By on June 1, 2009

GM filed for bankruptcy today. From now on, TTAC will chronicle GM’s fortunes under the series name bestowed upon post-C11 Chrysler: Zombie Watch. For there’s no doubt in my mind that GM will not recover from its federal stewardship to emerge, as Dan Neil puts it, “smaller, leaner, smarter and hungrier.” Sure, I’ll spot Dan smaller (obviously). Leaner? An efficient government-funded company is an oxymoron to rival military intelligence. Speaking of which, smarter? GM is as far from smart as Steven Hawking is from professional wresting. In fact, listening to GM CEO Fritz Henderson bleat to the press today, it struck me that the automaker is pulling a Mark Mothersbaugh: it’s de-evolving. Less obscurely, the company is actually getting stupider.

To wit: when Bloomberg asked Fritz whether there would be any changes to post-C11 GM’s corporate culture (i.e., when would someone shit-can the overpaid yes men and women who’d run General Motors into the ground), Henderson said there was no need for an executive cull. “Natural attrition” would ensure fresh blood. Well, he would say that, wouldn’t he? After all, any such overdue housecleaning would start by sweeping Fritz Henderson out with the rest of the garbage hanging around RenCen (e.g., HUMMER).

Even so, it was a stunning admission that all that talk about GM’s preparations for a government-backed renaissance—trimming dealers, reigning-in the United Auto Workers, softening-up bond-holders, etc.— was complete and utter horseshit. More specifically, Henderson was spouting the same crap GM’s been foisting on shareholders since Nikita Khrushchev used shoe-leather to pound home a point.

The truth: GM’s management still doesn’t have the slightest idea how to right the sinking ship—sorry, raise the Titanic. Henderson point blank refused to specify a deadline for a return to profitability. No goals. No timelines. Nada. If I didn’t know better, I’d think Rick Wagoner’s hand-picked clone/successor was trying to give this GM Death Watch series closure, in that “here we are at the beginning again” way. But no; there is no plan.

Now you could say that Henderson can’t formulate a plan. It’s up to the next GM CEO—the one appointed by the same presidential administration that fired the old CEO and swears up, down and sideways it doesn’t want to run GM—to devise a detailed strategy for returning some $50 billion dollars to American taxpayers. And those pesky bondholders. To which I’d reply, sure; what’s the hurry? We’re from the government and we’re here to—say, are those fresh donuts?

More evidence of increasing numb-nuttide: on this historic day, GM signaled recently dismissed dealers that they company will honor their franchise agreements until they expire (Oct. 31, 2010). Huh? If GM doesn’t terminate the franchisees before exiting federal bankruptcy, they’ll lose the chance to do so without legal repercussions. The abandoned dealers will live to fight the “new” GM in all 50 states.

In other words, even Chrysler somehow managed to get it right where GM continues to get it wrong. Of course, both automakers are missing the golden opportunity to tell the United Auto Workers to FO&D. Damn! I forgot! This is a government-sponsored bankruptcy. When the feds pull the strings, the union owns you. Literally.

Meanwhile, and lots of it, the mainstream media seems obsessed with the idea that President Obama’s minions will force the automaker to build shit boxes to appease the environmental wing of the democratic party, and, thus, drive GM into bankruptcy. Oops. I should have said “continue to suck-up taxpayer money until British Leyland looks like a winning lottery ticket.”

It’s a ridiculous concerm. Government Motors has but one goal: nothing. Remember? No deadline. No timeline. Nada. Which makes a mockery of the most important part of Neil’s post C11 prognostication: the hungry bit.

Simply put, governments are not profit-driven. At all. On any level. Ever. So it doesn’t matter what kind of vehicles post-C11 GM manufactures. At all. On any level. Ever. Snap! That makes “new GM” the same as “old GM.” See what I mean about circularity?

OK, time’s almost up. How do I see this playing out?

Either the feds will sell GM to another automaker soon, or the feds will sell GM to another automaker later. By that I mean either Renault Nissan (or someone) will swoop in “to the rescue” (for bupkis), or the public will eventually grow weary of subsidizing Government Motors. At that point, Uncle Sam will jettison the public’s shares in GM for cheap. Some strip and flipper will buy it up and do what they do best.

In other words, one way or another, GM is headed for liquidation.

I’d like to say that this is the bankruptcy I recommended four years ago, which will allow GM to reinvent and reinvigorate itself. But it isn’t. So I won’t. I’ll just say so long and thanks for all the Corvettes. Although the interior still sucks.

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98 Comments on “Editorial: General Motors Death Watch 260: The End...”


  • avatar
    Hippo

    Even ultra liberal Robert Reich agrees that they will not survive.

    Actually for someone that has the completely wrong idea as far as solutions, he has a remarkably clear view of what they are doing.

    A colossal waste of taxpayer money.

    http://www.nakedcapitalism.com/2009/05/robert-reich-gm-bailout-wasteful-way-to.html

  • avatar
    Strippo

    The hardest part of the GM Zombie Apocalypse is pretending I’m not excited.

  • avatar
    Rastus

    Bless your heart, Robert…but can you please change the title to “General Motors Death Watch 260: Dead!”

    God Bless.

  • avatar

    My G6 has the same steering wheel as that Corvette (minus the leather wrap). You stay classy, GM!

  • avatar

    LOL

    Wait till their stock hits .40 a share and GO LONG !

  • avatar
    kovachian

    Dear tax payers,

    F**k you.

    With sincerest love,
    GM

  • avatar
    cardeveloper

    Robert,

    How can you say Chrysler got it right? They took billions of dollars in tax money, govt protected the UAW bond holders, and are literally giving the assets to a foreign entity, without putting up any capital investment. On a related side note, Fiat is themselves deep in debt, taking bail out money and has a reputation for poor quality product. Chrysler does not have it right. I will concede GM has it wronger [sic].

  • avatar
    86er

    Well, it’s been a helluva ride, and I’ve been along for, oh, at least half of the time since DW #1 began. It’s been some depressing but informative reading.

