Advertisement
YOU ARE HERE: LAT HomeCollections

GM's new road

Bankruptcy gives the automaker a chance to remake itself. But can it build vehicles that consumers want?

June 02, 2009

As expected as it may have been, it was still unnerving to watch General Motors file bankruptcy papers on Monday. GM was the world's most popular automaker for decades before finally ceding the title to Toyota late in 2008. It was the country's largest employer for years too, peaking in 1979 with 618,365 workers. That's more people than live in Wyoming. It has fewer than 100,000 on its U.S. payroll today, yet it's hard to shake the image of GM as an icon of American manufacturing power.

Part of GM's problem, though, is that its brands also have come to symbolize inferior workmanship, second-tier technology and unimaginative design. Even as the company has improved the quality and value of its cars, the damage to its reputation has lingered like a dent that just couldn't be hammered out. So in a way, its trip through Bankruptcy Court is a chance for GM to make a formal, forceful break from the past as it also slashes its operations, cutting the cost of making and distributing vehicles.

The makeover of GM will be complicated by the federal government taking over 60% of the company's stock when it emerges from bankruptcy. (The governments of Canada and Ontario will claim an additional 12% stake in exchange for their financial assistance.) We've noted before that nationalization was an all-but-inevitable consequence of GM's dire financial condition. The company was losing billions of dollars a month, and no private lender would put up the money needed to keep it afloat through its restructuring. But even though President Obama and administration officials say they won't tell GM how to run its business, that promise is undercut by the administration's efforts to force all automakers to produce more fuel-efficient cars. The higher fuel-efficiency standards are almost certain to yield lighter and less powerful vehicles, despite U.S. consumers' history of favoring the opposite.

The public has shown its willingness to forgive a car company for its financial failings -- witness the rebound of Chrysler's sales in the 1980s after a federal bailout saved it from bankruptcy. How consumers will react to a government-run car company remains to be seen. If the restructuring goes through as planned, GM will owe the administration some thanks for pushing unions, creditors and company management to make the profound changes needed to become competitive again. Those gains will be meaningless, however, if a stigmatized GM can't produce cars and trucks that people want to buy.

Advertisement
Los Angeles Times Articles
|
|
|