What is Good for GM is Good for America!

What’s good for GM is good for America,” said Charlie Wilson, the former Chairman of the US auto major General Motors (GM), once among the largest employers in the world and now battling for survival. From becoming the first American corporation to pay taxes of over US$ 1 billion 53 years back, to filing for bankruptcy now, GM has indeed covered a rugged path to self created doom.

Whether what Wilson said was exactly what he meant or not, it certainly stood for the way most GM top executives have been thinking for the past five decades. During this period, the world’s greatest automobile company has frittered away its reputation and market share with an unending string of flawed management decisions and arrogance towards customers and the government that would be hard to make up.

And to compound the problem, the company invested too often foolishly as well as agreed to outrageous labour agreements and compensation packages for top executives.

Given these misadventures, its product superiority disappeared steadily over the years, and so began its decline that continues still today. The company’s market cap, which at its peak in 2000 was nearly US$ 50 billion, now stands at less than US$ 500 million! How it is possible that such an industrial giant could not find a competent management team in 50 years and turn things around is a question that will continue to worry management gurus and strategic thinkers for years to come.

And if what was good for GM was also good for America, the question that might legitimately be raised is that if bankruptcy is the cure for GM, would bankruptcy also be in order for the US. Remember, like GM, even the US has seen declining manufacturing supremacy over the past many decades, and whacky splurging by governments and consumers. Borrowing to invest may still make sense, but borrowing to consume is what the Americans have been used to for so many years now. Isn’t that the fast track to doom…bankruptcy in the case of GM and possibly for America as well? In fact, President Obama, in a recent interview with the leading American cable television network CSPAN, said that the US is already in deep problem now. “We’re out of money”, said Obama. He added, “This is a consequence of the crisis that we’ve seen and in fact our failure to make some good decisions on health care over the last several decades.”

Well, whatever may happen after the company files for bankruptcy, we hope that the end of an old GM lays the ground for the birth of a new one, for anything else would lead to a cascading impact on the US economy given that the mass layoffs at GM will considerably add to the unemployment burden that the country is already facing.

As for the bankruptcy’s impact on India, there are though some reasons to cheer. As reported in The Economic Times, GM India’s officials believe that the company’s global restructuring could throw up substantial opportunities for Indian component companies shopping for cheap overseas assets. Furthermore, there are hopes that the company will now get a ‘good’ management at helm that will lead to better times for the employees and customers in the future. We also hope so!

(Courtesy:Equitymaster)