    As others who have been around as long or longer than me can attest, this has been one daunting but I think worthwhile undertaking by the publisher.

    I’m not too proud to admit that as someone who grew up in a part of North America where the domestics still dominate, I might not have learned or heard of their troubles until perhaps a year or so ago had I followed traditional media.

  • avatar
    thetopdog

    People need to stop hating on my car’s interior! Yeah the wheel is the same as the Cobalt, but it works, and it feels good. I’ve spent almost every day of the past 2 years in that car and I have not had one complaint about the interior. Not that the Vette doesn’t have issues (steering feel, a severe lack of ‘tossability’ considering the car weighs only 3200lbs, a truck-like transmission) but the interior is more than adequate

  • avatar
    cdandy

    No Robert!

    You are the automotive statesman for the nation! Your work is not done yet. You must follow GM into the evacuated bowels of C7.

    C11 is only halfway there.

    Don’t abandon the effort now that you are so close!!

    I admit that without a plan from Fritz, Vegas will have a hard time laying out the over/under.

    Yet, we must be more than halfway there by now.

    Look to the Donner Party to gather the strength to go on. Please!!!

    Besides, everyone likes a good clown show. A smaller, leaner, more “green” clown show, but still a clown show.

    CLAPTRAK just might survive!!!

  • avatar
    faygo

    I see no reason whatsoever that there won’t be a new dealer cull plan issued as part of the C11. the initial cull was some sort of maneuver to put those dealers out first, for whatever cause they used to do the selection. the next/second/(likely not) last wave will be based on whatever new criteria they put together and will let them wipe out all of those that they want out, when they want.

    I would assume that they’ll use C11 to write new franchise agreements – sort-lived in the case of those they want out later but not now – such that they get to their desired dealer population down the road.

  • avatar
    cardeveloper

    cdandy

    We have a long ways to go. Currently at C11, the administration had to make up the rules for C10. then when that fails, make up the rules for C9… Long ways before we get to C7 :)

  • avatar
    unleashed

    Dear tax payers,

    F**k you.

    With sincerest love,
    GM

    This pretty much sums it all up.

  • avatar
    afabbro

    Funny thing is that I’ve read three or four reasonable scenarios for GM to survive…for example, some thoughts I’ve read here:

    - Slim down to Chevy + Caddy, drop the rest

    - pick the top 12 or 20 cars out of all the brand lineups and make one GM brand, or just call it Chevrolet. Retreat from the lux market (how many Cadillacs do they sell anyway?) until you’ve reestablished. There are some good GM cars – the question is why they make all the rest.

    - Focus on trucks, SUVs, Hummers, and other he-man vehicles – the only competition is Ford.

    - Stop the Chevy Volt “we make the cars the government wants the people to want” and make cars people actually want

    Etcetera…there are no shortage of good ideas. They’re mostly on the product end – there needs to be a lot of hard work done on factories, labor contracts, etc.

    Alas, the government is not doing any of these things. GMC+Buick+Chevy+Cadillac stuffed with Chevy Voltesque cars is going to flop. We’re going to see congressmen pressuring management to keep factories open in their districts, the government mandating cars no one wants, GM coasting along with its sclerotic management, etc.

    Bah.

  • avatar
    frizzlefry

    GM is doomed. The government involvement is only going to exasperate the existing problem. The expectation of jobs.

    The government only cares about jobs, not the manufacturing of cars people want to buy. For a long time now, GMs main failing is succumbing to pressure to provide jobs. If they said to hell with jobs and focused on making great cars years ago, they could still be alive. Granted, the H2 was not a “people want car”…along with most of their product. But had they been without the pressure to be an economic provider, they would have had a far better chance of trimming the fat and freeing up capital to hire people who knew how to make cars people would buy. The union pressure kept them from making decisions they should have made long ago. The 3 GM dealer lots by my house with the same 80 Vibes sitting in their lot for a year now were perfect indications of waste and unnecessary production. But instead they were challenged at every turn by folks who demanded a guaranteed job with full benefits and more pay than successful automakers gave their workers despite whether the product was selling or not. A luxury not afforded to most these days.

    Happy? Now you have no job.

    I’ll miss the corvette and hope that the G8 gets a re-incarnation. Other than that, good riddance.

  • avatar
    cdandy

    No, you all don’t understand.

    Just like Dr. Frankenstein.

    President Obama woke from a dream and then…

    “I saw the pale student of unhallowed arts kneeling beside the thing he had put together. I saw the hideous phantasm of a man General Motors stretched out, and then, on the working of some powerful engine, show signs of life, and stir with an uneasy, half vital motion. Frightful must it be; for supremely frightful would be the effect of any human endeavour to mock the stupendous mechanism of the Creator of the world.” The government took all the parts, put them together and declared…….

    IT’S ALIVE!! IT’S ALIVE!!!

    RATTLETRAK LIVES!!!!!!

    http://www.foxnews.com/politics/2009/06/01/little-engine-governments-role-gm-bears-resemblance-amtrak-route/

  • avatar
    Rastus

    CLAPTRAK…I love it.

    GM is the Wigger of the US auto industry.

    -Rastus

  • avatar
    gslippy

    One thing will accelerate GM’s certain death: a lack of sales.

    The 5-15 month inventory just won’t go away, and it will continue to build up as people quietly avoid purchasing from a zombie.

    I think that “smaller” GM is about to become ridiculously small.

    A local Pontiac/Hummer/Saab/Saturn/Buick/Cadillac/GMC/Hyundai/Kia/Infiniti/Nissan/Subaru dealer says they have $50 million in inventory – a simple check revealed the following NEW cars available from these model years:
    2005 (1)
    2006 (1)
    2007 (8)
    2008 (111)
    2009 (1327)
    2010 (18)

    They have six model years sitting on their lot, all NEW. Wait until the government forces them to choke on even more car shipments.

