The Truth - Indirectly

With Wagoner gone, GM may be on its way to its endgame. Or, at least, the bond holders and the UAW are being given fair warning that This Is It. U.S. Threatens Bankruptcy for GM, Chrysler

GM looks increasingly like it will be forced into filing for bankruptcy
protection, sometime in mid-to-late May, and that the surviving "new GM" will retain select brands and some international operations, said several people familiar with the situation.Stakes in this new GM could be given to creditors. It is also possible the new company could be sold whole or in parts to investors or its shares sold in an initial public offering. The UAW's retiree health-care fund would likely get either some shares or proceeds from the sale of the stock.A key ingredient in acting on this plan is getting the UAW to agree to an entirely new contract, including major reductions in health-care benefits, said several people involved in the matter. "That's the No.1 wild card here," one of these people said Monday.

The UAW isn't a "wild card." It is acting as if it thinks it can pull through this without any further pain. We'll see. George Bush probably couldn't put the UAW through the wringer because union supporters always manage to convince people that workin' stiffs will be forced to work as peacock tenders on the GOP's palatial estates. Obama, on the other hand, is positioned to hand the UAW its head on a "Nixon to China," "Clinton to Welfare Reform" theory.

President Obama also engaged in this bit of unintentional truth-telling

President Obama argued Monday that the U.S. auto industry -- and, by default, its largest component, GM -- was unique in its centrality to the U.S. economy. "This industry is, like no other, an emblem of theAmerican spirit," he said. "It is a pillar of our economy." He went on to insist that the government had no intention of running
GM.

Sadly, the part in bold is true. GM spent 35 years ignoring festering problems like unsustainable pension plans, stultifying work rules, and competition from despised "foreigners" from Germany and Japan. GM created an inverted pyramid of labor costs, where a shrinking number of active employees supported the gold plated pensions and medical care for retirees who often spent decades on the company dole. It leveraged itself to the breaking point, and sold cars with cheap financing. It allowed an over-expansion of its dealer network, which made just enough $$ to become rich and smug, so that GM's customer service plumbed industry lows. It clung to the outdated concept of GM as a company with cars for every step on the economic ladder, but then built cars that were undifferentiated in price, styling, and performance. And the cars themselves were often mediocre at best, as GM rode on the fumes of its once lustrous brand names.

Look at GM, and then look at a company like Southwest, Google, or Boeing. They are not perfect, but they certainly have not exhibited the hide-bound resistance to any sort of change demonstrated by GM's management and unions. There are some things in America that work like hell, but there is a lot that is simply broken - weighed down by bad babits, mediocre minds, and management-labor relations that prevent any meaningful reform or restructuring.

GM, and the US, have been kicking a number of cans down the road, and we have finally reached the point where the asphalt meets the sand. The stakeholders determined to hold on to this broken model, even as time and simple math counsel otherwise. In that sense, GM truly does represent the American spirit ca. 2009 with its bail outs and whinging interest groups .