Change – The One Constant

This week brought the long anticipated bankruptcy filing of General Motors. This century old American company was the leading automaker in the world for over 75 years, and was a long time symbol of American manufacturing and marketing prowess. “What’s good for General Motors is good for the country” was the saying from the 1950’s, and for a long time it seemed true. But times change and sometimes success can make a company or an individual resistant to change.

“Generous Motors” has for decades provided generous benefits and pensions to its workforce and retirees, leaving it with a cost structure that could no longer compete with competitors from Japan (Toyota and Honda) or more recently South Korea (Hyundai or Kia). It was also slow to bring fuel-efficient cars to the market when higher gas costs made them much in demand.

The recession and GM’s failure to adapt to changing market conditions finally led to its bankruptcy, and now it will sell its assets and brands, close more factories and dealerships, and trim costs and benefits. In short, all the things it should have been doing for years! There will be more job losses and both bondholders and shareholders will have huge investment losses.

Next Monday General Motors will be dropped from the Dow Jones Industrial Average of thirty companies and replaced by the technology company Cisco Systems, leaving General Electric as the last of the original Dow Jones companies. In many ways, this is symbolic of the shift from manufacturing economy to technology and service-based economy In the United States. Change is the one constant, do not resist it, but instead prepare for it and invest accordingly. If we are doing our job right, we are one or two steps ahead on the economic and market cycles! We are also very positive that the road that lies ahead over the next 3-5 years is going up!