  • avatar
    Packard

    General Motors has been operated for the last fifty years by a group of parasites of common interest, the managements of the company and the UAW. These people have repeatedly sacrificed the interests of the company and union, respectively, to further their own interests – and they’ve been exceptionally successful at it.

    Now, having run through the entire assets of the company, they’ve transferred themselves to a new host, the taxpayer. In barely six months, they’ve sucked up over $50 billion.

    This is a really remarkable achievement, from any perspective. But, for the folks running GM and the UAW it’s a truly brilliant move, because they’ve managed to make the predator who’d been stalking the industry for decades now a source of lifeblood for them, almost into perpetuity. At least as long as Obama’s around, he’s going to have to keep signing the checks, because each incremental few billions will be much easier to provide than would admitting that all the money that preceded it had been a waste, and that Mr. President had been suckered like a rube.

    Polls over the week-end indicated that two-thirds of the country opposes the GM bail out, with only about one-fifth supporting it – which seems a pretty large percentage of both knowledge and opposition. That Obama is, basically, telling that two-thirds that he doesn’t care what they think is probably not politically healthy, at least in the long run.

    Obama’s a fool to have been sucked into this. He’s betting a lot of his future on the proposition that a “new GM” can be something different than the old one, and not a money-loosing clone of the present GM, albeit smaller. The chances of that happening are zero, because the new GM will be run by the same people in both management and union as the old one – and they’ve already pretty clearly established where their talents lie. The sooner the “new GM” emerges from bankruptcy, the sooner it becomes apparent that it won’t be successful and will continue to sop up taxpayer money.

    Whether he intended it or not – and no one would be stupid enough to actually intend it – Obama has made GM a metaphor by which his success as President is likely to be judged. It’s going to be very easy to view GM in the future as a clear and easy to see example of how Obama’s policies have affected the overall economy.

    George Bush, though, gets the last laugh. Had Bush simply refused TARP money to GM and Chrysler, then Obama would have had a basis on which to say he wasn’t able to provide federal assistance. Once Bush provided the initial funding, Obama would have had to exhibit real courage to deny more.

    Sneaky old George Bush set him up.

  • avatar
    agenthex

    I’d like to say that this is the bankruptcy I recommended four years ago, which will allow GM to reinvent and reinvigorate itself. But it isn’t. So I won’t

    Actually it is exactly the bankruptcy which has been called for on this site. Conservatives just won’t admit it because it will completely invalidate their worldview from which their credibility will never recover.

    If anything’s wrong, it’s the belief that GM will “re-invent and reinvigorate itself” in any kind of successful fashion given the history of fail, but the current bankruptcy will give the best possible chance given the circumstances.

    If you look at the recent auto events, pretty much all the sane advocated policies have been implemented: reduce debt, cut dealers, cut brands, reduce union obligations, cut redundancies where needed. All done with record breaking efficiency and effectiveness, I might add.

    All together it still doesn’t create an entity which adds up to the total taxpayer bill, of course, same deal with the banks. So don’t play if you can’t pay (the external costs of capitalism).

  • avatar
    PeteMoran

    Ford and Toyota stock UP. At year highs I believe too.

    Maybe that WAS the plan, aside from just sending money into the rust belt to ease the much needed structural change that must arrive, sort-of, soon-ish, sometime.

  • avatar
    TaxedAndConfused

    Anyone know what happens to Daewoo in all of this ? Given they sell as Chevy in Europe and Holden in Australia, more or less developed the Cruze and so on.

  • avatar
    George B

    Weird scenerio where GM survives in spite of everything. Cast off products of Bad GM are purchased cheap and survive while the government “helps” Good GM and kills it. Bad GM then buys the scraps of Good GM for almost nothing. Don’t think there is enough demand to support this, but remember that William Durant lost and regained GM early in its history.

  • avatar
    sutski

    leaner meaner… and still not able to sell any cars!!

    Do these people not realise that the US economy has shed some 6.5 million jobs since dec.’07…and with it a large chunk of the GM car/SUV target market.

    I know of NO ONE who has the cash to buy a car outright, and if no one can buy outright and no one wants to be in debt or get auto leasings anymore, who will be buying these leaner meaner cars?

    As has now been said 260 times, just let it die… Fisker et al. will snap up the production facilities and workers and the market (or the Chinese…) will find a solution.

  • avatar
    agenthex

    RATTLETRAK LIVES!!!!!!

    Pretty much all forms of transportation in the US are taxpayer subsidized, from airlines/airports to roads and, yes, rail.

    Again, remember where you got the info, since they’re feeding you an incomplete picture (ie half-truth), and learn to be wary of either ignorant or deceptive sources.

  • avatar
    Matt51

    GM will survive. They have good trucks, they have good small cars coming, they have good mid-size/large cars. They have Daewoo, and the Koreans can produce for lower cost than American or Japanese factories. Opel being a high cost producer will be cut loose.
    GM would do much better though, if they canned Frankenstein Fritz. They do need to be run by someone who knows product, not another Ivy League MBA.

  • avatar
    Campisi

    Actually it is exactly the bankruptcy which has been called for on this site.

    Well, it isn’t. Brands died, plants closed, but at the end of the day the same executives and the same parasitic union not only persists, but thrives. I get the feeling that the latter two points are the contentious bits around here.

  • avatar
    V6

    after GM ‘emerges’ as a new company, are people going to want to buy their cars?

    same with Chrysler. There’s going to be a hell of a lot of pissed off people that will resent these companies for taking tax payer money & not to mention the thousands of people who have lost their jobs. even if i wasnt directly affected & was non fussed about the tax money, i dont think i would consider either of these brands due to the stigma that will be associated with them. i can just imagine coming back to my car in a carpark and finding spit and key scratches on it

  • avatar
    Dr. No

    It’s time to find another Alan Mulally for GM: Fritz isn’t the guy to lead GM out of C11. GM needs creativity and Fritz has zilch.

