GM and me (pg. 4)

But Lutz's press notices are well earned. He has served as a one-man focus group for new-car development and reinvigorated product design and engineering. The first batch of Lutz-inspired models - the Pontiac G6 and Solstice, the Buick Lucerne - failed to excite buyers. But the second wave - the Chevy Malibu, Cadillac CTS, and Buick Enclave - have been widely praised by analysts and well accepted by customers. Still, they represented only a fraction of GM's model lineup, and as trucks began to slip from favor, the company's weaknesses in passenger cars and its middle-market brands were exposed.

Wagoner's biggest flaw may be that he has been too forgiving. Here is a company that has lost more than $72 billion in the past four years, and yet you can count on one hand the number of executives who have been reassigned or lost their job. After spending $1 billion to shut down Oldsmobile, Wagoner has allowed GM's other weak divisions to live on despite their fading resonance in the marketplace. (A competitor says Wagoner is "too fundamentally decent" to cut off dealerships and put their employees on the street. GM says closing divisions isn't cost-effective.)

Nonetheless, the dedication and thoughtfulness that Wagoner communicated, along with measurable signs of progress (growth in foreign markets, successful new products, continued payroll reductions) prompted me to produce a skein of optimistic, if hedged, stories about the company. I should have taken to heart the analysis of Fortune's Carol Loomis, who saw bankruptcy looming for GM some three years ago. But after my most recent piece suggesting that a real turnaround was at hand, I finally ran out of patience. The company had been caught totally off guard by the spike in oil prices and possessed no backup plan when truck sales cratered and destroyed GM's business model for North America. Despite hopeful pronouncements, Delphi, its former parts division and now an independent company, took another turn for the worse and sank deeper into bankruptcy.

Meanwhile, the credit crunch was squeezing GMAC, GM's, 49%-owned finance arm, leaving it unable to deliver loans or leases to armies of potential customers. In a high-fixed-cost business like autos, with all those plants, machines, and people, the cash runs off very quickly when times are bad. The macroeconomic forces at work were no fault of GM's, but, already heavily leveraged, the company had left itself no room to maneuver.

If Washington wants to bail out GM, it's fine with me. A lot of short-term angst will be avoided, and taxpayer money has been spent for worse purposes. But you have to wonder whether the insular, self-absorbed culture that still dominates GM is up to the job of restructuring the company quickly enough to make it profitable and competitive again. GM has been on a downward path ever since I began covering it. What is going to make it different this time? As painful as bankruptcy may be, it would give GM the leverage it needs to redo its labor contracts and dealer franchise agreements, downsize the company, recruit new management, and position itself for an economic upturn in 2010 that would enable it to regain some fraction of its former glory.

Once again, boys might even dream of becoming chairman of General Motors. 

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