GM BANKRUPT, SO WHAT?

American industrial icon, founded almost 100 years ago, used to be the face of American industrial power had filed for bankruptcy. This filing has been anticipated long ago as the only option left for GM. So it didn’t came as a surprise to anyone in the world. They was no mayhem for the financial market, instead, the Dow Jones ended 220 points up. The rest of the world markets from Asia to Europe too enjoy one of the best days of the current market phenomenal rally.

GM has gone bankrupt, but so what? The factories will still be around, the workers will still be working and the same cars are still being produced. In reality, it’s just restructuring the company with a new owner taking over. Some assets are divested and many creditors are forced to write off loans and to accept new repayment terms. Employees too will have to accept the lost of perks and benefits. They have no choice if they wish to keep their jobs.

The biggest shareholder of GM will be the US government. This is the continuing phenomenon in corporate America. Previously, the US government does not own any commercial assets. Now it own substantial stakes in major banks, insurance companies and financial institutions. The US government used to pride itself as the only country that truly practice free market economy. It boasts the superiority of capitalism over socialism or communism. It used to berate other countries for subsidising industries and accused other countries of unfair competition. This financial crisis will forever change the landscape of corporate America. Perhaps US government should take a page from Singapore's model to create something similar to Temasek Holding or GIC.

The failure of GM should be a lesson to all American companies. It needs to be nimble and competitive. It had to be relevant to the rest of the world. It cannot ignore and be oblivious to the market needs of the rest of the world. The world is just too globalised and it cannot be inward looking and fool itself that it produces the best models and able to survive on domestics market alone. It needs to learn from Toyota and Honda.

The trying question is, can the new company survives. Or will it bleed more red ink and taxpayers have to foot the bills. Can they seriously compete with the Japanese or Korean auto makers? Failures means that American will be driving Asian made cars in future, just like all the products made in China sold in Walmart. Only time will tell.




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