Now that General Motors is where it belongs ”“ in bankruptcy ”“ it’s time for a collaborative recovery effort. Everyone from dealers and customers in Maine to assembly line workers in Lordstown, Ohio have an interest in the firm’s survival.
Recovery would also be good for the company’s bondholders, and U.S. taxpayers ”“ who now have a 60 percent stake in the company. Under temporary bankruptcy protection, GM can focus on becoming a leaner, more focused company.
But it’s not a sure thing that support will rally behind the struggling automaker, or the government’s efforts to bring it back from the brink. Some can’t resist taking aim at familiar targets like unions and federal bailouts.
House Republican Leader John Boehner of Ohio must have many constituents whose livelihoods depend on GM, but he asked: “Does anyone really believe that politicians and bureaucrats in Washington can successfully steer a multinational corporation to economic viability?”
Conservatives have endless faith in the marketplace, and many believe GM deserves to be left to the rough justice that hedge funds and Wall Street vultures inflict on failing businesses.
But government may yet salvage the best of General Motors by giving the company the time and money it needs to start a turn-around. Auto workers have made important concessions on pay and benefits and many bondholders have agreed to swap their debt for an equity stake in the company.
This kind of forced sacrifice ”“ possible only because of the company’s dire position ”“ is already transforming the company in a way that the marketplace could not. The sale of GM’s Hummer is an excellent start in the effort to make the company lean and competitive.
In the marketplace, entrepreneurs may find ways to turn a profit with GM brands like Hummer, Saab and Saturn. Eventually, the government will reduce its stake in General Motors, and the firm will have to earn its own keep.
It’s not the first time that government has taken control of a private company. In 1989, the Federal Deposit Insurance Corp. stepped in during the savings and loan crisis and took over more than 1,000 failed S&Ls. During the years that followed, the government’s Resolution Trust Company was widely criticized as it labored to clean up the massive financial mess.
In recent years, the government has taken over the airport security industry and mortgage giants Fannie Mae and Freddie Mac to defend the nation’s financial interests.
Rescuing General Motors is also in the nation’s interest; for all its failings, it remains a vital part of the nation’s industrial base. But we’re counting on critics of the arrangement to remain alert. At some point the U.S. will have to get out of the automobile business.
— Questions? Comments? Contact Kristen Schulze Muszynski or Nick Cowenhoven at 282-1535 Ext. 322 or 327 or at kristenm@journaltribune.com or ncowenhoven@journaltribune.com.
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