    And I think it’s dumb to suggest the # of dealers is the answer to GM and Chrysler’s future (at least for the next 3-4 years they have in purgatory).

    Let capitalism deal with the non-performing dealers.

    GM and Chrysler will live or die on product. No one is talking product! And forget Buick — sell Caddies to the Chinese instead. Buick should put its cars in mortuaries if Buick was smart about the demographics of its customers.

  • avatar
    Captain Tungsten

    The “do what you always did, you get what you always got” argument is sound. But, don’t the new owners get to install a new Board? And, thus, doesn’t the government get to call that shot, being the majority owner of New GM? I thought i read in earlier news reports that most of the board will be replaced.

    It seems that the brooming the top management of GM by the new board would be a popular move, politically. Why isn’t that a plausible scenario?

  • avatar
    MikeyDee

    We can discuss and analyse this until we’re blue in the face, but the fact remains, gslippy is right. Sales numbers are dreadful and continue to be terrible. As long as the sales numbers are this bad, how is the “new GM” going to fare any better than the “old GM”?

    It’s still very tough to get a car loan. The banks are still declining folks with good credit. The American public is still wary about losing their jobs and are not ready right now to take the plunge into a new car loan.

    What if the “new GM” emerged, but very few brave souls had the gonads to jump in and take the plunge?

    It’s all about sales. It you ain’t sellin’, it doesn’t matter what you do.

  • avatar

    I would find this fascinating, except that I’m paying for it without my permission.

    The only GM I’d consider is a used Vette, but that’s no help to current GM.

    It is not American Leyland…It’s GM-trak.

    Amtrak is to the golden age of passenger rail as GM will be to a competitive auto company.

  • avatar
    Happy_Endings

    they have good small cars coming,

    How do we know? Every new small car GM has produced was predicted to be be good. Yet none of them have been good. Their track record on this is poor, to say the least. So how can anyone predict with a straight face that the next one will be good?

  • avatar
    seldomawake

    Brilliant!

    I had been waiting for this article. Y’know, for four years or so.

    About dang time.

  • avatar
    200k-min

    Yep, GM is toast. On a local radio show this morning everyone that called in said “I’m a loyal Chevy/GM/Chrysler buyer…but my next vehicle will be a Ford.” Anyone who has been paying attention will not be buying another GM product. GM’s only hope is the American consumer is a bigger zombie than they are. Hmm, this could be interesting.

  • avatar
    Steve_K

    “…governments are not profit-driven.”

    Fantastic! This being the case, every FWD vehicle should be canceled immediately. All trucks should have the Chevy 572 V8, all Corvettes should be ZR1 or Z06 trim only. The Camaro will be available in SS level only, Pontiac G8 GXP will continue, as well as the Cadillac STS and CTS (V series of course).

    Your choice, $10k.

    What? If we own the company now, lets make some toys! Since Obama is in charge each of these vehicles can get 100mpg.

  • avatar
    no_slushbox

    PeteMoran:

    I kept telling all the Detroit apologists crying about American ownership to buy Toyota stock, apparently they should have listened.

  • avatar
    Pig_Iron

    Lots of good points of view here. I reckon GM will be around for 24 to 36 months. After that…?

    Separating board from executive is obviously the correct action. Buick and GMC will probably sap precious resouces from Chev and Cad.

    I find it hard to beleive they won’t beef up a Chinese micro/mini/subcompact and bring it here. I don’t they can support the paper thin margin of building it in NA, even from Mexico or Korea.

  • avatar
    Lokkii

    @agenthex :

    Actually it is exactly the bankruptcy which has been called for on this site. Conservatives just won’t admit it because it will completely invalidate their worldview from which their credibility will never recover.

    Uhm, no it’s not. The bankruptcy that conservatives have been calling for had no government money involved, and no intent or desire for extreme measures to try to keep GM alive. If GM died, so be it. The point of calling for bankruptcy years ago was that GM was still healthy enough in those days to have a chance of survival. Now it doesn’t.

    We were calling for heart surgery to clear clogged arteries before a heart attack. Now that heart attack has happened, and the patient is on intrusive life support. The patient is finally having surgery but the techniques being used by surgeon Obama are experimental and not in keeping with historical best practice. Even if the patient survives (which is not the most likely outcome) he will be on (government money) life support for a long time.

    See the difference? Probably not… sigh.

  • avatar
    Lokkii

    I was just listening to NPR talking about the GM bankruptcy with a GM spokesman.

    Here’s what I heard.

    GM is going to 36 (34,32?) models instead of 48. Still way too many, but it saves a lot of union jobs, I bet.

    GM is going to manufacture small fuel efficient cars as a priority. Thanks Nancy Pelosi, thanks!

    GM is going to build them in the United States with UAW labor. ‘Cause Michigan UAW wages are (politically speaking) just as cheap as Korea or China now.

    Yup! No politics here, folks. Just smart business decisions made by the same people who have been making smart business decisions in Washington and Detroit for years.

    Yup!

    GM is so doomed.

  • avatar
    akear

    It is now our company. Lets hope it survivies.

  • avatar
    51mustang

    GM is still the world’s second largest car company. It would be hard to close down and cause more harm than good.
    For better or worse GM is here to stay.

  • avatar
    shabster

    Mr. Farago,

    I gotta fess up. I didn’t think GM would file for bankruptcy. I thought your Death Watch series was over the top bluster.

    You ended up being 100% correct. I was wrong.

    Good work on your part.

    Thanks.

  • avatar
    Rod Panhard

    I feel like Carmaggedon is like what we’ve all thought it would be like after The Bomb gets dropped.

    A small number of cockroaches would survive the blast. They’d still be cockroaches, perhaps mutant cockroaches. But they’d be cockroaches. Eventually the radiation would kill them off.

    Could GM and Chrysler cars be those cockroaches?

  • avatar
    Pch101

    It’s all about sales.

    It isn’t. It’s really about profit and brand.

