Chrysler’s Fall May Help Administration Reshape G.M.

WASHINGTON — Fresh from pushing Chrysler into bankruptcy, President Obama and his economic team are hoping that the hard line they took last week gives them leverage to force huge changes in General Motors, a far larger and more complex company.

Officials say that, difficult as Mr. Obama’s decision was on Wednesday to take all the risks of a Chrysler bankruptcy, the politics of reshaping G.M. will be far harder. Already a shadow of the company that once dominated the American landscape, G.M. will be forced to dismiss 47 000 jobs worldwide, closing more than a dozen plants in the United States, eliminating four brands and shuttering 2 600 dealerships.

In Chrysler’s case, the tough job-cutting decisions had already been made and the government is taking only a small stake. An alliance with Fitat envisions selling the company’s cars in new markets around the world and adding cars that use Fiat’s fuel-efficient technology.

But in G.M.’s case, Mr. Obama needs to force deeper cuts and becoming the controlling shareholder. He will also be overseeing the radical downsizing of G.M.’s work force as he is trying to reverse rising unemployment.
That is why the recent decision about Chrysler is a very important one according to me. The threat of bankruptcy is very important in the negotiations with the bondholders. Without a clear and present danger to them, they won’t make a reasonable deal.

Bankruptcy may also be the only way to force the kind of paring down that Chrysler, with only a third of G.M.’s workers and half the number of plants, did not have to endure.

We have to remain realistic though, Mr. Obama is not going to allow G.M. to be broken up, its assets sold or abandoned. Mr. Obama could afford to take a hard line when dealing with Chrysler, but when dealing with a company as politically sensitive and as large as General Motors, he will have a far harder time separating the economic decisions from the political challenges.
But I am sure we all agree that we must take action in order to save as much of General Motors as possible. It will be hard to make G.M competitive again, especially when Obama is trying to reach his fuel-efficiency and low-emission goals at the same time.


Source: http://www.nytimes.com/2009/05/03/business/03auto.html?_r=1&ref=business