Lisa Simpson
Jul 31,2009
In: bankruptcy

The Bankruptcy of General Motors and its Fallout

The bankruptcy of General Motors and its fallout needs careful analysis. It could lead to some positive things. GM could bid adieu to innumerable dealers – the number running into thousands. It could bring down its commitments to millions of retirees. Factories could be eliminated. If all this works then it would be a sign to Japan and others that USA is determined not to lose and allow its manufacturing foundations to vanish. The world will get the message that GM would compete to grab markets in the emerging economies that are full of promise.

For the present however it seems that GM would become the same as the USA Postal Service so long as the government holds the major stake. Political interference has crippled the postal services of the country in terms of what services it gives and at what cost.

In the matter of GM one can already hear the rumblings of political interference. Barney Frank the Democrat of Massachusetts holds much clout. He called for the CEO of GM, Fritz Henderson to register his protest about plans to shut down the distribution centre in his home territory. Frank is the chairperson of House Financial Services Committee. The latter supervises the flow of federal funds directed towards GM. Under such arm twisting Henderson was in no position to refuse – at least for the present. If GM gets caught in the political opportunism there is the obvious risk that consumer confidence will suffer and so will suppliers. GM would become a minor orphan being cared for by the state with slim chances of maturing to adulthood. This is exactly what Obama did not want to take place.

If this happened Japan would fast fill up the void along with South Korea. Germans would capture the high ended market. One representative from the Japanese auto industry commented, “We were very comfortable being just slightly behind.”

Behind the bankruptcy a high tension drama is being enacted. The government has offered the post of chairman of the board of GM to Ed Whitcare, the AT & T Chief. It is doubtful if Fritz will be allowed to continue. Everything will be brand new in GM. But nobody can say with surety if it will shine as of yore representing the might of industrial America. It is going to be a test of what ‘globalization’ will connote for USA. Will the punch of will and prudence combined with strategy and tact prevail to make the prone giant rise up once more or will it follow the path of steel, electronics, tyre and other vanishing industries?