Bankruptcy will restructure General Motors into a smaller, leaner and cost-competitive company. The bankruptcy process is supposed to provide a second chance, and the idea of creating a viable business out of GM's good assets makes sense and comes at a time when the competition doesn't look as formidable as it once did.
Let's face it: Much of the success of the Japanese auto companies in the United States came about as a result of Detroit's failures. GM, Ford Motor Co. and Chrysler made it easy for the competition by not matching them in quality, not renewing their product lineups on a timely basis, virtually ignoring the sedan buyer and diverting resources away from North America and even away from auto assembly.
If GM restructures quickly, it can emerge as the low-cost producer in North America and use that position to gain market share quickly.
Ironically, some of GM's competitors aren't looking invincible anymore. At ¥100 to the dollar, imports from Japan aren't profitable. Nissan Motor Co. will lose money this year; and, despite Carlos Ghosn's magic, it has yet to demonstrate consistent product strength.
Toyota Motor Corp.'s quality is not rock-solid anymore. The residual values of its vehicles are falling, and product proliferation is confusing buyers and dealers. The blind quest to be No. 1 left Toyota with global excess capacity.
I have always said the United States needs a competitive auto industry. But the old Detroit model provided diminishing value to the nation, as successive management teams embraced one investment scheme after another that had nothing to do with making cars.
GM's leaders have played kick the can with dozens of insufficient and ineffective restructurings, ridiculous acquisitions and investments. They promised huge returns from globalization, financial services, Internet innovations and owning dealerships. They wasted precious cash on stock buybacks and dividends instead of investing in vehicles.