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2nd chance doesn't come easy for GM


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2nd chance doesn't come easy for GM

The beginning of the end of "Government Motors" is spelled IPO.

Two years to the day after GM's ousted CEO begged Congress for a bailout, investors bought shares Thursday in a renewed, redirected and financially viable General Motors Co. — essentially halving the government's 61 percent stake in the automaker and heralding a newly competitive era for a Detroit industry given up for dead.

There are lots of winners here and a not-insignificant number of losers. They include bondholders muscled by the government's speedy bankruptcy cram-down; employees who lost their jobs in swift downsizings and retirees whose expected benefits were reduced; communities whose GM facilities were swept into the old GM and readied for liquidation.

Also damaged is an implicit principle of American capitalism: Governments don't seize controlling stakes in private industry except in times of war. Wherever the arc of the newly public GM leads, the costs paid to get it to this point will be a controversial chapter in the history of GM and the presidency.

Still, the initial public offering, the largest in U.S. history, merits qualified celebration after years of scant joy here in the Motor City. The IPO stamps an exclamation point on the proposition that predominantly American and Canadian investors see a promising upside in a GM under new management and shorn of excess brands, uncompetitive labor costs and crushing debt.

That would have been inconceivable amid the first of several congressional beatings two years ago this week, or in the dark days of GM's bankruptcy in the early summer of 2009, or as the revolving door atop the RenCen swung to produce four CEOs in roughly 18 months.

"We know how we arrived here," CEO Dan Akerson said, less than an hour after buying his own shares on the floor of the New York Stock Exchange. "We know what we've done wrong, and we've learned from that."

Let's hope so. Because critics of GM and the moves by two presidential administrations to rescue GM and its smaller cross-town rival, Chrysler Group LLC, figure the feds won't truly relinquish their control over the nation's largest automaker. And if they do, the legacy of arrogance, bad habits and union entitlement eventually will sink GM for good.

Don't bet on it.

Change to believe in

The Unraveling of 2008 pushed Detroit's automakers — all three of them — to the brink, the closest thing to economic Armageddon this 100-year-plus industry has ever faced. However often armchair critics say they "don't believe" collapse was imminent, too many insiders, analysts, bankers and union officials understood the stakes because they knew the industry.

That kind of brush with mortality can change behavior, fundamentally, if the lessons are heeded. It can steel a new class of leaders who break from the slow incrementalism of their predecessors, acknowledge their dire predicaments and use accepted business principles to move their companies in radically new directions.

Ford Motor Co.'s Alan Mulally moved first, borrowing $23 billion while he could to put the Blue Oval on pace this year to be the world's most profitable automaker. And GM is emulating the example, after taking a $50 billion infusion from American taxpayers via the U.S. Treasury.

But the progress, namely at GM, didn't begin with terms set by the Bush White House or Treasury's bailout or the conditions laid down by President Barack Obama or the quick-rinse bankruptcy or the reconstituted board of directors or a succession of CEOs. Each of those helped finish a job already begun by a GM whose senior management has moved on.

The enthusiasm surrounding the IPO — the heightened demand from investors, the receptivity to GM's pitch, the fact that smart money people are placing bets on the company's global business plan — is vindication of an inherited long-term strategy sharpened by the new guys.

And more. To hear CFO Chris Liddell share GM's vision for a "fortress balance sheet" in which the greatest destroyer of capital in American industrial history now aims to carry no debt and field fully funded pension funds is, well, evidence of a new era at GM. Same for the growth prospects he touts.

Is new Detroit emerging?

To hear Akerson say that profit margins are running in the "7- to 8-percent range," but they could be higher in a stronger market, is emblematic of a GM that's serious about delivering world-class cars and trucks profitably instead of operating like a bloated arm of the federal government.

To hear United Auto Workers President Bob King tell CNBC that the "methods for achieving" dignity, job security and new investment for his members "in the past don't work in a global economy" is to hear reality. "We will," he added, "find ways to give our members a fair shake and keep General Motors competitive, both."

This is not your father's Detroit, though saying so is not at all enough. The new GM, its combined management team of longtimers and outsiders and King's UAW — not to mention the cars and trucks — will be judged by what they do in the months and years ahead, how they handle adversity.

Akerson, Liddell and Vice-Chairman Steve Girsky know numbers and Wall Street, but each of them is new (or comparatively so) to the rigors of running a global auto company that sells more vehicles outside the United States than inside. Will they prove equally adept as Ford's Mulally & Co. at managing engineering, marketing and manufacturing, at reviving their European operations, at under promising and over delivering?

King, the thoughtful new president of the union, has a sophisticated understanding of the industry, insiders say. But his members are likely to see eye-popping profits as national contract talks approach next year. Can he reap more rewards for them without inflating competitive labor costs and under-cutting a key reason for reinvesting in Detroit?

In the end, slaying the worst of the bad, old Detroit ways, the habits and mindset that culminated in collapse, depends on what real people actually do. On Thursday, the GM family officially got a second chance and it's up to them to do something good with it.

From The Detroit News: http://detnews.com/article/20101119/OPINION03/11190366/2nd-chance-doesn’t-come-easy-for-GM#ixzz15jeN61b1

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