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: MW | Jun 1, 2021 9:48:49 PM
Hey Mr. Beifus /Jimmy,
The pair of you make me sick. I read and read all the anti union / north american B.S everyone is so quick to write. I doubt either one of you has taken the time to remember what industry carried this great country of ours for so long and how union wages raise everyone elses wages along with them. (wait until unionism falls, and I only hope it doesn't, because you think non union jobs pay sh*t now!) As for quality I now drive a Chevy truck, but have owned imports in the past, ever pay to replace a Nissan Pathfinder A/C unit? How about a Nissan Quest Catalytic Converter? A Quest computerized valve stem perhaps? Maybe an Altima electric motor mount? I think you get the picture, none of these were cheap and ALL Cars and Trucks will need repairs. My DOMESTIC truck is a works hard, just like the men and women who make them!!
Oh yeah, by the way I am a non-GM empolyee, Just a proud Canadian.
Posted by: sleeka | Jun 1, 2021 9:56:10 PM
Read or skimmed over many of the comments. Let's restate a fact that is hugely important in this regard. Competition is good. Whatever the endeavor, competition should make the other person look over his/her shoulder once in awhile. So the teary eyed mumbo jumbo about how we let Japanese and Korean car makers into North America without a two way street is busted. Here's a few reasons why. Ever go for a drive and see, at the same intersection a McDonald's, a Wendy maybe a Burger King. The food industry knows competition is vital. You make (or appear) better, you sell better.
Nobody complained that VW, Porsche, MG, Jaguar, etc. sold here, because they were making the same crap as we were. When Honda and Toyota first came over, no-one complained because they were crap as well. When Hyundai and Kia came over, no-one complained because they were crap.
Herein lies the problem. While North American car unions were busting the nuts of the domestic 3, these Asian INTRUDERS were improving. Why didn't somebody go to GM or Chrysler's CEO 15 years ago and say we have a problem, we are losing market share? Answer, Big Bad Wolf Syndrome. We'll huff and we'll puff and we'll blow your house down.
Go into 1000 American households and look at the brand of their television. They didn't invent them, but having owned a Zenith and an RCA, you will find Hitachi and Sony in my home.
If you build it, they will come. Chrysler, GM, and Ford should have realized this a long time ago.
Posted by: G Lewis | Jun 1, 2021 10:58:09 PM
How short the memory is of the failure of Government Intervention in the European Auto, Financial and Heavy Industrial sectors : Driven by the economic contraction following a brief boom of the 1950's, the governments of Europe universally begin intervention into all failing sectors of their economies, the net result of which was economic stagnation - and absurd policies to keep the Heavy Industrial sectors operational (such as British Steel keeping mills open without material orders, and British Coal stockpiling coal on the ground without markets).
Evenually, faced with rising unemployment - and concepts such as work-sharing and 30 hour weeks to re-distribute the few jobs that the economies could generate - the european states begin in the 1980's to dismantle their state industries, and with the regulated of the EU - cut free a good many state indusries to 'sink or swim' - nowhere was the contraction more brutal than in France, and when all said and done, two auto giants emerged out of the 1/2 dozen - without real competation, and open to endless state subsidies the only encouraged the continuation of the same mistakes that had caused the corporations to fail to begin with.
The US is not immune to the same fate - The Europeans were plenty smart and equally well intending when they opted for state intervention. We need to be very careful.
Posted by: Randy Montgomery | Jun 1, 2021 11:17:16 PM
GM will survive but will be smaller. Yes, competition is a good thing, that is why most of GM products are at least equal or better than most Asian cars. Maybe now that the gov'ts are a shareholder of GM and Chrysler they will finally do something about the unfair trade practices which have seen autos dumped here from Asia but almost no autos built here are allowed into the Asian market. We need fair trade, not just free trade. Just can't believe the comments of so many that seem to have a lot of negative things to say but know nothing about the auto business. To believe everything that the media spews is just plain STUPID. Autoworkers still make a lot less than $50. per hour and work a lot harder than" screwing a screw into a fender". After spending 32 years at GM, why would I retire at 52 yrs. if I was making $50-$75 an hour and just sitting around doing virtually nothing. The only reason I left was to get out before I was totally crippled from pounding of assembly work.
