Upheavals

What’s really being bailed out at GM?

Can’t help wondering whether the American Government’s decision to take over ownership of GM is not dissimilar to the last Commander-in-Chief’s famous cry of “mission accomplished”.

GM may well be a mainstay institution, at least to some, and the thought of losing such a bastion of Americana may be politically unpalatable, again to some, but Government ownership and streamlining of the brand portfolio still doesn’t address what I see as the key concern: the inability of this company to show that it can produce cars that are market-competitive. And my reason for that concern lies in losses of $88 billion posted since 2005. That’s a very large chunk of change.

However, I don’t see the failure of GM as a funding issue. I think it’s far more than that. It’s a relevance and competitiveness issue, which not surprisingly has manifested itself in systemic revenue hemorrhage. The problem that the new majority shareholder seems to be missing, or perhaps ignoring, is not the financial position, but rather the reasons behind that financial position. As Stuart Hirshfield points out in this article, “they are addressing the financial issues, but not the business issues”. And throwing money at that may save face, and jobs for now, but I can’t see how it will save GM as we know it.

Personally, I can’t see a business case to save GM. With losses this large, how can there be? And if this wasn’t a “great” American company, I think Americans would be the first to acknowledge that. Failure is a tenet of the capitalist system.

So perhaps all this money is not about saving GM. Perhaps it’s about saving face, the US dream, something of the status quo, the legacy of power. Which in effect means this is not an automotive decision at all. It’s a state of the nation decision.

Maybe the factor that the boys and girls on The Hill are struggling with isn’t GM’s lack of money, it’s the acknowledgement of vulnerability. It’s the terrifying thought that if the most powerful player in the American car industry historically is now being eclipsed, then America’s standing as a car maker is also passing. A nation built on cars can’t make cars the world wants anymore. But others can. And perhaps the only way for GM to survive is if the mantle leaves America’s shores. The way BMW saved the Mini.

I feel like I’m watching a re-run of The Wrestler. Everyone seems desperate to believe in the happy ending. But you can’t help feeling that when the credits finally do roll it’s going to be on a train-wreck.

And you know what? If the only GM that has a hope commercially is one that Americans don’t recognise or find palatable nationally, then perhaps General Motors itself may end up having little value in the American market anyway. Which would be ironical to say the least.

As the last President discovered in Iraq, sometimes the problem you see and look to fix is not the problem you really have. I wonder if that will be the case here too.

POSTED: Wednesday, 10 June 2009

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