After Bankruptcy, Can GM Emerge Competitive?

In an interview about the plight of U.S. automakers last fall, Wharton management professor John Paul MacDuffie told Knowledge at Wharton that "bankruptcy is probably the last option that these companies will want to pursue." Indeed, the companies tried to strike all manner of deals to avoid the "B" word. But the last option became the only option: Chrysler filed on April 30 and GM dropped off its Chapter 11 request with the federal court clerk in New York this morning. Chrysler may soon emerge from bankruptcy — a judge in New York last night approved the sale of most of its assets to Italian automaker Fiat.

As The New York Times notes in its coverage of the story today, "GM was forced into the filing by President Obama, who is betting that by temporarily nationalizing the onetime icon of American capitalism, he can save at least a diminished automaker that is competitive." That's a big bet. At stake: Not only the symbolism of saving or losing a once-proud icon, but also $30 billion in U.S. aid on top of $20 billion that the government has already lent the company. The Canadian and Ontario governments are upping the ante, putting in $9.5 billion for a 12.5% stake.

In a statement just after noon today, Obama said the government's effort to rescue GM is part of a "viable, achievable plan that will give this iconic company a chance to rise again." Tomorrow, KnowledgeToday will look at the future of GM in an interview with MacDuffie, who also is a co-director of the International Motor Vehicle Program.