Giving Credit To GM's Turnaround (GM)

Days before General Motors' (NYSE: GM) long-awaited IPO, the New York Times ran a piece by Andrew Ross Sorkin, in which Sorkin discussed who should receive the credit for GM's turnaround.

In particular, he takes issue with Malcolm Gladwell's review of Steven L. Rattner's book about his tenure as the nation's car czar. “The conventional wisdom, of course, is that GM was turned around by a group of White House-imported private equity and restructuring experts, ‘Team Auto,' led by Mr. Rattner,” Sorkin wrote.

However, Gladwell – the author of “Blink” and “Outliers” – doesn't buy it. Rather, Sorkin said that he makes the argument that GM's newfound success is a result of Rick Wagoner, the company's former chief executive.

Sorkin quotes Gladwell, who said that Wagoner "took the world's largest company from an uncompetitive monolith to a worthy competitor of Toyota and Honda."

“While Mr. Gladwell may be revising history to be provocative, his observations say a lot about the way much of the public still views the buyout world,” Sorkin wrote. “Indeed, the private equity industry and its many lobbyists have been fighting for years to prove their value to the public, producing all sorts of studies and white papers to back up their claims.”

But Sorkin agrees with Gladwell's assessment that the turnaround was an act of financial engineering. “While ‘financial engineering' has become an expletive of sorts, in this case, it is actually a good thing,” Sorkin insisted. “Indeed, GM's turnaround should become a case study for when and why the private equity and restructuring business can work.”