Ed Driscoll

As GM Goes...

With his headline of “8 AM: BUST”, Matt Drudge zeroes in on the real news buried within this Bloomberg article:

General Motors Corp. plans to name Al Koch as the automaker’s chief restructuring officer tomorrow when GM is expected to file for bankruptcy protection at 8 a.m. New York time, the Wall Street Journal reported, citing unidentified people familiar with the matter.gm-logo-3

Koch, a turnaround specialist and managing director at the advisory company AlixPartners LLP, will be the highest-ranking executive at GM from outside the company, the newspaper said. He will oversee approximately 60 Alix workers employed by GM and will report to GM Chief Executive Officer Frederick Henderson and the automaker’s board.

The 67-year-old Koch was interim chief financial officer of Kmart Corp. when it filed for Chapter 11 bankruptcy in 2002, the Journal said. Koch also spearheaded a turnaround of Champion Enterprises Inc. that allowed the manufactured-home builder to avoid bankruptcy, the Journal reported.

If GM emerges from bankruptcy, Koch is expected to lead a new management team to wind down the “Old GM” which would include efforts to sell or spin off the automaker’s assets including the Saturn, Pontiac and Saab brands and as many as 20 factories, the newspaper said.

Winding down the old GM seems like a polite euphemism for the company to begin to focus on building plenty of “Little Green Cars”, to borrow from the headline of Larry Kudlow’s latest essay.  (Insert obligatory link to “P.U.M.A. Power” video here.)

But couldn’t GM have arrived at bankruptcy without the sturm und drang of the last year in DC? As Ed Morrissey presciently wrote in February:

When the Bush administration and Congress started discussing a bailout for American automakers, critics pointed out that massive loans would do nothing to fix the problems of GM, Chrysler, and Ford.  In fact, we argued that bailouts would prove counterproductive, as it removed the incentive for the real stakeholders in the company — stockholders, management, and labor — to substantially change their economic model to make themselves more competitive in the marketplace.

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In fact, bankruptcy processes exist for just this kind of situation.  Instead of bailing out GM and Chrysler, the government should have stayed out of the situation altogether.  If labor didn’t want the companies to declare bankruptcy, they could have negotiated a contract that would have avoided it.  Now we have wasted billions of taxpayer dollars to get us right back to the same point we were in the fall.

Obama can’t afford to alienate the unions by cutting the automakers loose.  He’ll wind up pushing through another expensive bailout, which will kick the can down the road to about June or July.  And once again, we will find ourselves at the same exact point, because the upcoming bailout will do what it did the last time, which is to allow management and labor to avoid making some hard choices about their business model.

The definition of insanity is doing the same thing over and over again and expecting a different result — or perhaps that’s the true definition of Hope and Change.

But then, thinking that bankruptcy was always the prudent first choice for GM assumes there was any sort of reluctancy on the part of their board to get into bed with the federal government.

Related: Power Line notes that “Americans Oppose GM Bailout”, but that opposition isn’t reflected in Obama’s positive approval ratings. As to why, that’s a topic that Michael Barone explored in January.

Update: “The bailout that was the failout.”