GM: Successful Bailout or Successful Restructuring?
Nicolas Loris /
General Motors is making moves to sell some of its government-owned stock back to the private sector in what would be one of the largest initial public offerings (IPOs) in U.S. history. While this is certainly a positive sign, it should not be used as an example and an excuse for more government-sponsored bailouts. The truth is that restructuring an inefficient business model is turning around a company.
While the economic downturn and the credit crunch exacerbated GM’s problems, the automaker has been hampered by long-term problems such as high labor costs, legacy costs, and inefficient dealer networks. Restructuring these inefficient business operations was the critical part of GM’s turnaround.
Last year GM reduced its global labor force by over 10,000 and reduced domestic employers by 3,400—a 12 percent cut. By the end of this year, GM will cut its workforce by 21,000 hourly workers and reduce the number of production facilities from 47 to 34. Another agreement made in the government-financed bankruptcy was that GM would terminate its franchise contracts with hundreds of dealerships throughout the country.