The Nationalization of GM and the Path to Restructuring

General Motors has filed for bankruptcy. Although there are formalities remaining (identical to those of Japan’s Civil Rehabilitation Law), the bankruptcy and nationalization of GM, which had been the world’s largest automobile company, is shocking.

Including parts manufacturers and chain stores, the number of jobs that GM had supported is gigantic. The bankruptcy will cause a great shock to the economy.

The American government has assisted GM with great amounts of funds since the end of last year, and had been urging the company to carry out voluntary restructuring. However, due to the continued difficulties with the labor unions and creditors, it had no choice but to follow the same path that Chrysler undertook one month ago.

Already, GM’s German subsidiary, Opel, has been sold to a Canadian automobile accessory manufacturer. But the rebuilding of GM itself will not be as simple as selling itself or its subsidiaries.

For Chrysler, bankruptcy can be avoided if the sale to Italian company Fiat goes through. A complete purchase of GM though, is unfeasible. For that reason, the plan for reorganization is to sell off unprofitable branches and make large-scale reductions in its number of brands.

Japan cannot avoid being affected by GM’s bankruptcy, as there are many Japanese parts manufacturers that supply GM. Even though the American government says that it will support both GM and its parts manufacturers, GM has numerous foreign parts suppliers that are in an ambiguous situation. Wouldn’t it be logical to provide support for both domestic and international suppliers?

The plummeting automobile sales due to the financial crisis were a direct cause of GM’s bankruptcy. However, if you look more closely at previous years, GM, due to its inability to produce appealing products, has had its share of the market snatched away by Japanese and German automobiles. It did not change its strategies of pursuing short-term profits and relying on high profit ratios for large-size automobiles; and it had fallen behind in environmental innovation.

GM’s current plan is to accelerate the restructuring and become independent, freeing itself from the government’s supervision as soon as possible. However, because of the gigantic scope of its goal, problems remain. GM’s rebirth will not be easy.

As for the restructuring of the rest of the automobile industry, it remains to be seen how it will play out. With the rise of automobile manufacturers from emerging countries like China and India, there may be big changes in the industry.

Though the ultimate cause of GM’s bankruptcy was its inability to create automobiles that appealed to consumers, I want the Japanese automobile industry to take heed as well.

There was once a time when most people had dreams about their ideal car. Today, though, interest in cars has waned in young people. Perhaps the creative sense in making appealing cars has declined, but it is also necessary for us to take a fresh look at ourselves.