Bloomberg Radio was in Detroit this morning buttering up the U.S. car-makers.
Nine months ago, you may remember, GM and Chrysler swore that bankruptcy would be a death-knell. Now, they’re singing a different tune.
GM, in particular, is now celebrating the virtues of bankruptcy, which have allowed it to radically cut costs and write off billions of dollars of liabilities. For the first time in memory, the biggest US car company sounds like it may be getting its act together. For example:
- It now plans to be profitable (EBIT) at a 10-million-unit US annual rate of sales, versus the 15 million previously
- It has a new car that some people actually want to buy–the Camaro–which apparently gets 29 miles per gallon with 300 horsepower.
- It is celebrating the virtues of technology that can improve efficiency while preserving power.
So who do we have to thank for this turnaround?
Barack Obama and Steve Rattner. By taking a hard line with Detroit, these two have done more for the U.S. car industry than the industry itself has done in a generation.
No, we do not applaud the defenestration of the rule of law in bankruptcy proceeding itself (see the treatment of the senior creditors vs the union). We also do not applaud the vaporization of tens of billions of dollars of taxpayer money in exchange for…nothing (see the Chrysler details).
But the refusal to cave to yet another complete bailout demand from Detroit was a refreshing and admirable surprise. It has given GM a chance to once again become what it used to be: A company that builds products that people love while being a company that investors and employees are proud of.
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