The one good thing about the government's takeover of General Motors is that they won't have to change their logo very much. In fact, I've already fixed it for them. (see image, right). Governmental Motors has a short-term advantage in the auto market, but that will quickly turn out to be a disadvantage. If you thought that GM sucked when the government was sticking pins its voodoo doll from afar, just wait--it gets much worse. We've seen this movie before.
Now that the United States government has purchased its first automobile company, they should be getting some words of advice from citizens of the former Soviet Union. Wait! The Russians just did give their input, unsolicited and with perfect timing. They said, not surprisingly, that we're much stupider than they were:
It must be said, that like the breaking of a great dam, the American decent into Marxism is happening with breath taking speed, against the back drop of a passive, hapless sheeple, excuse me dear reader, I meant people.It's been a pretty common claim in the last few days that such a boondoggle has never been tried before.
True, the situation has been well prepared on and off for the past century, especially the past twenty years. The initial testing grounds was conducted upon our Holy Russia and a bloody test it was. But we Russians would not just roll over and give up our freedoms and our souls, no matter how much money Wall Street poured into the fists of the Marxists.
Both GM and the Obama administration understand they are navigating uncharted territory. Obama vows that the government won't meddle with product decisions or other company business.No, they're not navigating unknown waters. In addition to the Soviets, Mussolini tried just this, and look how well it works!! It's a good thing Obama's automobile task force will not meddle with product decisions...like...well...requiring GM to discontinue the Pontiac brand if they want to continue sucking at the government teat.
The media are infatuated with Barack Obama. He's received twice as much favorable press coverage than either Bush or Clinton did in their first hundred days. It certainly makes it easier for the federal government to take over a car company!
The stock market reacted favorably yesterday on news of GM's bankruptcy filing and government takeover--at least you thought that, didn't you? In reality, the bump in the Dow was almost exclusively due to the dumping of Citigroup and GM from the Big Board and replacing them with much more healthy Traveler's Insurance and Cisco Systems. But it sure made the Obama Adminisration's decision to take over a private company look good, didn't it?
Few things illustrate government ineptness as well as the government takeover of GM. Intelligent observers recommended that GM go into bankruptcy nearly a year ago. Yet government was confident that it could bail out the beleaguered automaker with my grandchildren's paychecks. Bankruptcy was presented by the government as an unconscionable and potentially catastrophic option, because three million jobs would be lost. Yet here we are, a year later--with GM in bankruptcy. Imagine how much further along GM would be now had they not kowtowed to federal government embiciles.
GM does now have apparent advantages over the other automobile manufacturers, but any advantage won't last long. In a move that will all but ensure that necessary quality improvements in GM products will notoccur, the Obama Administration promised, during Obama's usurpation speech yesterday, that the federal government will purchase almost exclusively from GM and Chrysler for its governmental fleets.
Meanwhile, Ford, where quality really does matter, is increasing its production output due to increased consumer demand.
If only Stalin and Mussolini could come back from their graves.
At least with the government purchasing exclusively GM and Chrysler cars the company will continue to have some customers. The day may come when you will know who works for the government simply by the cars they drive, and dealerships will be more than happy to take taxpayer money for their endless repairs of those cars that only the government is willing to buy.
ReplyDeleteDespite what the President says, GM's (and Chrysler's) actions will now be driven chiefly by political considerations than by market considerations. Some have suggested that shaking up the board and the executive cadre would help. Excuse me, but this is messing with the micro while ignoring the macro. The company will now respond to its most pressing incentives -- and those are now political.
ReplyDeleteAh, but what to do. The government can't let a government owned business fail. The answer is more politically motivated propping up, of course. Using taxpayer money, of course. It's always so much easier to 'save the country' (or the world) when you can use other people's money to do so. Especially when some of that money is guaranteed to come back as political donations and lobbying perks.
Simply mandating that your government use your dollars to buy only vehicles from government owned car manufacturers won't be sufficient and the politicians know it. The answer is to do what has always been done in every socialist economy: SUBSIDIZE. Even now the US Senate is debating a plan that would subsidize the purchase of politically favored vehicles up to $4,500 at a shot. Who cares about any competitors (or taxpayers or consumers) that would be harmed by all of this? There's a political payoff to be had.
