Many factors have contributed to the timely death of General Motors but when the industrial postmortem is conducted, one cause will stand out: debt - too much of it, to be precise.
On a simple level, this is what bankruptcy is all about. GM is a business no longer able to pay its creditors and therefore seeking court protection to shed some of its liabilities. But the company's customers are also drowning in too much debt. A generation of car buyers had grown used to funding big purchases on the never-never. When the banks and financing companies withdrew this artificial stimulus, many households decided they could wait and save up until they really needed a new car. The combination of plunging sales and soaring liabilities would have crippled even a well-run company.
Of course, GM was far from well run. It has consistently made products that people didn't want to buy with a stubborness that would have shamed a central planner from Soviet Russia.
But amid the inevitable angst today about the future of the US automotive industry, it is worth remembering that Chapter 11 bankruptcy protection is the great second chance in American capitalism. The protection of the court gives one of the world's most important companies a chance to reinvent itself. There will be howls of protest from bondholders and other creditors forced to share the pain but at last there is a chance to move beyond immediate survival and think about creating a transportation company strong enough to weather the next recession.
* General Motors
* Automotive industry
* United States
* Global recession
* US economy
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http://www.guardian.co.uk/commentisfree/2009/jun/01/generalmotors-automotive-industry
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