There is a precedent for yesterday's extraordinary announcement that executive control of Dubai World is to be handed over to a Government-appointed "chief restructuring officer" as a prelude to a radical reshaping of the group. General Motors (GM) had the same kind of status in the US that Dubai World has in that emirate: an iconic corporation that encapsulated the ethos of its country.
GM was Cadillac and Chevrolet, brands as American as baseball and apple pie. Dubai World is DP World and the Palms, businesses that have come to symbolise the emirate's dynamic growth and glamour. As GM found out last year and the Government of Dubai discovered yesterday, iconic status is no guarantee of financial security. When consumer tastes change, or when change is forced on local markets by global financial upheaval, even the biggest and the best have to bow to commercial reality.
GM was taken over by the US government, shielded by provisions of the American bankruptcy laws, bolstered by a big injection of public money and eventually came out of Chapter 11 a fitter, leaner corporation that is contemplating an initial public offering listing next year. It was even able to resist a fire sale of assets in Europe. Something similar is happening at Dubai World. It will have to make difficult decisions now and perhaps may even find itself smaller at the end of the process.
But Dubai has shown it is willing to grasp the nettle of hard financial reality, making difficult decisions even when it involves a national icon. email@example.com