Rick Wagoner has announced that he is stepping down from GM, and President Obama has announced that the industry has not taken sufficient steps to get “there,” wherever that is. He is putting the onus on GM and Chrysler to cut deals with the suppliers, employees and bondholders to put the companies in a position to come out the other side of this economic downturn in a position to thrive. The alternative would be to let these companies file for bankruptcy. My guess is that Wagoner has taken this as far as he can and he is stepping away to allow another person to go back the stakeholders and move to the next level. The President has to leave the possibility of bankruptcy on the table to get the stakeholders to move. Is this a question of who blinks first or are the stakeholders simply negotiating to get the best deal they can before they blink? I think it is the latter. Unfortunately, everyone knows that bankruptcy can have severe consequences for the overall economy and should be out of the question for this administration. On the other hand, sometimes the President has to be unpredictable. Would he really allow bankruptcy to take place? I don’t think so, but the stakeholders may not be so sure.
I don’t know about Chrysler, but GM is getting into a position to come out the other side of this as a successful player, possibly leading the industry to the next level. I will say again, there is no reason for anyone to buy a car today unless a car has to be scrapped. No one will make money at today’s sales levels, which are likely to continue until 1) the economy recovers and 2) autos provide a better value proposition. It does mean a bigger check will have to be written to get through this.
It is too bad that Wagoner won’t be leading the effort at GM. Maybe some day he will get the credit he deserves for repositioning the behemoth that could lead the industry to the next level. Unfortunately, at today’s sales levels, the cash is disappearing quickly. There isn’t much time. I give the President credit for the way this has been positioned. This is really up to the bondholders and the employees now. I think this is the most critical part of the economy on the table at the moment. How this plays out will determine how quickly we come out of the economic mess we are in, and the role US transportation will play in the lower carbon world of the next several decades.