Posted by: rb | Jun 2, 2021 12:05:41 AM
put this into perspective buying a foreign built car is an insult to can-americans
for every foreign car purchased here represents 1 job lost for 1 man for 1 year
if that job is yours then you may eat your foreign car
Posted by: Warren Gross | Jun 2, 2021 12:19:39 AM
The choice to carry four brands under a 'leaner' GM is interesting...
Chevrolet... Makes sense!
Cadillac... Makes sense!
Buick... (Don't get me wrong, the Ford Fusion I purchased a year ago was nearly a Buick Allure... I love the brand and the product) in this market that has wharped phenomenally from where it was even ten years ago... is this product necessary? You want a family car, buy a Chevy... you want a luxury car? buy a Caddy.
GMC... Other than having the big massive trucks (small Semi's), how are they any different than Chevy trucks and SUV's??? Just run a heavy duty line of chevy's (the small Semi's, etc) and bingo!
I understand that they nead to lean up... but are they really doing that???
Posted by: pumpdoctor | Jun 2, 2021 7:35:12 AM
What a robbery that goverments need to get into the car business!!! If it where any other industry the market would decide who would survive, not the goverment. Two of the North American manufacturers didn't see the writing on the wall while their administrators where being paid performance bonuses and outrageous compensation! On the other hand FORD hasn't received any goverment handouts. Why? Quite simple. They simply streamlined their offering, designed and sold card that meet with todays needs. No surprise this process started 8-10 years ago. As for GM and Chrysler,they simply continued on their path of destruction making cars that couldn't compete againts the imports in quality, performance and design. Last I checked, the goverment doesn't make up for my employers risk in conducting business and the market place decides wither we survive or not.
Posted by: Survivor | Jun 2, 2021 6:46:56 PM
You know what makes me sick, you arm chair blowhards that don't know your a.. from a hole in the ground. Many of you must think alot of your selves. Why complain about what some one else has, why not question why you don't have more. I can imagine many of you look in the mirror and can't stand what they see. Get a life losers. Oh and by the way buy your import crap, send your money overseas to a nation that was dinning on their POW's not that long ago or I guess that means nothing to you gutless garbage mouths. GM Ford and Crysler should offer you bunch of ignorants an opportunity to work for a week on the line during night shift. I doubt any of you could make it through a shift and you would probably cross thread everything.
Posted by: G Lewis | Jun 2, 2021 9:40:56 PM
One of the rules of economics is a strange observation that 'bad money drives out good money'; in other words, the currancy that is inflating will be used the most, and all other moneys will remain out of circulation but increasing in value.
The US committment to nearly $1.2 Trillion in debt relief, financial sector bailouts, and auto industry bailouts will in time put enormous infation pressure upon the American dollar. By streight calculation the US dollar is ready to inflate a minimum of 7% just to cover the debt taken on by the Federal Government since November 2008.
This will drive foriegn currancies into hyperspace - and none of this looks good for Canada - I predict that a rising Canadian dollar will deliver the final blow to the Canadian Auto Industry - and in the end, Canadian Auto's and Canadian Auto Parts will be outpriced out of the global market. The US auto industry might survive with generous US federal hand-outs, as the inflation of the US dollar will at last make US auto products attractive on the world market - but not so with Canada. The Canadian auto industry may bee doomed - even though the Canadian PM just announced another $12.5 billion to GM coffers.
Posted by: Lisa | Jun 3, 2021 12:02:47 PM
Why insult people who chose to buy imports? Is that going to make GM better? No it sure isn't! You Complain that one import car bought is 1 job lost in Canada/USA, yet have you looked at your clothing labels, where are they made? Where is your food bought from? How about your computer and electronics? Hmmm? Are you all buying everything local? I am pretty sure the answer to many of those questions is no! So don't knock on someone because they purchase an import car! And by-the-way, for those who bash buying "import," there is a rather large Honda Plant that is located in Alliston, Ontario, and I do believe we have a Toyota Plant as well! So think before you leave comments about buying import, because generally, those imports are actually made here!
