It's no secret to anyone who has read this blog on a regular basis that I've been pushing for GM to declare bankruptcy for months now. The reason being that I felt that the bailout and restructuring efforts were just prolonging the inevitable, and because I believed that it was the fastest way to separate the good parts of GM from the bad. While some may see this as a dark chapter in GM's history, I personally feel that it's really just the first step towards the company's rebirth.
However now that the bankruptcy is moving forward the question offered is: will GM be used to service the interests of the various stakeholders in the company, or will they instead work together and focus on what needs to be done to make the company profitable again?
Just think about it: GM's problem as a company was never its ability to sell cars, as for nearly all of its history prior to the bankruptcy it always sold more cars than anyone else in the U.S. if not the world. Instead their problem was that their overall operating and capital structures prevented them from being able to sell cars efficiently, due to having service a myriad number of liabilities, labor costs, excess dealer capacity, costs related to unneeded manufacturing capacity, etc. The problem was never cars that people didn't want, fuel efficiency, reliability, styling, etc, instead it was always efficiency. This is not to say that fixing those problems wouldn't help, but to say that the company would've been profitable in spite of them if it had been structured properly.
Money can hide a multitude of sins and the problems that destroyed GM were problems that always existed, but were simply being hidden/subsidized by the company's hey day when it had a multiple of its current market share, SUV sales were higher, the economy was stronger, etc.
In other words the Obama Administration and the UAW have to make profitability their only objective, not green cars, saving jobs or any other socio-political goals. Because only when the company is profitable will it have the muscle to focus it's efforts on green cars, higher fuel efficiency and job creation. Otherwise GM will turn into a de facto GSE that is used to service a myriad number of social-political interests, and the end result will not be pretty.
After all just look at what happened with the mortgage GSEs.
When tackling the problem of fixing GM the Obama Administration and the UAW need to ask themselves the following: companies like Honda, VW, Subaru and others have run profitable automaker operations in the U.S. despite selling a fraction of the number of cars as GM, so how do we structure GM in such a way that it doesn't need to have 40% market share to be profitable, and could instead be profitable with say 7-10%?
Disclosure: at the time of publishing the author didn't own a position in any of the companies mentioned in this article; the ideas expressed are solely the opinions of the author and shouldn't be viewed as financial or investment advice.