The government slammed GM (GM) in its assessment of the company’s turnaround plans, as it called the company wildly and unrealistically optimistic. While the government does believe that GM (GM) could turn itself around, it does not believe it could happen anytime soon.
WSJ: Despite the pessimistic view on GM’s restructuring plan, members of the task force said they are “confident that with a more fundamental restructuring, GM will emerge from this process as a stronger more competitive business.”
To help GM, the Administration will provide it with working capital for 60 days to develop a more aggressive restructuring plan and a credible strategy to implement such a plan.”
A five-page summary reviewing GM’s financial health is largely an evisceration of the plan GM presented to the task force earlier this year. It challenges the auto maker’s rosy projections on almost every front, from how quickly the company expects to lose more U.S. market share to its ability to price competitively to its ability to introduce and sell new, fuel efficient cars.
This disconnect may have contributed to Wagoner’s fall, as the government simply realised that current management was too divorced from reality to be effective. Most of the directors will be replaced as well.
As for the strict treatment of management, there does seem to be a double standard compared to a few well-known bank CEOs. But you can afford to be harsh with car CEOs in a way that doesn’t make sense for banks. Remember, all banks can be insolvent if they’re believed to be — particularly if they’re somewhere on the borderline. Any bank can have a run and be forced into bankruptcy. Meanwhile, you can say whateveryou want about a car company and it doesn’t change reality much.
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