    GM has prioritized market share for decades, and that is what destroyed the company. The old joke about making for losses with volume was supposed to be a joke, but GM believed this to be a legitimate business strategy.

    If GM is going to succeed, the management needs to begin by figuring out how to turn a profit on lower volume. Not more sales, but fewer sales with higher transaction prices. Use the cars, brand and service to earn respect and command higher prices, instead of using cash back and red tag sales to give everything away at a loss.

    Everyone can complain about the government, but the fact remains is that the feds have done more to address the issues in a short period of time than GM management was willing to do in decades. There’s no assurance that it work, but this is the closest thing that GM has had to a workable plan for a very long time.

  • avatar
    gamper

    I dont understand why everyone is so sure the GM cannot succeed. It is true that they failed to correct some issues in Bankruptcy for political reasons (read UAW, management) but the new company is going to be relatively free from debt. Health Care will no longer be an issue. Dealers and brands will be down significantly. GM still makes great trucks and SUVs that will continue to sell. GM’s newer products that the have launched in the last few years have been pretty competitive. The CTS, Malibu, Lambda CUVs. The new LaCrosse looks great, the Cruze by most accounts is a great car. GM’s 2.0T is a fantastic engine that could find its way into more cars. There is a lot of good product, and hopefully more to come.

    I think GM finally gets it that they cannot produce crap anymore, good products will sell even if they are made by GM. I will be the first to admit that I didnt think GM would ever file for bankruptcy, but I dont think a GM is destined to fail. Everyone is patting Robert on the back for calling GM’s demise. But how much of that demise was attributable to the 4.00 gas prices that destroyed truck and SUV sales? How long could GM have lasted if not for the current Recession? How long could GM have lasted if credit had not dried up? All these outside factors contributed to the current situation, and probably moved GM’s demise up by a number of years.

    The market will recover and if GM has some appealing cars and trucks on the market, they are bound to make some money if they have no debt to service.

  • avatar
    Mr. Sparky

    The purpose of Bankrupt 2 was not to save the US auto industry (that’s Ford’s job). The purpose was to slow the destruction down to a manageable level during the greatest economic contraction since the Great Depression.

    Basically, you can’t let too many major firms go down at once in such an economically fragile time with out killing the patient. The government is simply providing Hospice care for GM and Chrysler until the economy perks up. If GM and Chrysler manage to succeed during that time, that’s great. If not, the government can say that they were given a fair shot, and let them liquidate safely as much smaller entities in a healthier economy.

    I have never really gotten the level of angst on TTAC. Many of the posters seem very personally affronted by the whole thing… Tax dollars, socialism, and such. If we spend $300 billion to clean up the mess and have it collapse in a orderly manner, that works out to about $1k per person. That’s not a big deal kids.

    I think the problem is I’m just not a TTAC believer. As they say, “It not you… It’s me”.

  • avatar
    geeber

    agenthex: Actually it is exactly the bankruptcy which has been called for on this site. Conservatives just won’t admit it because it will completely invalidate their worldview from which their credibility will never recover.

    Conservatives don’t have to admit it because they can see the difference between the two types of bankruptcy.

    The type of bankruptcy advocated by conservatives wouldn’t have involved massive transfers of taxpayer money directly to GM.

    agenthex: If anything’s wrong, it’s the belief that GM will “re-invent and reinvigorate itself” in any kind of successful fashion given the history of fail, but the current bankruptcy will give the best possible chance given the circumstances.

    Considering that this bankruptcy has left GM lifers still in charge of the company, and only resulted in one executive scalp – Rick Wagoner’s – being demanded as a sacrifice, I fail to see how this bankruptcy will help GM reinvent and reinvigorate itself.

    agenthex: Pretty much all forms of transportation in the US are taxpayer subsidized, from airlines/airports to roads and, yes, rail.

    Roads are paid for with local, state and federal taxpayer dollars; the car companies, until recently, were not. Big difference.

    Mr. Sparky: Many of the posters seem very personally affronted by the whole thing… Tax dollars, socialism, and such. If we spend $300 billion to clean up the mess and have it collapse in a orderly manner, that works out to about $1k per person. That’s not a big deal kids.

    If it works out that way, I agree with you.

    The fear, though, is that the federal government WON’T back away if GM and Chrysler can’t right their respective ships. Instead, there will be pleas for more money, because they only need a few billion more to really thrive…

    Unfortunately, those few billion dollars will function more as a narcotic than as an antibiotic.

  • avatar
    Lokkii

    But how much of that demise was attributable to the 4.00 gas prices that destroyed truck and SUV sales?

    IMHO, not so much. The banking crisis got them more than the gas prices….

    Having said that, GM has been a dead man walking long before the financial meltdown and the gas prices.

    Remember that they were losing money hand-over-fist even during the boomtimes. They’d already been selling things off…

    It’s sort of like an Aids patient catching the flu. Yeah, technically the flu killed him but it wouldn’t have if he hadn’t been in such a weakened state already.

    The worry (for me anyhow) is that they haven’t cut back far enough to focus on their core competencies. They’re still trying to save too many models, and do too many new things. They should be building Malibu’s, CTS’, and their popular trucks and SUV’s. Everything else should stop. Now.

    That’s the concern

  • avatar
    John Horner

    I think Mr. Sparky’s view makes sense. With regard to current management staying in place, as far as critics are concerned there seems to be no right answer to this question. When the PTFOA fired Red Ink Rick the Greek chorus howled at the temerity of the federal government for firing a CEO. Now the chorus wants to know why not everyone was fired.

    What the PTFOA has actually said is that the new board which is to be put in place post C11 will be empowered to pick and choose the executive team. The PTFOA, as majority shareholder, is going to choose the majority of those new board members. Thus a lot comes down to how good the quality of that new board is. Hopefully a few of America’s most talented, long-view executives will get put on that board and will lead the company through a successful restructuring. The odds against this happening are long, but certainly not out of the realm of possibility.

