The General Motors (GM) bankruptcy has been well chronicled. Through the intervention of the US government and the presence of a plan before going in, GM went through bankruptcy in record time. Most Fortune 500 companies that enter bankruptcy stay there for two years, but definitely over a year. Not so here. You should have seen me rejoicing. I literally jumped up and down. I had been stating for nearly 20 years to anyone who would listen that GM needed to seriously restructure, and that the GM management was not capable of doing it themselves. They were too vested in the status quo. This came from my days as a college intern at GM for four summers at two different plant locations and the observations I made at that time. But that’s a discussion for another time.
According to a superb Wall Street Journal article, “The Secrets of the GM Diet”, business bankruptcy has greatly benefited GM. Here’s a table copied directly from the article, comparing GM’s performance 3 years ago with the performance this past quarter. The highlighting is my emphasis.
2Q 2008 2Q 2011
Global Production (in millions of units)
Global employment (in thousands)
Cost of sales (in billions)
Revenue (in billions)
Profit/loss (in billions)
Look at how positive the 2nd quarter 2011 numbers are compared to 2008. Why am I sharing this? Because some small and medium companies are seriously underwater with the debt they have on their balance sheets and the thought of a bankruptcy makes the owner(s) ill. I do believe that there are other options to bankruptcy that may be better but the only way to determine them is to face the financial and operational challenges head on, stare the bankruptcy in the face and say, “Ok, what should I do?” The worst thing you can do is bury your head in the sand…unless you are exiting the business and passing the headache on to someone else to handle. Like GM’s performance, when your company’s financial performance and balance sheet are in such a mess, bankruptcy or one of its alternatives can be the answer to your prayers to return your company to a profitable, growing enterprise.