General Motors, so much seen as the exemplar of American business, with its strengths and, for sometime now, glaring weaknesses, is filing for Chapter 11 bankruptcy protection. The writing had been on the wall for sometime. Its bankruptcy petition documents $82.3 billion in assets and a hefty $172.8 billion in debts. This has also been something of a horror month for the company, with the failure of a debt exchange bid announced last week, and the ending of contracts with about 1,100 dealers on May 15. Judge Robert Gerber of the United States Bankruptcy Court has been assigned the onerous task of saving (or burying) the bruised titan.
The importance of GM to US politics and the economy has assumed mythic proportions. This hagiography was certainly helped at various stages by extensive connections to various administrations. The chief of wartime production during the Second World War was GM’s very own William P. Knudson. The company’s CEO Charles ‘Engine Charlie’ Wilson was nominated US Secretary of Defense in 1953. In Wilson’s words before the appointment hearings, he would claim that ‘for years I thought what was good for the country was good for General Motors and vice versa.’
Its survival and success is seen as totemic to American progress, however genuine that might be. The company’s record of goodness to America is, to put it mildly, blotted. This goes not merely for its supremely successful efforts to destroy the US public transit system, but by evidence of links to Nazi Germany, a connection shared through its German subsidiary Opel. In 1938, it was clear that what was good for GM was evidently good for Hitler, and rather bad for the Jews. James D. Mooney, head of GM’s overseas operations, received the Eagle with Cross, a suitable blessing for the company’s involvement with that unsavory regime. In April 1939, with the air thick with prospects for war, GM’s president Alfred P. Sloan would write to a concerned stockholder that, ‘such matters should not be considered the business of the management of General Motors.’
On the economic front, GM’s success has proved a fetter on US innovation in general. The cardinal virtues in a vehicle of colossal size and draining inefficiency don’t excite the modern ecologically minded buyer. Even Saturn, the unit founded in 1990 and intended for a rearguard action against foreign-made cars, has also filed for bankruptcy. That particular brand is being phased out by 2012.
Those snapping at the heels of the company to fulfill its obligations are the bondholders centred on the Wilmington Trust Company, and those connected with the United Auto Workers Union. Claims by both of these groups will amount to something in the order of $43 billion.
What is most stunning about these developments is the appearance of the US government as the major shareholder, however reluctant the Obama administration claims it was in assuming the obligations. Free market dogmas, along with much of a tired, debt-ridden GM, are now ready for the scrap heap of history. As Glenn Hall of The Street put it (27 April), ‘Everyone will fight change until there’s nothing left to change.’
In truth, there may be much in American culture that has changed. Matt Bai (NYT, Mar 25) senses the emergence of a new ethic: something akin to the nobility of failure. The time when a bankruptcy label would sink a company are over. ‘In the fastest growing quarters of the economy, admitting your failures and remaking yourself is the new American work ethic.’ Give the tragic hulk a chance, and a newly reformed GM might start rewarding rather than disappointing. But not all will grieve at its demise.
BINOY KAMPMARK was a Commonwealth Scholar at Selwyn College, Cambridge. Email: email@example.com