What the Dodgers can learn from GM
The automaker solved its problems in bankruptcy court. Can the ball team do the same?
By Ted Reed, TheStreet
When you really think about it, bankruptcy court has become a place where miracles happen.
Also in bankruptcy court, Delta (DAL)transformed itself from a bloated regional airline into an international airline that was, briefly, the world's biggest. Additionally, in a courtroom merger, US Airways (LCC) and America West, two small, weak, near-death airlines remade themselves as a financially fit survivor.
This brings us to the subject of the Los Angeles Dodgers.
The Dodgers were given a license to print money when they moved to L.A. in 1958, after New York urban planner Robert Moses would not let the owner build a new ballpark in Brooklyn.
It is hard to imagine that such a successful business would need to file for bankruptcy. But two things happened. One, team owners Frank and Jamie McCourt got divorced, creating financial conflict and debt. Two, Frank McCourt wanted a place to hide from baseball commissioner Bud Selig. What better place to hide than bankruptcy court, where the only law that applies is bankruptcy law and a single person, the bankruptcy judge, is in charge of interpreting it?
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Two years ago, Selig used a bankruptcy court in Texas to engineer the sale of the Texas Rangers to his chosen buyer, Nolan Ryan, even though major creditors initially objected. This led directly to a miracle: Ryan led the Rangers to their first-ever World Series appearance.
With the Dodgers, the tables have turned. Now the intent is to evade Selig, who wants to take this grossly mismanaged franchise and put it in the hands of someone who would use the team's profits to strengthen the team rather than to pay divorce-court debt. In fact, in 2010, respected former Dodgers owner Peter O'Malley said that McCourt had lost all credibility as an owner and that "it would be best for the franchise and the city if there was new ownership."
Some observers say Selig wants to reward his college fraternity brother Lewis Wolff, who has run the Oakland A's into the ground in an effort to scare off fans and move the franchise to San Jose. That way, an owner who failed to serve Los Angeles fans could be replaced by an owner who failed to serve Oakland fans.
That's too bad, but bankruptcy court is a place to find solutions, not follow tradition. In the case of GM, the Obama administration, acting as both principal buyer and principal creditor, made all the rules.
Normally in bankruptcy, secured creditors get repaid, but in the GM bankruptcy it was the workers' health care plans that came out whole. For a change, workers won, rather than bond speculators. On top of that, the Obama administration forced better management on a bloated collection of fiefdoms that was pretending it was the world's best automaker, simply because that is what it once had been.
Now, of course, GM is a far better company, most likely fixed, capable of making the best-selling compact car in the U.S. and also running Buick, the fastest-growing major brand, even though, unfortunately, it is not quite capable of convincing investors that the offering price for its IPO was justified.
What is the lesson for the Dodgers?
Right now, the team resembles pre-bankruptcy GM. It no longer connects with its glorious past. It is one game out of last place. It has failed to police its stadium parking lot, where this spring a San Francisco Giants fan was beaten nearly to death. It can't pay its bills without selling its future.
Last, the team has been eclipsed by its one-time peer. If the Dodgers are GM before bankruptcy, then the first-place Giants are Ford (F).
Bankruptcy court, where miracles happen, is exactly where the Dodgers ought to be.
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