What’s So Bad About A GM Bankruptcy?

It finally happened:  General Motors (GM) finally declared bankruptcy on Monday, a bankruptcy filing over a decade in the making.  This has long be heralded as the end of America’s industrial dominance i.e. the end of the world as we know it.  But is it really?

A Long Time Coming

GM’s bankruptcy isn’t the end of the world.  As the 4th largest bankruptcy in U.S. history, it is certainly a whopper and yes, it likely does signal the end of America’s industrial dominance, but industrial might won’t be the most significant creator of wealth in the 21st century anyway.  Besides, American auto manufacturing isn’t going away, it’s merely restructuring; and probably for the better.

Let’s face it, the General Motors business model simply no longer works.  Consumers have lost their appetite for gas-guzzlers in light of recent acceptance of one simple fact:  oil is a finite resource and we are running out.  Did this come as a surprise to anybody?  It shouldn’t have:  we should have learned our lesson after the 70’s oil crisis.  American consumers in their endless optimism, unfortunately, are quick to forget the lessons of the past and repeat the same mistakes time and again.

Bankruptcy Isn’t That Bad

Bankruptcy is actually a good thing.  It was designed to allow a failing company to restructure and divert resources away from a failed business line and put it to more productive use.  Without bankruptcy, failing companies would simply die and everyone would lose their job.  At least this way, General Motors will be allowed to continue operating and keep workers on the job.  Sure, plenty of workers lost their jobs, but even more got to keep them.  Without bankruptcy protection, creditors would simply sell GM’s assets to the highest bidder without regard for the rights of workers.

In the end, GM will emerge from bankruptcy a stronger, more focused company.  GM as we know it is gone forever, but the future is bright for the new GM:  Buick sells like hot-cakes in China and GM sells a number of very successful models in the European and South American markets.  Refocusing on smaller, more fuel-efficient, higher-quality cars domestically while expanding what’s already working abroad is a recipe for success.  GM may not emerge the titan it once was, but it has a very good chance of reclaiming some measure of its past glory if it plays its cards right.