All my life, long before I became a journalist, my mom warned me that there’s no free lunch, and to be careful in asking for favors. “You don’t want to be beholden,” she has said, numerous times. If someone does something for you, you need to do something back as fast as you can, she taught me, so that the ledger is balanced.
I thought about that yesterday when I read Forbes.com contributor Louis Woodhill‘s piece, “General Motors Is Headed For Bankruptcy.” It had to have sent blood pressures soaring at the Renaissance Center in Detroit, and it’s clearly caught the attention of Forbes.com readers.
But in a sense, the perception that GM could end up in the soup again is GM’s own fault.For GM, the federal bailout and its trip through bankruptcy, quick wash or not, just won’t go away. GM sought — and took — the free lunch, and because it has yet to do something for the American taxpayer, in the form of paying back every dime it borrowed, it has to bear the consequences. (Yes, I know GM repaid the portion of the bailout that it was required to repay. But the government remains in the hole for the overall bailout, and with GM’s shares where they are, is likely to stay there.)
Unlike Woodhill, I don’t think GM is in danger of a bankruptcy filing. I covered the auto bailout and many airline industry bankruptcies. At the moment, there are none of the classic signs of a bankruptcy filing, such as low cash (GM has plenty), an inability to borrow (GM just announced a 5-year bond issue) and executives who can’t keep a grip on the company. Okay, two out of three.
But because GM went through Chapter 11 once, the possibility of a second Chapter 11 filing will hover over the company until it proves, conclusively, that it isn’t going to happen again. There are only two things that will lessen the chatter: prosperity, and time.
GM has had a measure of prosperity, but it hasn’t been decisive. Europe is an enormous barrier to GM’s overall success, and because it’s taking so long and will take so long to fix it, GM can’t be declared to have uninterrupted prosperity, to borrow a line from the band Cake.
Likewise, GM’s U.S. market share is falling. Never mind the fact that it’s selling small cars for more than its bean counters probably ever dreamed they could sell small cars. It is losing share at a time when it by rights ought to be gaining share, if its turnaround was indeed as successful as the company declares it to be.
On the time front, the bailout is simply too fresh in our memories. Blame the media if you want, but you can also blame President Obama, who is using GM as a campaign talking point. Our polarized political environment means that for every political statement, there is an equal and opposite political statement. If Obama declares GM to be a success, somebody else, like Mitt Romney, has to declare it to be a failure. And truth squad-ers have to dive in to figure out who’s right.
It’s understandable to think the passage of three years might be enough to push Chapter 11 off the front counter, especially a company like GM that has introduced new models, eliminated divisions, unloaded factories, and essentially feels it has nothing to do with the old GM.
On the other hand, nobody has forgotten United Airlines’ stint in bankruptcy (certainly, its unions haven’t). All of us who fly Delta Air Lines know that it survived and Northwest Airlines didn’t, since Delta gobbled it up. Any one who drives by a K Mart and shakes their head over its demise knows that bankruptcy did not fix its ills.
GM might not like people saying that it’s going to end up in bankruptcy again. And the facts may overwhelmingly say otherwise. But as long as it has a president that keeps the bailout in the ozone, and as long as the government is underwater on its GM shares, it has to face the fact that people will bring up that possibility.
Because, as my mom would tell Dan Akerson, they’re beholden.