Latest Restructuring Plan Takes GM Where no U.S. Manufacturer Has Gone Before

MCT

   The following editorial appeared in the Detroit Free Press on Wednesday, April 29:

   General Motors unveiled its third turnaround plan in five months this week, but it won't be the company's last. The latest restructuring scheme is getting especially bad reviews from GM bondholders, 90 percent of whom must agree to swap their bonds for GM stock if the plan outlined by CEO Fritz Henderson is to succeed. So it's likely Henderson and the Obama auto team will either have to address the bondholders' objections, or ask a federal bankruptcy judge to sweep them aside.

   But if the definitive version of GM's reinvention is still months away, the outlines of what will remain a year from now are coming into sharper focus:

•    It will be a company whose market share, payroll, product line and dealer network are all dramatically smaller than even the most pessimistic analysts would have forecast three months ago.
•    It will be a manufacturer in which the U.S. government — and, by extension, U.S. taxpayers — play an unprecedented role in deciding what to build, where to compete and how to compensate employees, who will also be the government's largest equity partners in a restructured GM.
•   And it will be a concern in which institutional investors accustomed to getting their way will exercise, at least for a time, sharply diminished influence in matters of corporate governance.
  

   To conservative ideologues, this latest turnaround plan marks a shocking abandonment of free market principles. The more adventuresome may be curious to learn what happens when Uncle Sam endeavors to save auto jobs, reduce climate-warming pollutants, diminish dependence on foreign oil and turn a profit, all at the same time.

   Bondholders may yet wield sufficient clout to curtail both the government's influence over the new GM and the company's plans to preserve four model lines. Many believe a bankruptcy judge will ultimately carve out a larger equity stake for unsecured creditors and force the company to abandon Buick and GMC as well as Pontiac and Saturn.

   With just a month remaining before the final deadline to get all stakeholders on the same page, the only thing that seems certain is GM is on a trajectory to go where no manufacturer of its size has gone before.

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