GM enters bankruptcy, effect might be limited

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General Motors Corp. went into bankruptcy protection Monday and the effects will ripple through Michigan with the closure of seven plants, but they might not be detrimental to Lansing, experts say.

The fallen giant, the largest U.S. industrial company ever to enter bankruptcy, is shedding some 21,000 jobs and 2,600 dealers. Sparing few communities, the retrenchment amounts to one-third of its work force and 40 percent of its dealerships. About 8,640 of those jobs are in Michigan where the unemployment rate is 12.9 percent.

“We are acting as reluctant shareholders because that is the only way to help GM succeed,” President Barack Obama said of the temporary nationalization of the 100-year-old company.

Robert Wiseman, an MSU professor of management, said this outcome has been expected possibly for a couple of years and the effects on Lansing might be minimal.

“The effect on the Lansing area will be somewhat muted because they have already closed down (plants) they should have closed down here,” he said. “The new manufacturing facilities that they have built here are probably pretty much safe and will be part of the new GM that emerges.”

Statewide, however, the failure of GM could cause additional bankruptcies, Wiseman said.

“There is a ripple effect throughout the supply chain,” he said. “As they eliminate brands like Pontiac, that is going to have an effect on the supplier network and could push some suppliers over the edge to bankruptcy themselves.”

Reckless spending and investing was influential in GM’s bankruptcy said Jackie Douches, a general business and pre-law senior.

“This is a long time coming,” Douches said. “GM has been giving away too many benefits to those who are fired and retired. This bankruptcy is nothing but good.”

Obama lauded what he called a “viable, achievable plan that will give this iconic American company a chance to rise again” as GM followed Chrysler into bankruptcy court. Of Detroit’s Big Three automakers, only Ford Motor Corp. has avoided bankruptcy restructuring and has not taken federal bailout money.

The prepackaged GM bankruptcy deal — crafted by the administration, the company, the United Auto Workers union and a group of bondholders — would give the U.S. government a 60 percent controlling stake in what was once the world’s largest automaker. An additional 12.5 percent would be under Canadian government ownership.

“What I have no interest in doing is running GM,” Obama said. His only goal, he said, was to get GM back on its feet and then “to get out quickly.”

Although Obama reiterated the speed of GM’s recovery, Michelle Burns, a political science and criminal justice senior, said it will take much longer for the state of Michigan and Detroit.

“It’s hard because GM’s saying the new GM will be newer and better,” Burns said. “It’s going to take years, if not decades, for Detroit to rebound.”

Neither Obama nor his spokesman offered an indication of how long the government’s involvement with GM would last.

“I don’t know that there is a time line,” said Robert Gibbs, the White House spokesman.

“He has a strong obligation to ensure that there is a management structure in place that is making smart business decisions,” Gibbs said. “Is the president going to thumb through engineering reports and each page of the annual report? No.”

With the U.S. on track to be GM’s new owner, the road ahead for the troubled automaker was an uncertain one — with a heavy potential for conflicts and many risks for taxpayers.

“The agreement may buy some time, but does nothing to ensure GM’s success,” House Republican Leader John Boehner of Ohio said. “The only thing it makes clear is that the government is firmly in the business of running companies using taxpayer dollars.”

Staff writer Marissa Cumbers contributed to this report.

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