GM and Bankruptcy

Executives of General Motors Corporation are saying GM cannot survive a bankruptcy, and needs government money to continue operation.

The second part of their statement is certainly true. In the latest report, GM is asking for $4 billion to keep operating through December and another $4 billion for January. With more to come.

The first part of the statement, about not surviving a bankruptcy, seems wrong. There are many, many cases of companies going into bankruptcy, emerging and regaining successful operations. Two come to mind – the Dana Corporation, and automotive and truck parts and accessories manufacturer; and Harnischfeger Corporation, a mining and heavy equipment manufacturer. Both now are successful, generally thriving companies.

Think about the airlines – most have been, are in, or are going into bankruptcy. People still fly on them. Usually there is an interruption for a few days, and then service is as normal as airline service is.

Then there are the the retailers. Kmart and Winn Dixie stores have been through bankruptcy, along with many others. Each is better off after the event than before. Customers continue to do business with them.

GM executives say people will not buy GM vehicles if the company is in bankruptcy. What is new about people not buying GM cars? People are not buying GM cars now because they are the wrong ones, and of lower than desirable quality.

Bankruptcy will give GM the tools to deal with the killer problems they face as they go forward. It will allow reworking legacy costs, labor costs and an unwieldy dealer organization. Yes, enormous problems are involved in restructuring those items. They can be overcome.

Car buyers would no doubt rather buy cars from a revitalized, restructured GM that from the one that exists now, propped up by massive infusions of our (taxpayers’) money.

Let the government infuse the money into GM after bankruptcy. Everyone except some GM executives will get more bang for the buck.