Thus, we move from any semblance of response to market incentives to response to political incentives. Care to predict the predictable result?
Reach, I don't see much merit to your argument. Even if the "goals" become political, those "goals" for stockholders will still be turning a profit. Gasp!
ReplyDeletePerhaps I'm missing something here folks, but wasn't this simply a choice between no more GM, and bailing GM out? And isn't it sort of, you know, a good thing that the investment is written in a way that should the company grow, the return goes to the taxpayers? And then (stay with me here) turn the company back over to a private investor once it's again viable?
Please explain to me why that is not possible, and why the loss of hundreds of thousands of jobs INSIDE the country would be a preferable solution?
Are we making decisions here based off of intelligent, forward thinking problem solving, or is our goal just the incessant blindness of seeking ideological purity above all else?
And do you seriously believe, for a split second, that there is anything new to this action being undertaken, other than the media coverage it's getting?
Profit, yes. But profit for those chosen by the government. At the expense of taxpayers. Current estimates put each union job saved at a cost of $500K to taxpayers. This is not a deal, even if the goal is keeping jobs inside the US.
ReplyDeleteThere was no danger that GM would have closed its doors. It could have restructured via bankruptcy without a bailout, but that would have prevented unions from cashing in. It still would have closed down dealers, shut plants, and spun off units like Saturn, SAAB and Hummer.
This is not about keeping jobs in the US. Hummer jobs will go overseas after 2010. GM is already going to import small Chinese cars to meet the new CAFE standards. This is not about US jobs; it's about union jobs -- paying back some of the biggest campaign supporters.
GM will no longer work to satisfy consumers. It will work to satisfy politicians and their backers.
Reach, I don't disagree with you on several of the asinine dynamics of the bailout, or the way in which this could have been handled better.
ReplyDeleteBut I still see your objections being more about ideological purity than a reasonable assessment of the investment.
In fact, the word "investment" is key. If GM can be made viable, the long term ramifications cannot be measured in a simple "cost per job" analysis.
We can get caught up in the "union hate" and we can dislike the idea of government dabbling in business from an ideological perspective (in fact, I would argue such discussions are important to have), but if we do only that, conveniently ignoring the loss of an industry and marginalizing the effects of that "job hole" to do so, we create only an environment that doubles down on ideology alone.
From a business perspective, doing so is one of the sure fire ways to be less adaptive and responsive to the realities of the market you're faced with. In business, a "big loss" investment one year may be unpleasant. But it's often the only way to save your business.
What this boils down to can be simplified (specifics of mistakes made aside, and I agree there have been several). We can either do without an American auto-industry, or we cannot. If one believes, as I do, that it is important to keep GM alive -- looking 15 years down the road, not just to the next election cycle -- then this "investment" is just realistic business practice. If one believes that the auto-industry's contribution to our economy is something that will one day pull us back (at least a little) from a 100% financial industry economy (i.e. we produce nothing, become the speculating investors of the planet), then this was smart business.
It may be ideologically anathema to conservative economics, but that does not, in any way, parlay it into a bad investment. And considering the era we are just now seeing come to an end, I'm unconvinced conservative economic notions have been as fully thought out as Reagan had us believe.
Jason,
ReplyDeleteI'll try not to speak for Reach, but as for me, this has nothing to do with ideological purity. It is, simply put, a gigantic stretch of the imagination that government investment will encourage GM to do anything that will make it produce cars that are more attractive to the buying public than they already are.
You talk as though the government is saving the U.S. auto industry. They are not. Ford didn't participate in the bailout, and, rather than being involved in bankruptcy proceedings, is ramping up production, because people actually like their cars. Ironically, one of the reasons that people like their cars is because the hybrids get really good MPG, and Ford didn't even need government to force them to comply with CAFE standards.
General Motors is a stupid corporation, and now the government has rewarded and sanctioned their stupidity. That's a terrible investment.
I'm with Frank. This is not about ideology or union dislike. The fact is that this is about political payoff. My concerns would be the same if anybody else were getting political favors.
ReplyDeleteAgain, there was no danger that GM would simply have shut down. It would still have restructured, but without taxpayer money. The restructuring would have looked the same in some ways, but different in others.
Frank is right. This is a terrible "investment."