The End of An Era

It was a slow train coming. General Motors filed for bankruptcy protection this morning. This path certainly has a number of pitfalls, but, according to the WSJ, has the potential for a rosier scenario:

Bankruptcy should allow GM to pull off one of the most expedient downsizings in the industry’s 120-year history. Long hampered by laws, union strife and management practices that kept it from fast action to fix problems, GM plans to eliminate almost all of its debt, halve its U.S. brands, shutter 2,600 dealers and rewrite labor contracts almost overnight.

Emerging sometime this summer would be a GM with a cleaner balance sheet and slimmer operations than the company that has posted deep losses since 2005. GM has burned through $33.6 billion in cash the past four years. Under its restructuring plan, GM will shed more than $79 billion in debt, gain work-force savings worth billions of dollars a year, close unneeded facilities and reduce its dealer network by 40%.

Working itself free of servicing over $79 billion in debt will provide a profound new flexibility and maneuverability to the company.