Friday, July 11, 2008

GM Should Be Put To Death

This past week has seen a flurry of GM-related articles in the Wall Street Journal.

On Tuesday, my old squash partner, Paul Ingrassia, wrote "That 70s Show: Detroit," focusing on why GM might go Chapter 11. He, like the crowd, dwell on GM's need for about $10-15B in new equity at a time when it only has about $6-8B.

Much is made of the need to cut costs, grow, import the production of overseas-designed smaller vehicles.

But I have a different idea. My partner says it can't happen, at least due to political ramifications.

Here is what should happen. GM's inept CEO, Rick Wagoner, should send the following letter to shareholders,

"Dear Shareholders,

This is a tough letter to write. It's an admission of failure. My and my management team's failure of you, our owners.

We just can't see a future in which we'll be a fitting investment for you anymore. We've lost too much market share, have too high a cost structure in the US, and just too many problems to overcome before the economy returns to a higher growth phase.

I could tell you we'll be trying really hard to fix things. Sell Hummer- but who would be stupid enough to buy it now?

Winnow our brands and focus on the profitable cars. Hope to get more clawback in costs from the unions....again.

But honestly, we'd just be bleeding you of your cash on our balance sheet, to no good end.

We should not even file for Chapter 11 bankruptcy.

Instead, I'm going to dissolve the firm.

First, we'll package the models and brands GM owns which actually make money and have growth potential, and auction them off to the highest bidder. We'll sell our remaining stake in GMAC, as well as hire bankers to sell whatever attractive real estate we still own.

After that, we'll dismiss our workers- salaried and hourly- and hold a board meeting to hire a closing specialist to assist us in shutting GM down.

Our objective will be to raise the most cash, then distribute it among our creditors and other claimants. If anything is left, you, our owners, will receive it.

We will also offer for sale the GM name and stock market ticker. Whatever will raise money, we'll do.

I am sure the union leaders and various elected political officials will try to stop us from closing GM down. They'll argue for jobs, the effects of our closure on various vendors, cities, etc.

But really, this is all nonsense. Employees deserve to work at a firm with a future. GM is no longer that firm. Governmental entities need to let private enterprise conduct its business as it sees fit.

And the board, my managers, and I all agree, it is time for GM to die.

Thank you for allowing me to serve you these past years as CEO. I am sorry I failed.


-Rick Wagoner,
(The Last) CEO, GM"

That is what I think would be best for GM's owners and the economy.

Then the CEOs of MBIA and AMBAC could learn a lesson and follow suit.

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