A federal court this week cleared the way for General Motors to sell off assets and reorganize. The process ahead will be so painful for GM stockholders, creditors and employees that only one thing can justify it: The hope that the car company can be reborn as a profitable business.
Most stockholders already know that GM stock is essentially worthless, and workers at scores of plants are resigned to seeing them shut down. But the restructuring will also hurt those injured by defective GM products, who must face the likelihood that there will be no money left in the “old GM” to pay off claims filed before June 1.
Like any bankruptcy, this one will bring hardship, but now that the Obama administration has invested its credibility and taxpayer dollars in the company’s survival, there is no looking back. U.S. Judge Robert Gerber said the company’s only chance of survival lies with the sale of its assets and its reorganization as a smaller, more nimble company. GM seems prepared to move in that direction.
It will sell off its Hummer, Saab and Saturn brands, and halt production of Pontiac cars by the end of the year. The new GM will run its remaining lines ”“ including the successful Chevrolet and Cadillac divisions ”“ with less debt, a less expensive workforce and a smaller dealer network.
If a leaner company can struggle back to profitability, that will be good for the remaining employees, and for us ”“ U.S. taxpayers ”“ who stand to own about 60 percent of the new GM in return for making about $50 billion in bailout loans.
Early efforts by company officials, union leaders and the Obama administration, appear to have succeeded navigating quickly through bankruptcy. GM’s CEO, Fritz Henderson this week that it is now the company’s responsibility “to fix this business and place the company on a clear path to success without delay.”
One of the primary tasks will be to get customers into showrooms to consider the merits of its Camaro, Malibu, Silverado, Cruze and other brands. Within a year, consumers interested in freeing themselves from fossil fuels will be able to consider the Chevy Volt, an extended range electric vehicle.
The economy has been through considerable turmoil since the executives of the Big 3 automakers took their punishment before Congress last fall. Since then, the prospects for Ford and GM have improved, providing reason to hope that domestic auto sales will rebound.
— Questions? Comments? Contact Kristen Schulze Muszynski or Nick Cowenhoven at 282-1535 or kristenm@journaltribune.com or nickc@journaltribune.com.
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