Howes: A decade on, burden of 'old GM,' bailout weighs on automaker

Daniel Howes
The Detroit News
Members of Michigan's congressional delegation asked General Motors Co. CEO to reconsider restructuring plans for the Detroit automaker. They would eliminate 6,000 salaried employees, idle four U.S. plants and imperil 3,300 hourly jobs.

Nearly 10 years after its taxpayer-financed bankruptcy, General Motors Co. has moved on.

But the rest of America, and members of Congress, haven’t. That’s shaping up to be a big problem for the automaker as it executes a sweeping restructuring expected to claim another 6,000 salaried jobs, target four U.S. plants in three states and potentially affect 3,300 hourly jobs.

Look no further than the furious reaction to GM’s restructuring announced the first workday after the Thanksgiving holiday — reaction that continued Thursday when President Donald Trump used a Fox News interview to call GM's moves "nasty" and predicted, "General Motors is not going to be treated well.”

Welcome to the present, GM, where your past is part of your future. The president of the United States uses Twitter to demand new product for plants expected to be idled next year. An Ohio Democratic senator, Sherrod Brown, reminds GM CEO Mary Barra just how much GM owes U.S. taxpayers. And U.S. Rep. Debbie Dingell, the Dearborn Democrat, tells whoever would listen that her former employer, GM, is the “most disliked company in Washington.”

Overheated? Sure. Politicized? Naturally. But the sentiment driving the outrage is real and shouldn't be dismissed. It's likely to be a recurring problem as the company booking $1 billion a month in pre-tax profit right here at home tries to explain its pressing need to cut jobs and plant capacity even as it hires anew.

The optics stink. The historic rites of Detroit mean cutbacks like this come when sales and profits are falling fast and when the economy is in recession. They don't come when North American profits are pushing $10 billion a year or when the national jobless rate is hovering at full employment. 

Political optics often are driven by crude, zero-sum calculations loosely connected to complex business decision-making. Converting excess plant capacity to produce higher-margin vehicles in the future, chiefly to generate more cash for Auto 2.0 ventures of mobility, autonomy and electrification, doesn't make for a good sound bite.

It's next-generation, not today. It's longer-term speculation, not short-term reality. It conjures images of degreed engineers and programmers working behind flat screens, not blue-collar workers assembling trucks and SUVs in the industrial heartland paying union dues. 

But keeping plants open to save jobs because GM owes the American people? That's a sure-fire winner with pols and "the people," even if actually doing so would be vintage Old GM. This is the same company whose brass ignored financial reality, asked Congress for a bailout in 2008 and paid for it with ritual denunciations and executive humiliation.

GM's justification is a tough sell made tougher by the fact that the Obama Treasury Department pumped $49.5 billion into the rescue of GM, and lost roughly $11 billion of it on the sale of GM stock. It's made tougher by the expectation that GM would use bankruptcy to eliminate costly excess capacity, not wait a decade later before doing it.

It's made tougher by the simple fact that politicians on both sides of the aisle, and in the White House, see the auto industry circa late 2018 through a 30-year-old lens. It assumes production can be moved almost instantaneously to offset declining demand; that capital allocation decisions aren't made years in advance (which they are), but in weeks; that the supply and manufacturing network is not global, but national.

None of that is true. No matter how many times Barra makes the rounds on Capitol Hill or briefs Trump on what GM is doing and why, the response will be to remind her of GM's obligation to its employees, its communities and to the country — because GM "took the money."

That's an uncomfortable fact GM can't wish away anytime soon. Under Barra, GM navigated the airbag-inflator scandal, exited unprofitable markets, sold its Opel and Vauxhall brands in Europe after 90 years, bet big on Cruise Automation to form its GM Cruise LLC unit, and began to forge a new identity on Wall Street that is only starting, barely, to be reflected in the price of GM's shares.

All of that is a part of the present GM. But so is a controversial past that is way too recent to consider it buried. It's not, and it won't be anytime soon.


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Daniel Howes’ column runs Tuesdays, Thursdays and Fridays. Follow him on Twitter @DanielHowes_TDN, listen to his Saturday podcasts, or catch him 3 and 10 p.m. Thursdays on Michigan Radio’s “Stateside,” 91.7 FM.