GM's second and last lease on life

With a landmark public stock offering last week, General Motors now has a second lease on life. It won't get a third.

The onus is again on the automaker to show the discipline to make good on the federal wager to rescue it. On paper, the new GM has a much stronger, almost debt-free balance sheet, significantly lower health care costs and new management promising to cease overproduction and make decisions faster. Labor costs are more in line with those of Japanese rivals and are likely to continue to fall as the automaker hires workers at lower pay grades negotiated with the United Auto Workers.

Equally significant, proceeds from the IPO will help pay back the government for the $49.5 billion it spent on the rescue, which has resulted in GM moving from billions a year in losses to making a modest profit. And of course, the federal government is a huge step closer to getting out of GM's boardroom.

The ultimate test is whether the automaker's culture has changed enough or whether, with the crisis behind them, its managers will revert to their old sins and corporate hubris. GM's biggest challenge is to focus on designing and selling fuel-efficient cars that Americans want.

We all know the story of the automaker's last two years all too well. The government stepped in to prevent a messy bankruptcy from accelerating a downdraft that would have tossed tens of thousands of workers onto unemployment rolls and buried the economy in an even bigger ditch.

For example, Ford, the only one of the big three automakers not to accept a federal handout, would have been imperiled if Chrysler or GM had failed. Suppliers would have gone out of business because GM and Chrysler probably would not have made good on their bills, which in turn would have hurt Ford's ability to get parts and, thus, survive.

The American psyche demands that those who create their own problems suffer consequences, so the GM bailout remains an anathema to free-market purists. But GM suffered stiff consequences, as did investors who lost their shirts, and the company's failed managers rightly were pushed out the door. As a result, the new GM is in better shape.

The U.S. auto industry is as strong as it has been in years, and GM has an opportunity to demonstrate that it can embrace innovative strategies in line with the competitive global market. It mustn't again veer into a ditch, because next time, it's unlikely that a federal tow truck will pull it out.

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