So, early Monday, the deed was done. GM, the nation’s largest automaker and in a way the face of the American car, filed for Chapter 11.
Ironically, it was an affiliate, Chevrolet-Saturn of Harlem, that started the ball rolling. Folks in the world’s best known black community must be scratching their heads about that one. In the end, it will be the city of Detroit that takes it on the chin.
Maybe there was no other way to do this. After all, we’re talking about a company whose stock was valued at $40 a share two years ago. As of Friday, the value was 75 cents. The litany of GM mistakes, blunders, and shortsightedness doesn’t need to be chronicled here. Suffice to say it’s been left to Uncle Sam and to the US taxpayer to clean up the mess.
The “New General Motors” will get just over $30 billion dollars in bankruptcy financing from Uncle Sam. That’s in addition to the nearly $20 billion in loans the “Old GM” already received. Of course, none of it comes with guarantees, and it puts the government in the unique position of owning a big chunk of an American corporation. While the reorganized company will have to comply with salary cap restrictions like those imposed on financial institutions back in February, the impact on workers has yet to be calaulated.
It’s likely to be severe. GM says it plans to close 11 factories and idle another 3, and that was before the filing. There will likely be a big cut in the company’s workforce, with some estimates at 21,000 jobs gone by the end of the year. Almost half of GM dealerships will close, leaving hundreds if not thousands of others out of work. Not a pretty picture by any stretch of the imagination.
Make no mistake. The aftershock of this action won’t just be felt in Detroit, which must feel a lot like a punch drunk fighter by now. Cities and towns across America will also feel the pain. The Obama Administration has acknowledged as much, sending members of his cabinet to reassure citizens in the four states likely to be hardest hit.
There is another, potentially devastating aspect to the GM bankruptcy. That’s the possibility that the government will preside over the exportation of autoworker jobs to non union southern states, or, worse yet, overseas. While the Obama Administration does have a great deal of leverage over the “New GM”, it can’t directly tell them where to build new cars.
That leaves open the possibility that states hardest hit by the bankruptcy, states Obama won last November, will be forced to sit by and watch as the next generation of GM cars are manufactured in Mexico or Korea. Suffice to say Obama needs to use every means at his disposal to make sure that doesn’t happen.
Can he make this bankruptcy work, or at least be a viable alternative to liquidating GM, which most everyone agrees would be a total disaster? You tell me.