    Chrysler’s new management team is going to be led by the people who turned around Case-New Holland and Fiat’s European car operations. You know, the same Fiat European car operations that GM thought were so hopeless that it paid them $2B to go away. Fiat-Chrysler has a fighting chance of pulling it off. Not a certainty at all, but a real shot nonetheless. Chrysler still has a lions share of the minivan market, has the strong Jeep brand, has the only volume rear wheel drive car platform in the US and will have a strong lineup of engines from small (Fiat) to large (Hemi). Also, Chrysler has the advantage of being small enough to only need a few solid hits to be a winner.

    The handful of potential buyers who are all up in arms about never doing business with Government Motors are little more than a loud minority. Americans have an infamously short memory and like to get all heated up about Cable News’ disaster of the day, only to move on tomorrow.

  • avatar
    GeeDashOff

    The purpose of Bankrupt 2 was not to save the US auto industry (that’s Ford’s job). The purpose was to slow the destruction down to a manageable level during the greatest economic contraction since the Great Depression.

    Ding Ding Ding. We have a winner.

    Obama is a lot of things, but one thing he is not is a fool, stupid, a rube, or gullible.
    The man has political instincts like a silent ninja killer.

    The last thing Obama wants to worry about is building cars, but extraordinary times call for extraordinary measures, and here we are. Give it 6 months, let the economy recover a bit, pull the plug, and let the new american auto industry rise from the ashes.

  • avatar
    Happy_Endings

    It is true that they failed to correct some issues in Bankruptcy for political reasons (read UAW, management) but the new company is going to be relatively free from debt.

    GM’s biggest problem isn’t debt, but revenue. Using their 2007 numbers, their operating costs were greater than their operating profits by about $5B. They are simply not selling cars for enough money to make a profit. If they don’t make a profit, they won’t survive.

    In order to sell cars now that they are in bankruptcy, they are going to have to lower the prices on their cars. So, the difference is going to be even greater than the 2007′s numbers. At some point, GM will have to come to the conclusion that they must sell their cars at a profit, not simply sell cars at whatever the price.

  • avatar
    windswords

    “In other words, even Chrysler somehow managed to get it right where GM continues to get it wrong.”

    Lovin’ it.

    It’s still sad. Yesterday driving home from work I was behind a new Caddy CTS. In the lane to the right of me was an older STS 2 door, otherwise known as an Eldorado. When the light changed and traffic got moving a new Pontiac G8 went by me on the right. GM could make a good car when they tried or when the moon and stars aligned properly. If only just most of GM’s cars were like those maybe this would not have happened.

  • avatar
    Jimal

    Matt51:
    Isn’t it interesting that it always seems to be the Ivy League MBA’s that run companies into the ground? Do they offer course credit in this?

    MBA’s in general seem to think they make the world go ’round. My thought is that the world continues to go ’round despite their best efforts.

  • avatar
    Mark MacInnis

    Ummmmmm……anyone happen to notice if there was ANY traffic at ANY GM dealer yesterday?

    I am still surprised by an apparent dearth of polling data on the issue of new car sales….one would think that with SO MUCH government spending on the issue that SOME agency or political party, or even media outlet, would be dropping some cabbage to our friends at Gallup wondering about the average American’s ability/desire to buy new iron, and what this means for Obama’s Grand Plan. That this isn’t happening is noteworthy, and my conspiracy theorist Spidee-sense is tingling.

    Could it be that we don’t want to create a “no one else is buying, maybe I shouldn’t either” sales environment? What ever happened to independent journalism, or have all the media become SO in the tank for Obama that they are in effect an organ of the Socialist Party of Liberal Obama Democrats(SPLOD)?

  • avatar
    Happy_Endings

    What ever happened to independent journalism, or have all the media become SO in the tank for Obama that they are in effect an organ of the Socialist Party of Liberal Obama Democrats(SPLOD)?

    That completely ignores the fact that many conservative commentators, Hannity, Rush, Beck, etc are paid spokesman for GM. Do you think they are going to want to release a poll showing no one is buying anything from the company that is paying them a lot of money?

  • avatar
    NBK-Boston

    I also have to agree with Mr. Sparky. The big issue, as far as the White House is concerned, is the damage that an uncontrolled and chaotic bankruptcy at this very moment would cause to our currently fragile economy. If the President loses sight of this short-term goal, and keeps shoveling money into GM long after any rationale evaporates, enough voters might wake up to the bad business that’s going on and vote Congressmen out of office. We’ve seen it happen before (2006 anyone?), and I have enough faith that it will happen again, if and when needed.

    Yesterday’s article about the 31-year-old White House automotive advisor (Brian Deese) makes this rationale clear: He was, most notably looking into welfare and medicaid costs associated with an automaker liquidation — not, or not just, product plans, fuel economy, or new-energy technology. The real issue now is stabilizing the broader economy.

    If spending an additional $30bn right now, on GM’s DIP financing (the earlier $20bn loan is now a sunk cost), can cut the broader government costs of a GM liquidation by a similar or greater amount — by permitting the liquidation to take place in a friendlier market instead of the current depressed one — then it really is taxpayer money well spent. Even if GM never produces another car worth buying. Even if GM itself never actually pays back the money. Just so long as we pay out less in welfare and medicaid by delaying the liquidation, we’re getting value out of this thing.

  • avatar
    jkross22

    Just so long as we pay out less in welfare and medicaid by delaying the liquidation, we’re getting value out of this thing.

    The chances of GM employees being without a job is pretty damn high. The idea that throwing money down the chute at a failed company when that money should be going to retraining programs for people affected just blows me away.

    Contrary to the spending Obama has done over the last few months, there isn’t an unending supply of money from taxpayers. We’re going to get to a point where the check comes and someone’s going to have to pay up. What happens in the next few years when inflation skyrockets due to all this money Obama has flushed into the economy? Didn’t we get into this mess by only being concerned about today and not planning for tomorrow??

    One other thing: How does delaying the payout of welfare and medicaid AND throwing billions down the hole save the taxpayer money in the long run? Sounds like some funny math.

