Was GM worth saving?

Was the Bush-Obama General Motors Corp. bailout "one of the great turnarounds in American business history," as Wharton School management Prof. Michael Useem says?

With GM's (32% US taxpayer-owned) shares slipping below $20 (back to last year's lows, from $39 in early 2011), the electric Volt and European sales losing mone, the job's still not done, admits vice chairman Stephen Girsky. But the fact GM is profitable, still in business, and boosting sales is, he says, sufficient justification: "Failure would have been catastrophic." Instead, "we earned $9 billion last year," employ more than 200,000 (some called back to work after plants re-opened), and are expected to stay profitable this year and next.

Girsky won his million-dollar-plus-per-year job through an unlikely route: He was a stock analyst at Morgan Stanley covering GM and its more-profitable rivals, cheering its shutdowns and layoffs, in the 1990s and early 2000s. Later, as an auto consultant, he was United Autoworkers' union head Ron Gittelfinger's pick to serve on the GM board as it veered toward bankruptcy and near-collapse; he got along well wth GM's new boss, Dan Akerson; in 2010 he was named Vice Chairman-Corporate Strategy and Development, responsible for product planning, purchasing, supply chain, European division Adam Opel, and wireless communications wing OnStar, among other businesses.

What does a Wall Street number-cruncher have to offer the factory floor? Math, for one thing; which shows current"labor costs aren't the problem here," Girsky told me as he prepared to go onstage at Wharton's yearly management conference last week.

"We operate in a complex ecosystem: outside suppliers, internal engineering," investors, lenders, "and, yes, labor. And the customer in the middle. If anything gets out of balance, our ability to support the customer is disrupted." Which happened as GM retiree benefit costs swelled as its labor force shrank through the 1990s and 2000s.

The larger problem: "When your market share goes from 50 percent to 20 percent, someone is not taking care of the customer," Girsky said. 

GM's glory years traced the period in which it was controlled by Wilmington's DuPont Co.(still a major GM supplier), starting in the 1920s, and ending in the early 1960s, when the governent forced DuPont heirs to sell, and management became a collective that often seemed to lack a cohesive central leadership. By the eve of its 2008 near-collapse, with cash running out and no plan to borrow more, GM "was barely profitable" even with its biggest, most-expensive models, Girsky notes.

With retiree liabilities paid down by giving the union and the government shares at bondholders' expense, the company now claims progress. GM s making money in Asia (especially China and Korea), North America, Latin America. It's joined its wireless communications businesses to a new venture-capital unit and a still-formidable R&D arm, that's now judged, not by how many patents it registers in Washington, but by how many innovations get built profitably into GM cars, Girsky says. "Bell Labs didn't help AT&T." GM has to do better.

Adam Opel is still losing money; Girsky's still negotiating with German officials and unions about job cuts and plant closures. He's proud of the electric Volt -- "the highest customer satisfaction we have, it's brought more BMW families to GM than Cadillac," though initial sales disappointed. He's less sanguine about proposals for cars that run on Pennsylvania natural gas: "We need the global infrastructure in palace. That's still a ways off." 

"GM shares are now trading below $20 again. That belies the great optimism displayed by executives, the media and members of the (Obama) Administratoin," counters Mark Modica, who lost his job at a Bucks County Saturn dealership when GM killed the brand during the crisis, and has since been an occasional commentator on Fox News. "Management continues to focus on the politically-motivated Chevy Volt, which loes money for the company and its shareholders, most of whom are the U.S. taxpayers," Modica told me. 

It will take many successful models to save GM long-term, Girsky said. He's enthusiastic about the new Cadillac models. "The low-end ATS is convenient; the big XTS is a whole connected car, phone, music, anything. It's a higher level experience than you're goint to have" in a mid-range model. "Cadillac needs to be successflu globally if we're going to be as profitable as Volkswagen," which sells fewer vehicles than GM but makes more money.

I ask if he's worried most young people aren't buying cars (or houses, or cable TV) these days. "Yes," he says. It would be great for GM if US annual vehicle purchases rose back toward 20 million again. But GM, broadly, "is in the mobility business," and he's open to building other kinds of transportation (as GM has in the past), if that's where the market moves. It's just "hard," Girsky concluded, even in a business that's all about long-term planning, "to know the future."