Top of the News: So General Motors has left bankruptcy court as a “good GM,” its CEO vowing “business as usual is over.” The “bad GM” left behind includes the solemn pledges it made to hundreds of thousands of retirees, who as employees created most of the real wealth the company enjoyed.
I hope GM can pull it off. Still, we the people own 60 percent of GM, and the Obama administration lost a key opportunity in using billions of dollars to rescue a company hobbled by decades of mismanagement (remember the EDS acquisition back in the 1980s?).
The government could have insisted that much of GM be retooled to build 21st century transportation equipment, including trains and light rail that would have not only fit with an intelligently crafted stimulus and helped retrofit the country for a higher-energy, less-carbon future, but given GM a big opportunity to open new export markets. In World War II, GM’s plants were quickly converted to make military equipment. Instead, the cautious administration opted for a slimmed-down status quo.
So the “new GM” enters an automobile market that may never return to its former strength in North America. What rebound that occurs will be scrapped over by competitors that avoided bankruptcy court. As for saving jobs, the administration’s chief goal? GM will emerge with 64,000 employees, down from 91,000 at the start of the year. In the 1980s, GM employed several hundred thousand.
Meanwhile, GM’s holiday from debt, thanks to Chapter 11, won’t last. Leverage will soon return — it’s how the braino MBAs are taught to do business. The company will face pressure to repay the federal government. And if it goes public, as it pledges to do, then Wall Street will be waiting with the financial nunchucks.
The Back Story: The looming loss of a sponsor for the Lake Union fireworks show is another example of what happens when a city loses a major headquarters. Now we’re just another market for JPMorgan Chase. The difference between being a city and a market is, as Donald Trump would say, h-u-g-e.
The unsettling question is whether Seattle can and will grow new corporate giants. Industry consolidation has left most American cities as mere markets, getting a little community money from the corporate mother ship, but having lost their most important civic leaders. And it shows. That is hasn’t happened here, yet, is one of the things that separates Seattle from most other metro areas.
Today’s Econ Haiku:
Who knew that Boeing
Wants hands off derivatives?
So did Killinger
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