Administrative Governance at Present, One

Administrative Governance

At present, one of the most contentious administrative issues in the American business and political community today is how General Motors (GM), the formerly iconic American car brand, should be governed. Once again, GM is petitioning the United States Congress for financial assistance, alleging that going bankrupt would destroy its reputation and thus destroy entire swathes of the economy dependant upon its manufacturing jobs. Congress has become a de facto governor of GM at present as if it does not G.M. extend $16 billion in federal loans the company will have to declare bankruptcy.

Those who advocate letting GM fall upon its own sword have much to defend themselves in the way of credibility. GM has made wasteful and fuel-inefficient cars. It lacks the leanness and efficiency of its foreign competitors, along with their reliability. Throughout the 1990s, it made SUVs as if gas prices would never rise -- and then gas prices did go up, to stratospheric heights, too quickly for GM to fundamentally shift the emphasis its product line. It is also saddled with exorbitant union contracts, heavy with pension and healthcare costs. Its foreign competitors do not have to give these benefits to their workers, because healthcare and pensions are guaranteed by the governments of Japan and most of Europe. Also, even the American counterparts of companies like Toyota are not unionized and have a leaner manufacturing approach.

GM contends that the entire economy has been hit hard by the recession, which is certainly the case, as unemployment makes people reluctant to buy new cars and the credit crisis has made banks wary of making loans. Even Toyota has posted a loss. But the recession has merely exacerbated a problem that has building at GM for decades. Sympathy runs high for GM because it is believed that there are political interests at stake in terms of how the debate is splitting in Congress: "Republicans, who preach the primacy of markets, especially representatives who hail from the rural states where GM's foreign competitors now provide thousands of highly coveted, nonunion jobs. This group contends that GM will never be able to right itself unless it can renegotiate its untenable agreements with workers, debtors and dealers" (Bai 2009). In contrast, Democrats from states where GM has high concentrations of employees are desperate to infuse cash into the company. But although the messenger may be biased, what the Republicans in this instance say is correct -- surely the money could be used to fund other jobs in other economic areas, rather than extend charity a company that seems uncertain how to restructure itself to move into the future. Also, there is another, biased reason that GM may be particularly reluctant to declare Chapter 11: bankruptcy destroys the value of GM shares, and many members of the executive board are GM's chief shareholders.