GM on a path to complicated bankruptcy

By Laurie Bennett

May 28, 2009 at 11:07am

Bondholders accepted a sweetened deal from General Motors Thursday, after rejecting an earlier plan to restructure company debt.

The move will likely ease the path to bankruptcy, rather than avert it.

Chapter 11 proceedings aren’t expected to go nearly as smoothly for GM as they have for smaller, privately held Chrysler, which declared bankruptcy May 1 and may emerge from the process next week.

For nothing is simple with GM:

  • It’s a behemoth encompassing more than 50 subsidiaries, many incorporated outside the United States, in places such as the Cayman Islands, Mexico, Japan, Indonesia and Kenya.
  • It sells multiple brands, several of which are for sale or scheduled to be phased out.
  • It has 1,500 suppliers in North America alone.
  • Its secured lenders include some of the world’s biggest institutions, including JPMorgan Chase and Citigroup, themselves foundering in tumultuous financial waters.

Graphing the enormity of a company is almost an exercise in futility. A map of GM’s many interlocking relationships clogs a computer screen faster than you can say “global economy.”

But in this case, complexity is the point.

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  • #1.   westland 05.29.2009

    In GM’s case, bankruptcy will probably initiate a huge improvement in efficiency and productivity. There is no way that any single person or group could effectively craft strategy for such a balkanized mess portrayed in the Muckety networks.

    Interestingly, this is pretty much the situation that Alfred Sloan walked into when Durant lost control of GM to the DuPonts in the early part o the 20th century — a huge, complex, inefficient, overextended company with some good products. Sloan developed one of the first theories of corporate strategy in the process of sorting GM’s problems.

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