Today, what was once one of the most influential companies on the planet, fell into bankruptcy and its shares were removed from stock exchange listings.
General Motors is now 60 percent owned by the US government. President Obama calls the US state a ‘reluctant shareholder’ which would ‘refrain from making decisions’ about the re-invention of the company. And that’s despite the US government planning to plough another £30bn into restructuring GM.
The US government wants to see a ‘New GM’ rise quickly from the ashes of a global carmaker that currently has $82bn (£50bn) in assets and $172bn (£105bn) in debts.
Despite skepticism from some experts, the government has said that GM’s financing will only go ahead if the transition to ‘New GM’ is completed by 10 July. And there’ll be no more money after the new company is established.
The pain to come will be intense – as Obama made clear in his speech this afternoon. GM could cut its remaining factory worker numbers from 54,000 to just 33,000.
But that’s probably the price of making GM structurally profitable with US new car sales running at 10 million units per year. The recent US new car market peak was 16m annual sales.
It’s amazing to think that GM currently employs around 92,000 people in the US, less than a fifth of the workforce at the company’s 1950s peak.
There has been some disquiet in the US over the Government’s majority stake in GM. Today one website renamed GM ‘Government Motors’.
A few US commentators have also drawn parallels with the British Leyland nightmare – a story relatively well-known on the other side of the Atlantic.
The creation of BLMC from the relatively healthy Leyland-Triumph-Rover combine (Leyland was once the biggest exporter of commercial vehicles in the free world) and the ailing BMC (Austin-Morris-Jaguar) is a well-documented disaster.
When Prime Minister Harold Wilson and Minister of Technology Tony Benn decided, in 1968, that the backbone of the UK car industry should merge into one mega producer, it created a problem that took 21 years for the government untangle itself from.
When BLMC collapsed in 1974, it employed 250,000 workers directly and at least the same again in related jobs. Over UK 40 factories operated under the BLMC banner, as well as extensive holdings overseas, from Italy to Australia and South America.
The government had to nationalize it, creating British Leyland which staggered on, absorbing huge amounts of money. Even in the midst of the early 1980s recession, Sir Michael Edwardes managed to extract nearly £1bn from Mrs Thatcher to keep it on the road.
It wasn’t until 1989 – when the Rover Group rump went (controversially) to BAe – that the taxpayer was finally free of the BL monster.
The US government says it will create the healthy ‘New GM’ in just 40 days, allowing the ‘bad’ assets to be disposed of. If it does manage that, it will in stark contrast to the successive British governments – and taxpayers – that were drained of funds for 15 years.
The potentially disastrous results of Government intervention in trying to run the automotive industry have been burnt into the minds of administrators and managers across the globe.
When Obama said his government was ‘a reluctant’ shareholder and that they would ‘refrain’ from making decisions about New GM’s future, he quite possibly had the global disaster that was British Leyland in mind.