General Motors, an 101 year old company has opted for Chapter 11 bankruptcy. "My years with General Motors" by Alfred P.Sloan would make one believe that General Motors is for ever. What went wrong with the company?
It is true that there is worldwide recession and demand for automobiles is on a southward journey. Japanese companies Toyota et al are tough competitors. But there is no need to blame external environment.
GM had become too bloated. Committees ruled the roost in the company making it very bureaucratic. Agreements with worker-unions were very liberal and suicidal. Cost per GM vehicle exceeded cost of comparable vehicle produced by competitors atleast by $1400 on account of pension and healthcare outflow alone. Lesson: If management is too benevolent to any stakeholder, it could be ruinous to the company.
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Isn't it too early to write an obit on General Motors. It will come back rejuvenated.
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