The GM & Chrysler Success

During the State of the Union address, the President crowed about the success of the GM/Chrysler bailouts, noting that these companies were thriving again. An NPR program this evening was holding up GM/Chrysler as a beacon of hope for Kodak, as if bankruptcy were now the fountain of corporate youth.  

But this just begs the question of why did the GM/Chrysler bankruptcies work? What made these bankruptcies success stories? NPR raised the question, but had some lame answers, namely that it forced management to make decisions it hadn't wanted to do like cutting loser brands (Saturn, Pontiac). It might have helped focus management decision-making, but that alone can't be the answer, I think. I'm curious to hear readers' thoughts. A few thoughts of my own below the break.

(1) Deleveraging. This one should be obvious. A lot of GM/Chrysler creditors got paid very little, but the 363 sales enabled the firms' good assets to be reployed to companies that were not weighed down with tons of financial leverage and legacy liabilities (CBA terms, retiree benefits, dealerships). Deleveraging, however, only helps if the underlying business is competitive. Apparently it is.

I'm not a car afficianado, but I've got to say that this surprises me. I was not under the impression that GM/Chrysler were turning out particularly great cars in 2007-2008, and I don't have the sense that they're boasting radically different product lines now (I'll find out soon, however, at the DC Auto Show...). But maybe the answer is that they were producing reasonably good cars and now they're able to price them more competitively. Thoughts anyone?

(2) How much of a management shake-up did bankruptcy entail? Perhaps bankruptcy revitalized management. Still, I suspect that what management can do with firms of this size is fairly constrained. 

(3) GM/Chrysler did manage to avoid major layoffs of their own employees. But they also closed down a lot of dealerships. In other words, there was major job loss as a result of their bankruptcies. Not as bad as it might have been, but it wasn't a bloodless operation. The job loss from the dealerships, however, was spread out geographically, rather than concentrated in the Rust Belt. So this was akin to amputating a toe to prevent gangrene from spreading. I'd be curious if anyone knows of any figures on the actual job loss.

(4) Did it help to have the government as DIP lender? That is, does public DIP financing actually facilitate reorganizations because the DIP lender's goal is reorganization, rather than maximization of its economic return? 

Again, I really am interested in hearing thoughts on this.