GM bankruptcy marks the end of an era in American history

The century-old automaker General Motors (GM) was once viewed as the symbol of American economic might and dynamism. Once upon a time GM was the largest corporate entity in the world, apart from being the largest automaker. But it had to file for bankruptcy protection on Monday, marking the biggest failure of an industrial company in American history.

By selling more vehicles than General Motors in 2008 Toyota put an end to the American company's 77-year reign as the world's biggest carmaker. GM has been losing market share since the early 1980s, and its stocks fell to 75 cents on Friday, a level last seen only during the Great Depression, about 80 years ago. General Motors’s current debts now total $173 billion.

Professor Gary Chaison, the renowned car industry analyst and a professor of labor relations at Clark University, said the GM announcement marked the end of an era.

"It'll have a huge impact in the US because it's more than just a corporation - it's an icon. It represented manufacturing supremacy and good jobs for American workers - that's gone," Professor Gary Chaison added.

The writing started appearing on the wall for GM quite some time. GM has been losing market share since the early 1980s, not really triggered by the current recession, though it fanned up the fire. GM was also slow to move away from producing gas-guzzling SUVs when consumers were looking for more fuel-efficient vehicles. The sharp decline in credit markets, miserly consumer spending, shrinking demands for GM products in favor of better products from companies such as Toyota and high labor costs are cited as triggers of the GM downfall.

The US administration has to pump into General Motors an additional US$30 billion (£18.5 billion) of US taxpayer funds to restructure the automaker, in addition to US$20 billion of emergency loans GM received at the end of last year. Ironically, GM made a loss of US$30 billion last year.

GM is running into an uncertain era of government ownership, as 60% of stake will be taken over by the Obama administration, which is toying with the idea that the restructured and overhauled General Motors can compete with the likes of Toyota, after cutting the debt by half and pruning labor costs.

About 20,000 American workers are likely to lose their jobs, out of GM’s 173,000 employees across USA, Canada and Mexico. It is expected that GM may be able to exit bankruptcy protection within 60 to 90 days.

If General Motors is the second of the Big Three US carmakers to enter bankruptcy protection, after Chrysler, it would now be interesting to watch the happenings at Ford, the remaining one of the Big Three.