  • avatar
    gohorns

    So in the months coming up to this I read statements from GM saying they were going to get their costs (labor and legacy) in line with the Japanese. Did anyone else with even a modest business background read that and think they have already lost.

    You dont try to be “as good as” a competitor if you do you lose. The goal is to have a cost structure that leaves the competition scratching their head at how you did it while at the same time making quality that consumers flock to. Also ran attitudes in business are the talk of failures.

    Komatsu had an internal mission statement of “Beat Catapiller”. Not almost be as good, come close, be nearly as half assed but BEAT them. That is what a real business does not this perpetual attitude of failure and defeat.

  • avatar

    gamper “I dont understand why everyone is so sure the GM cannot succeed.”

    They can succeed but I don’t think they will based on their track record. Its not all about finances and spread sheets. Its about the actual product and the people making the decisions. Whats changed?

  • avatar
    agenthex

    The bankruptcy that conservatives have been calling for had no government money involved, and no intent or desire for extreme measures to try to keep GM alive. If GM died, so be it.

    So as long it keeps taking idiot investor money as it had been for decades, I guess that makes it all right.

    The patient is finally having surgery but the techniques being used by surgeon Obama are experimental and not in keeping with historical best practice.

    The misconception here is that private = good, gov = bad, and excludes any real discussion of competency. It’s quite clear that the gov has been far more competent in the last couple months than the private d3 has been in years and years, and yet some folks will NEVER EVER admit this because it means total destruction of their entire belief system which is based on the meme at the beginning of this paragraph.

    -

    The type of bankruptcy advocated by conservatives wouldn’t have involved massive transfers of taxpayer money directly to GM.

    Oh ok, I guess we so fortunately that all the wealth destroyed by MBS’s (and GM) was only limited to their idiot investors. We sure dodged that bullet.

    Now, I think I’ve mentioned external costs quite a few times here and many times prior. You’d think even folks with the minimal amount of intellectual curiosity would’ve bothered to find out what that means.

    Government intervention to resolve externalities is nothing new. Look up your local Superfund site. Unfortunately in this case we all get to pay for it, when really we should confiscate as much as possible from “responsible parties” like GM management and their idiot shareholders, and maybe even a bit from union folks (tho they prolly spent it all like the good little capitalism lemmings).

    -

    Considering that this bankruptcy has left GM lifers still in charge of the company, and only resulted in one executive scalp – Rick Wagoner’s – being demanded as a sacrifice, I fail to see how this bankruptcy will help GM reinvent and reinvigorate itself.

    Don’t worry, you’ll get your chance to be wrong again soon. I’d be surprised if the top execs don’t get replaced given that much of the board is sure to be.

    -

  • avatar
    Guzzi

    re: GM’s eventual sale to…whoever…I wonder if in two years the government will make Ford a low-interest offer they can’t refuse, on NA assets anyway. GM europe and asia then sold to the highest bidders.

  • avatar
    agenthex

    How does delaying the payout of welfare and medicaid AND throwing billions down the hole save the taxpayer money in the long run?

    I think it’s easy for people to understand a fixed cost, but economic cost are not necessarily so.

    For example if X and Y are the constant cost for two companies liquidating/failing, dropping X and Y together at the same time may have total cost much higher than X + Y.

    More concretely, if one large bank/corp failed every year for 10 years, that may be ok. But having 10 fail at the same time is not the same thing and can be quite catastrophic.

  • avatar
    geeber

    agenthex: So as long it keeps taking idiot investor money as it had been for decades, I guess that makes it all right.

    Yes, because those investors are making choices with their own money. If investors happen to be dumb enough to give their money to a company in trouble, that is their business.

    It might help if you learn the difference between government funneling money into a company (hint – the money involved comes from taxpayers) and individuals investing money into a company (which is their own money).

    agenthex: It’s quite clear that the gov has been far more competent in the last couple months than the private d3 has been in years and years, and yet some folks will NEVER EVER admit this because it means total destruction of their entire belief system which is based on the meme at the beginning of this paragraph.

    What’s clear is that you are assuming this will all work, and there is absolutely no indication of that.

    For future reference, this is thetruthaboutcars.com, not the Psychic Hotline.

    You are making predictions, and have no more information than the rest of us. You can certainly make predictions. We are not obligated to accept them as facts, and will certainly call you out when you attempt to do so.

    Like just happened in this post.

    agenthex: Now, I think I’ve mentioned external costs quite a few times here and many times prior. You’d think even folks with the minimal amount of intellectual curiosity would’ve bothered to find out what that means.

    And other posters have mentioned that: a.) it’s better to get this over with quickly, absorb the external costs, and move on, so that the capital and useful facilities can be freed up for more productive uses, and b.) there is a very high chance we will be paying the external costs anyway when GM ultimately fails. Which means that we will be out the money funneled to GM, PLUS the external costs.

    You might engage in a little intellectual curiousity yourself and research those positions.

    agenthex: Don’t worry, you’ll get your chance to be wrong again soon. I’d be surprised if the top execs don’t get replaced given that much of the board is sure to be.

    Learn the difference between a prediction and a fact, and you’ll be farther ahead. There is no place that I’ve been proven wrong now – except in your imagination, which, based on your posts on other threads, is a place that quite often has only a tenuous grip on reality.

    -

  • avatar
    agenthex

    It might help if you learn the difference between government funneling money into a company (hint – the money involved comes from taxpayers) and individuals investing money into a company (which is their own money).

    Yes, that’s exactly what I’m saying. To conservatives, once money touches an individual’s hand it possesses magical powers, like the power to perform miracles such as prop up not quite feasible industrial giants for decades while setting them up for a catastrophic fall.

    -

    What’s clear is that you are assuming this will all work, and there is absolutely no indication of that.

