.
Posted by: Oldtimer | Jun 1, 2021 2:14:37 PM
As noted by a previous poster, the Governments of the United States, and Canada, should have insisted years ago that opening the North American Market to imports from Asian Countries, had to result in a corresponding opening of those Asian Markets to North American Vehicles. The fact that this did not happen, meant that the Asian Manufacturers gained an unfair advantage over their North American counterparts, an advantage they continue to enjoy to this day. Not that the Governments of the U.S. and Canada are major shareholders of two manufacturers, they may see the inherent wisdom in setting strict quotas for the marketing of vehicles of Asian origin, wether manufactured in North America or not. After all, the profits from the sale of these vehicles still go offshore.
Posted by: L H | Jun 1, 2021 2:17:01 PM
I'm pretty sure GM sells the Buick line in China and is VERY successful.
i hope GM comes out of this better, leaner and meaner. they need to reprice the line-up and make it competitive. the products are VERY good. they just have a bad rap right now. anyone who gives them a chance and drives one, you will be impressed. some other good things about GM vehicles
-excellant ride
- better quality than in the past
- OnStar
- better/long warranty than before
Some excellant vehicles:
- Silverado/Sierra
- Malibu
- Impala
- Camaro
- Tahoe/Yukon
- Cadillac CTS
- Cadillac Escalade
- Cobalt
Posted by: LILBRD | Jun 1, 2021 2:20:37 PM
Do we now change the name of GM to GOVERNMENT MONEY or GOVERNMENT MOTORS?
Posted by: GMC Guy | Jun 1, 2021 3:22:03 PM
I would like to thank the GOV`TS of both the USA and Canada. for helping out on this problem. I am looking forward to seeing a better GM not that they weren`t great before but lets look to the better years to come. AS for so of the bloggs that I have read GM does have a number of great Vehicles Unfortauly they let some go when the Pontiacs leave here at the end of the year The G8 and the Vibe were both great cars but anyhow Heres to GM and Lets put on a good show so we can BE NUMBER AGAIN
Posted by: GM | Jun 1, 2021 3:27:11 PM
Funny, all the claims about GM being saddled with legacy costs, that caused the sompanies failure. Well, most of the same legacy costs will remain with a smaller company. May be people are begining to realize that the pensions as not a part of the companies operating budget, but have been paid for over the years the employee's have been working for GM.
No the real blow is the medical coverage in the US. The US is the only country in the Western world not to have a universal medical system with coverage. So the import company's have an advantage of about $1500.00 per vehicle produced over the US manufactures as they have universal health care which US manufactures have to build into the cost of production. So this is a gov issue, not a union or company issue.
Overall, GM failed through stupid choices and very poor management. Yes the unions also had their problems, but GM ultimately, signed the bottom line for the contracts. If they were too rich, may be GM should not have agreed or fired those negotiating on GM's behalf.
In the end, management run the company and the blame will always pay with the captain ultimately. Like it or not.
Posted by: GM | Jun 1, 2021 3:33:31 PM
So GM failed. That is a shame.
However, consider the economic impact on buying a non North American car. All imported plants have everything manufactured off shore and only provide assembly jobs here in Canada. That represents less than 5% of the cost of the product. Obviously importers with no facilities here, that's 100% of th work contracted out.
When you consider there are 7 jobs for every manufacturing job and the economic multiplier factor of the money running through the system is also 7 times, then you can see the harm and significant damage to the economy that is being done by buying imports.
You only have to look at the de-industrialization of England to see our future. That started the same way with Honda bikes. Once all the bike manufactures were gone, the price of the bikes quadrupled. SO be warned, this is our destiny here, if we don;t look at things differently.
Posted by: GM | Jun 1, 2021 3:42:45 PM
Why complain about GM getting a bail out. Have you looked at your hydro bills over the last few years. Ontario Hydro really messed up in managing the generation business. That was an easy resolve. They simply added a debt retirement charge to your monthly bills. That's because they are a crown corporation. As for the cost of that debt, no one complained about the Hydro workers all making in excess of $100.000.00 per year or bad management, they simply just paid the monthly debt reduction charge imposed by Hydro, now OPG.
Every worked out what that true costs was or will be. Look at your bill, multiply that by the services in Ontario, then complain about the GM bail out. The tax payers are getting a better overall deal with GM than Hydro.
As for pensions, ask your MP how many years he has to work before he gets a nice 80% pension. 5 years, compared to a GM worker who need to put in 30. Again, the tax payers pay.