Posted by: Jeff | Jun 3, 2021 4:22:35 PM
Well I have a honda going on 5 years and not one problem and not one complaintone of the best investments I ever made. The company I work for used to own GM trucks and every week at least one was in the shop then back 2 weeks later, absolute crap from the bottom up. We used to like GM trucks but needed reliability, we now have a fleet of Tundras going on 3 years and no breakdowns, better ride and hold up in the field even better than any of us imagined. It is too bad the industry went this way, but the nail is in the coffin for GM and it's the tax-payer who in the end gets the shaft.
Posted by: Only Get Worse | Jun 4, 2021 9:44:18 AM
I have had 15 straight years of paycuts. My pay has dropped 28% over that time and my benefits decrease every year. Yes, I am part of a union. The GM situation will quickly worsen. The workers will get hammered with paycuts "to enable the company to remain competitive" so management won't be making any sacrifices. The cuts will continue over time. After a few years you think the guy on the midnight shift will care if he cross threads anything? especially when he will struggle paying his mortgage? A lot of people I work with have lost everything - their houses and families (due to stress) and will be in debt until they die. Management continues to increase their bonuses every year and have never taken a pay cut. Now they are applying for pension reforms. It will never end. This is the reality of the recession. The people who created it will feel no effects from it. Our CEO just talked to the employees "times are tough and you are all overpaid!!" Here we go again. I make 12 cents an hour more than I did 25 years ago and I'm overpaid?? I really feel for the GM workers because I have seen their future. It's not pretty.
Posted by: Lorne from Alta | Jun 6, 2021 5:32:09 PM
Im hoping GM does well. Iif they get it right Id gladly buy my next truck from them.Two conditions though...Youve got to have a feature that shuts off those driving lights.Tundras and Dodge Rams can so obviously its legal so do it.Secondly ,a Harper majority.If Sothern Ontario votes liberal again after the country bent over backwards for them.....
Posted by: tim conway | Jun 8, 2021 5:49:36 AM
uh huh. yep.
everyone's talking like the north american auto companies are absoolute failures.
forgetting the fact that g.m. was the global sales leader up untill the credit crisis.
like, duh, they sold more cars than anyone else, even with unfair trade agreements. yet, idiots still insist they sold less or don't produce products that sell(shall we throw facts out the window?).
and please, will someone address the fact that legacy costs remain a theory as long as the company does not collect or pay out for these costs. north american autoworkers make nearly as much as import workers. the companies clearly do not have the money for the pensions etc.....they are renegging on their agreements. the money they are supposedly collecting IS NOT THERE. where did it go? not into the workers pockets. not into reduced prices for the consumer. if that money is not there, then it was NEVER collected, or (brace yourself) was put into someone else's pockets.
it would be like me using the price of my apartments rent as the reason for my financial problems.....when i have not paid into it for a decade....give me a break...
in the mid 90's , 4.5 million north american autos were sold, made by nearly 200,000 employees.everything was great, everyone got paid. a very successfull business. last year 4.4 million north american autos were sold, made by 70,000. but somehow, this industry is losing it's shirt? hello?
the ceo of g.m. got a 5.8 million dollar raise just last year. 5.8 million!?! that is just the raise...nevermind the taken for granted salary....give me a break.
you putz's still insist it has something to do with a labourer's wages? the only wages that went up were the leeches at the top.
that same ceo received a 23 million dollar severance package. wtf? and yet the same dingbats that question 32 dollars an hour cannot seem to see what's really going on...
can we all really be so stupid as to buy into the misinformation that the leeches are spinning in the media?
appparently so
Posted by: tim conway | Jun 8, 2021 6:03:56 AM
omg. lorne you are an idiot who quite obviously thrives on stupidity. harper has a minority....because the majority did not vote for him. pretty simple.
let's repeat this.....the minority gov't DID NOT GET A MAJORITY. and that means something. it means THE MAJORITY DO NOT WANT HIM. why is this hard to understand?
and then i see your major gripe is that the driving lights can't shut off. is this why you won't support your fellow canadians who are in danger of losing their jobs?
how many years is it going to take for you to accept something as simple as driving lights?
good god, man!!! are you really willing to screw other people's livelihoods over, on such an inane point?
sweet jesus, we are lost...
the media spin-meisters (look it up) and the corporations are counting on you.
you and your ilk will be licking the sweat off the ceo's underpants long before you know how to spell exploitation.
read enuff of these posts, and one will lose faith in our collective's IQ