A Real GM Rescue Plan

The "Big Three" automakers made their way to DC to beg for another bailout package despite their complete lack of a plan as to what to do with it. I actually think that Ford is already on the right path, and Chrysler is a lost cause. GM, however, has the makings of a recoverable company so long as they follow the right path which has yet to be defined.

GM has been trounced by the economic crisis as a result not just of the environment, but their business management to date. I have often said that the problem with GM is not their products but their board of directors who have never driven their company's executive leadership to take effective action to respond to their highly effective competition. This reality is a challenge to the idea that any infusion of cash, even with specific objectives, will only end up delaying the end.

The countering challenges to not taking action would not only be the loss of GM jobs but supplier businesses as well. The balance of these two strong forces leaves very few feasible options which will come close to providing a probable window for recovery. I believe the most reasonable option has yet to be discussed.

My idea stems from my frustration with the term "too big to fail," which has been popping up quite often recently. It seems the measurement of "too big" comes from the assessment of hard a thud the giant will make when it falls. The current philosophy of keeping the giant upright involves infusions of cash or government ownership. However, this infusion does less to restablize the giant as much as reduce the inevitable impact, and giant leaning on the government only disables the government as well.

GM needs something quite different than a shot in the arm or a government crutch. A failed megacompany needs a chance to revive in a low risk environment. This environment is all but impossible in the current economy. Creating such an environment for GM will force the government to buy them out as they did AIG and their buy-in of certain banks. This step towards Socialism is completely unacceptable.
Instead of extending the extraordinary effort to soften up the environment, the government should reduced risk by handling GM differently. The risk the government is ultimately trying to manage is to the economic environment, minimizing job and small business losses. To increase the likelihood of success, the best action to take would be to break GM into multiple, independent companies.

Normally, adding more parts increases the opportunity for failure, but the nature of the organization of GM already embodies most of this complexity. Breaking up GM would reduce risk to the economic environment once disassembled by reducing the chance that the larger current organization collapses at one time.

Splitting up the company allows free market forces to drive corporate reform by removing the inhibiting heirarchy of the current structure. Instead of telling businesses how to do business better, allowing independent companies to have equivalent economic authority will put them against each other inviting innovation in productline and business process.
Breaking it up also increases opportunities to small businesses and suppliers. The newly split companies will have the opportunity to look at suppliers which they had not previously been allowed because of supply chain volume deals in which large companies commonly engage. These new car companies will also have the chance to engage in their own advanced design and consider new technologies and configurations which also open opportunities for new suppliers.

The benefits of splitting up GM seem to outweigh the prolonging of its inevitable collapse. To do this, the government should propose a stimulus figure which will be provided only if the company is split into four equivalent parts by three months from the acceptance of the agreement.