GM and the Dodgers: A case study
While writing the filibuster the other day, I got to thinking. What’s so bad about MLB taking over the Dodgers? It’s not something they want to do and ideally they’d like to get rid of the franchise as quickly as possible. Both MLB and the Dodgers hope to emerge from this more healthy. The weird thing is that as I considered all the aspects of this move, it began to feel a little like deja vu. I had the distinct feeling that I had read this story before. Then it hit me. This same story happened just recently with a little company called General Motors, and the US Government played the role in which MLB now finds itself.
Just like today’s Dodgers, GM found itself in trouble because of profligate spending, terrible management and an inability to provide the consumer what they demanded. As it became clear that GM could no longer support its obligations and refused to make the changes needed to resolve its issues, the government stepped in.
Just like with MLB’s decision to take over the Dodgers, the government’s decision with GM had its share of detractors. Although I don’t think anyone outside of San Francisco truly wants to see the Dodgers fail as a franchise, a fair amount of the fringe right and left wing in the US were more than happy to watch GM collapse. While refusing to see what impact GM’s dissolution would have on an already fragile economy, these people decided that the moral obligation was to let GM collapse as an example to other firms. Obviously this was not an option for the government, just like McCourt’s continued ineptitude with one of baseball’s storied franchises was not an option for MLB and the commissioner.
The real moral of this story comes in the aftermath. GM quickly emerged from its bankruptcy and government receivership. More importantly, not only did it emerge more streamlined and healthy after government managers got rid of deadweight makes and models, it also set a record with its IPO. MLB is hoping for a similar outcome and looks to be using an important tool that the government also utilized with GM: get rid of the management who got you into this problem in the first place.
Since GM rose phoenix-like from its own ashes, those who criticized the initial move have become much more subdued in their comments. Although the level of criticism hasn’t been quite as great with MLB and the Dodgers, I have a feeling that even those who have decried Selig’s actions will end up eating their words once the Dodgers are resold. Takeovers are always painful but they aren’t always bad.