So please, look at things in reality and also look at the bigger picture.
Posted by: Ted | Jun 1, 2021 3:45:57 PM
I have followed the GM story since 2004, and have always been an owner of the Pontiac label. I am impressed with what I have driven and have tried other brands on test drives but I am an enthusiastic driver and find that I can't find the combination of Fun and performance in other vehicles without taking out a small loan to repair them, so I truly hope that GM will bounce back better than ever. As a former union member I do realize that unions can cripple companies and hopefully the new agreements being made will include the calculations at time of retirement and costs of benefits in the long term..75 years from now. I would have went for the bankruptcy myself if I were in the same position as well.
Posted by: Roy Weston | Jun 1, 2021 3:46:07 PM
General Motors is now dead. What will emerge from bankruptcy protection, if anything does emerge, will be a small automaker struggling to survive against the new giants of the industry. Leaner and meaner it may be, but it will also be lesser.
Posted by: Jimmy | Jun 1, 2021 6:31:25 PM
I would hope that after this debacle, all those workers who think they deserve over $50 per hour to screw on a fender might think of how lucky they really have it. Now everyone who makes real big money -like workers from McDonalds, Starbucks, Tim Horton's, Walmart, Landscapers, etc (you get the picture).. - now have to subsidize these guys. The same guys who would strike just because the company won't give them a 10 cent raise when they already make $50+ per hour. All you auto folk should be ashamed of yourselves. I don't see any of you ever wanting to help those who lose their jobs and make less than $10 per hour.
Posted by: edd | Jun 1, 2021 6:55:55 PM
Hey Jimmy......the workers definately dont make $50 per hour.....get your facts straight before you spout off. Who do you think helps fund the United Way , EI and the such? Get your head out of you know where before you post anywhere!
Posted by: Dennis McKinnon | Jun 1, 2021 7:14:34 PM
Worked on North American fleet as technician for 26 years! Want to hear some horror stories? Own 7 year old Nissan Sentra.Have not so much as changed a bulb. I rest my case!
Posted by: yooooooo | Jun 1, 2021 7:19:54 PM
I know people that made $20 an hour for years and years and knew how to manage their money better and get into investments and buy investment properties and rent them out etc etc etc.
The unions crushed GM many of their workers make far more than $20/hour and mismanage the money so they're always living beyond their means and living on credit. Typical factory workers.
Posted by: yooooooo | Jun 1, 2021 7:23:50 PM
Typical factory trash. Overpaid and living beyond their means, terrible with credit, always in debt. It seems people from other professions like administrative jobs can manage their lower wages alot more effectively and get into investments and starting their own business and what not. Typical factory trash.
Posted by: Dennis Beifus | Jun 1, 2021 7:36:14 PM
What a huge waste of money. If the big three north american auto makers had moved with the times and started producing better quality and more energy efficient vehicle this fiasco may have been avoided. Typical political vote buying. The auto makers are located in Ontario where the most votes are to be had. What a coincidence. I like my Toyota better than the north american crap anyway.
Posted by: Tim | Jun 1, 2021 7:52:13 PM
Oh the typical story about how absolutely perfect the Japanese vehicles are! My last two cars have been American and they are excellent if taken care of properly. I presently have a Pontiac Sunfire 2001 with 255000k on it and I have had no issues with it whatsoever except for replacing the brakes, tires, and a few other small things (wear and tear items). I wouldn't mind a bigger car but this car just won't break down so how can I get rid of it. American cars had their issues in the 90's but they have been very good for the last nine years. A lot of people still think that they have a lot of issues. I've seen a lot of people have trouble with their new Japanese cars so they're far from perfect.
Posted by: canaman | Jun 1, 2021 9:23:21 PM
Great that you like your Toyota but dont call the others crap.By the way, I hope you like your job too, it might be the next to be outsourced
Posted by: Dan | Jun 1, 2021 9:38:08 PM
It would be the same since the company is still running by the same management. They should replace the top 10 with new blood who would bring in a new vision for the company. The same people will screw up the company again once it has emerged from bankruptcy protection.
Posted by: jord | Jun 1, 2021 9:42:46 PM
just to put my two cents worth in i think that gm will come back without such a strong union and will bloww the other big car manufacterers off the charts b/c it was the union that ripped them apart to begin with. b4 the union got dtrong they were awesome then they just went down.