General Motors, the End of a Period

Pierre Rousselin’s editorial of June 2nd.

General Motors embodied the industrial power of the United States for a century. Its bankruptcy is more than a symbol.

Born in 1908, in bankruptcy in 2009, the car manufacturer was the supplier for these beautiful Americans of everything chromium, Cadillac, Pontiac, Chevrolet and Buick; feeding the dreams of a middle class with a lifestyle which was going to become imperative all around the planet.

In the 1950s, GM was the biggest industrial firm to the world, the biggest employer of the United States. What was good for GM was good for America, according to the slogan of its former boss, Charles Wilson.

Today, it is the hasty fall of this giant which strikes the spirits. Outstripped by Toyota, the firm of Detroit failed to take into account the evolving market for small cars with better fuel efficiency. It also pays enormous wage costs, owing to the power of the labor union of the automobile workers (UAW), and to the necessity of the United States to mitigate the incapacity of the system of pensions and health coverage at the level of the federal State. At GM, the golden age of the automobile was translated by lifetime employment, matched by what one would call up in France a ” special regime.” That, the United States cannot allow itself anymore. No more than we can.

The American manufacturers, like the steel industry – the victim of the last recession in the 1980s – are not competitive enough and have to learn to adapt. Ford had to restructure. Chrysler also filed for bankruptcy and will be taken back by a group led by Fiat. But, as Lehman Brothers in the financial sector, General Motors was judged “too big to fail,” too important, in terms of jobs and symbolic load, to envision a bankruptcy.

The crisis swept in, despite these certainties. It took at first real estate, then the bank. And it strikes quite hard at what it remains of industry in the United States. The automobile is not the vertebral column of the American economy any more, but it remains strategic because of the number of direct and indirect jobs. A waterfall of bankruptcies, with the loss of tens of thousand jobs, would dig the recession into the whole of the country and can entail the economic collapse of the industrial Midwest.

That’s why Barack Obama is doing everything to save what can be salvaged of the activities of Chrysler and General Motors, even if it means showing the government as “protectionist” in favor of jobs in the American automobile industry.

There also, it is the end of a period and the advent of unprecedented interventionism by the federal government.

Thanks to compulsory liquidation and to the 50 billion dollar injection of public money, a “new GM,” viable and competitive, has to be born. Sixty percent of its capital will be held by the federal state, which leads certain skeptics to call it “Government Motors.” For Obama, it is less a question of changing the laws of the economy than to show political pragmatism. His re-election, in 2012, can very well depend on the score that he will make in key states of the Midwest, where the car industry is concentrated.