General Motors, ever restructuring
By David Brooks
New York Times
Published on Wednesday, Apr 01, 2009
NEW YORK: Some companies are in the steel business, some are in the cookie business, but General Motors is in the restructuring business. For 30 years, GM has been restructuring itself toward long-term viability.
For all these years, GM's market share has endured a long, steady slide. But this has not stopped the waves of restructuring. The PowerPoints have flowed and always there has been the promise that with just one more cost-cutting push, sustainability nirvana will be at hand.
There are many experts who think that the whole restructuring strategy is misbegotten. These experts think that costs are not the real problem. The real problem is the product. The cars are not good enough. The management is insular. The reputation is fatally damaged.
But if you are in the restructuring business, you can't let these stray thoughts get in the way of your restructuring. After all, restructuring is your life. Restructuring is forever. Restructuring is the way that dieting is for many of us: You think about it every day. You believe it's about to work. Nothing really changes.
When the economy cratered last fall, the professionals at GM went into Super-Duper Restructuring Overdrive. In October, they warned the Bush administration of a possible bankruptcy filing, and started restructuring. In December, they came back asking for a loan while they . . . (wait for it) . . . restructured.
The Bush advisers decided in December that bankruptcy without preparation would be a disaster. They decided what all administrations decide — that the best time for a bankruptcy proceeding is a few months from now, and it always will be. In the meantime, restructuring would continue, federally subsidized.
Today, GM and Chrysler have once again come up with restructuring plans. By an amazing coincidence, these plans are again insufficient. In an extremely precedented move, the Obama administration has decided that the best time for possible bankruptcy is — a few months from now. The restructuring will continue.
But this, Obama declares, is GM's last chance. Honestly. Really.
Could this really be true? Could the Harvard Business Review's longest-running soap opera possibly be coming to an end? Could Obama really scare the restructural recidivists in Detroit into coming up with changes big enough to do the job?
Well, the president certainly acted tough on Monday. In a show of force, he released plans from his Office of People Who Are Much Smarter Than You Are. These plans insert the government into the car business in all sorts of ways. They pick winners (new CEO Fritz Henderson) and losers (Rick Wagoner). They basically send Chrysler off into the sunset. Joe Biden will be doing car commercials within weeks.
The Obama team also raised the bankruptcy specter more explicitly than ever before. Even more tellingly, the administration moved to ''stand behind'' the companies' service warranties. That lays the predicate for a bankruptcy procedure and should be a sharp shock to Detroit.
And yet by enmeshing the White House so deeply into GM, Obama has increased the odds that March's menacing threat will lead to June's wobbly wiggle-out. The Obama administration and the Democratic Party are now completely implicated in the coming GM wreck.
Over the next few months, the White House will be subject to a gigantic lobbying barrage. The Midwestern delegations, swing states all, will pull out all the stops to prevent plant foreclosures. Unions will be furious if the Obama-run company rips up the union contract. Is the White House ready for the headline: Obama to Middle America: Drop Dead? It would take a party with a political death wish to see this through.
Furthermore, there's no reason to think the umpteenth restructuring will produce compelling results. Cost control without a quality revolution will make little difference.
There's no reason to think Americans are going to flock to GM cars. (The president lauded their fantabulousness, but GM sales were down 51 percent during the first two months of this year compared with a decline of 39 percent in the overall market). Politically expedient environmental demands will make the odds of profitability more remote.
Corporate welfare rarely works when the government invests in rising firms. The odds are really grim when it tries to subsidize fading ones. (In the '80s, Chrysler already had the successful K-car in the pipeline).
The most likely outcome, sad to say, is some semiserious restructuring plan, with or without court involvement, to be followed by long-term government intervention and backdoor subsidies forever. That will amount to the world's most expensive jobs program. It will preserve the overcapacity in the market, create zombie companies and thus hurt Ford. It will raise the protectionist threat as politicians seek to protect the car companies they now run
It would have been better to keep a distance from GM and prepare the region for a structured bankruptcy process. Instead, Obama leapt in. His intentions were good, but getting out with honor will require a ruthless tenacity that is beyond any living politician.
Brooks is a New York Times columnist.