From General to Government Motors: can GM return to its former glory?

Some very positive things could happen in bankruptcy - GM could be allowed to shed thousands of dealers. It could lower its obligations to a million retirees. It could eliminate more factories. If the bankruptcy works, it would be a wakeup call to the Japanese and others that the US is not going to continue to allow its manufacturing base to slip away, and that GM will be a vital competitor in China, South Korea, India, Russia and Poland, among other promising markets.

But at the moment, the greater likelihood is that GM will be turned into the equivalent of the US Postal Service as long as the government owns a majority stake. The Post Office is crippled by political interference in terms of what offices it can close and open, and what services it offers at what price.

And one can already get a taste of the extent of political interference possible. One of the most egregious cases involved Barney Frank, the influential Massachusetts Democrat, who summoned CEO Henderson to complain about GM’s plans to close a parts distribution centre in his home district. Because Frank is chairman of the House Financial Services Committee, which oversees the federal funds flowing to GM, Henderson obviously had to relent, at least for a while.

If GM gets bogged down in bankruptcy and political stage-management, the risk is that consumers will lose even more confidence in its products and suppliers will wither on the vine. GM would essentially become a ward of the state, which is precisely what Obama said he did not want to happen. In such a case, the Japanese manufacturers would fill the vacuum in the mass market, along with Hyundai from South Korea. German manufacturers are much more concentrated on the high end of the market, with the exception of Volkswagen. The Japanese already are worried about having the largest slice of the US auto market because of new demands and expectations. “We were very comfortable being just slightly behind,” one Japanese source told me.

So a tremendous drama is playing out. The government has tapped former AT&T Chief Ed Whitacre to become chairman of the board at GM, and he is remaking the entire board. For better or worse, management talent that Rick Wagoner assembled is beginning to vote with their feet and go elsewhere. It’s not clear that Henderson himself can survive. It’s going to be a brand new GM. What nobody knows is whether it can once again become a shining example of American industrial might. In many respects, it’s a test of what “globalisation” means to America: does it find the will and wisdom to resuscitate its fallen industrial giant or does it allow it to go the way of the steel, tire, electronics and other lost industries?