New GM will include Cadillac and Chevy and chuck the rest

Alfred P. Sloan, the legendary CEO of General Motors Corp. (GM) from 1934 to 1956, envisioned GM as a company that would offer a car for every income level, thus keeping customers in the GM fold as they climbed the ladder of American success from their entry level jobs to their peak earnings years. Starting out, a customer would buy a Chevrolet and then keep buying bigger intermediate cars -- e.g., Pontiacs, Oldsmobiles and Buicks -- before reaching the summit -- Cadillac.

The new GM won't sell you those intermediate cars -- it will get you at the bottom (Chevrolet) and the top (Cadillac) and offer you nothing in between. Through something called a Section 363 bankruptcy, GM will sell its most valuable assets -- Chevy and Cadillac -- to a new government-funded company. The rest of GM -- Buick, Pontiac, Hummer, etc. -- will be left in the old GM. The proceeds from selling the good assets will help pay claims like GM's $27 billion in unsecured debt and its $20 billion in union pension liabilities.

Last November, I suggested a six point restructuring plan for the industry. On Sunday, the U.S. took the first and most important step, which was to replace GM's CEO. If this Section 363 plan goes into effect, the U.S. will move onto another key step: getting rid of unprofitable product lines and keeping the good ones, which I thought included Chevy, Cadillac and Buick. Some of the hard things that remain to be done are giving workers a pay cut, closing excess dealerships, and cramming down painful losses on bondholders.

GM's board should have done all this years ago -- and the failure of corporate governance here suggests that we need to rethink the way we run American companies. I believe these six changes would help.

Peter Cohan is president of Peter S. Cohan & Associates. He also teaches management at Babson College. His eighth book isYou Can't Order Change: Lessons from Jim McNerney's Turnaround at Boeing. He has no financial interest in GM securities.

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