    The point has nothing to do with the venture becoming successful in the future. The government has simply done more correctly in a couple months than private industry has for many years. I know that blows the minds of certain people, but that’s what eventually happens when you believe in crackpot ideologies.
    -

    a.) it’s better to get this over with quickly, absorb the external costs, and move on, so that the capital and useful facilities can be freed up for more productive uses,

    A liquidation will likely turn many industrialized areas into a wasteland not unlike new orleans. The british had experience with this, hell even the soviets now know better than this. American Conservatism <- more backwards than the commies.

    -
    and b.) there is a very high chance we will be paying the external costs anyway when GM ultimately fails. Which means that we will be out the money funneled to GM, PLUS the external costs.

    I see you’ve ignored the point right above that these cost tend not to be static.

    -
    Learn the difference between a prediction and a fact, and you’ll be farther ahead. There is no place that I’ve been proven wrong now – except in your imagination,

    So are you insinuating lack of exec replacement as prediction or fact? Because either you’re wrong now or will very soon be.

  • avatar
    geeber

    agenthex: Yes, that’s exactly what I’m saying. To conservatives, once money touches an individual’s hand it possesses magical powers, like the power to perform miracles such as prop up not quite feasible industrial giants for decades while setting them up for a catastrophic fall.

    If conservatives said that, you’d have a point.

    But, since they haven’t been, you don’t.

    Again – If people want to invest their own money into GM (or any other failing business), that is their business. It is THEIR money. It is different if the government uses taxpayer money to prop up a failing enterprise.

    As a taxpayer, I expect the government to be more careful with MY money. One way to be careful is not to funnel it to dying companies that have failed to compete in the marketplace.

    agenthex: The point has nothing to do with the venture becoming successful in the future. The government has simply done more correctly in a couple months than private industry has for many years. I know that blows the minds of certain people, but that’s what eventually happens when you believe in crackpot ideologies.

    In which case, you lose all credibility. As explained before, there is no proof that this will work, and, second, the success of this venture is VERY important.

    Unless GM is to become a permanent ward of the federal government. That won’t play too well in the long run.

    agenthex: A liquidation will likely turn many industrialized areas into a wasteland not unlike new orleans. The british had experience with this, hell even the soviets now know better than this. American Conservatism <- more backwards than the commies.

    There are parts of GM that are still viable. If other companies can make them work, they will.

    And the idea that we must prop up GM forever or areas will turn into wastelands is blackmail, not sound government policy.

    One, other companies will come to the area if there are sound opportunities and state and local tax and regulatory policies are reasonably friendly to businesses.

    And, two, people can do something radical when a job disappears – they can move to where the new jobs are. The last time I checked, there is no law preventing people from following opportunities.

    If you are really concerned about the viability of communities with GM plants, then you will advocate that they (and their home states) adopt policies that encourage businesses to locate there and set up facilities. That is ultimately more productive than keeping GM permanently on the dole.

    agenthex: I see you’ve ignored the point right above that these cost tend not to be static.

    Sure – they decline, as wise policies encourage companies to locate to the areas, bringing new jobs and revenue with them. Unless the only thing that these communities can ever do is bolt together GM cars. In which case, the failure is with the communities themselves, not with people who oppose propping up failed companies.

    agenthex: So are you insinuating lack of exec replacement as prediction or fact? Because either you’re wrong now or will very soon be.

    The prediction involves the long-term chances of GM’s survival. The simple fact is that there isn’t much new on the horizon that will set off a stampede to GM showrooms.

    And Toyota, Honda, Nissan, Hyundai and Ford aren’t twiddling their thumbs and delaying new model introductions until GM gets its house in order.

    GM will only become truly viable if more people want to buy its products.

    GM is still producing the same models that largely bored buyers in the first place – except that they now carry the taint of bankruptcy. Which means that plenty of people who will visit GM dealers in the coming weeks are those who smell blood and want big, fat discounts (bigger than the ones that already exist). That certainly isn’t going to help the return to profitability (which is the ultimate goal here).

    The new models coming out are nothing to get excited about – the Chevrolet Cruze isn’t giving buyers anything that they can’t get in a Civic (and the Civic comes from a company with a better reputation), and the Buick LaCrosse is okay, but hardly earth-shaking, and certainly not more impressive looking than the new Taurus.

    The Equinox, SRX and Terrain? Yawn…

    Unless GM is now a permanent ward of the state, receiving regular injections of cash to keep it going.

  • avatar
    gohorns

    Agenthex I would encourage you to read a GM memo from Elmer W. Johnson. The fundamental issue of GM is corporate culture and the only way for that to change is a very significant blood letting at the top which seems unlikely. GM has had a “good enough” attitude for far to long.

  • avatar
    agenthex

    If conservatives said that, you’d have a point.

    It’s exact what’s being said, in this very thread. Hell, even the editorial says it. Being wrong comes so naturally.

    -

    In which case, you lose all credibility. As explained before, there is no proof that this will work, and, second, the success of this venture is VERY important.

    Nobody ever said this was guaranteed to work, so you’re wrong again. In fact, the topic of discussion was whether this was even relevant, so off track yet again.

    -

    And the idea that we must prop up GM forever or areas will turn into wastelands is blackmail, not sound government policy.

    The government already does this in the form of pollution, another externality (which even ardent conservatives have stopped decrying, btw). So by ignoring and dodging prior points you only continue to be wrong.

    -

    Unless GM is now a permanent ward of the state, receiving regular injections of cash to keep it going.

    This must be the kind of idiotic prediction you mentioned. Need I continue to mention that the current folks in charge have made good on every claim they made? Did anyone, even their supporters, ever believe they’d clear chrysler out in a month? The incompetents need to stfu and watch the pros do work, maybe they’d learn something.

    Did you also forget the point about subsidies for pretty much every form of transportation in the US? I originally only posted it to mock the AMTRAK fools. So even in the worse possible case, it’s par for course.

    -
    One, other companies will come to the area if there are sound opportunities and state and local tax and regulatory policies are reasonably friendly to businesses.

    And, two, people can do something radical when a job disappears – they can move to where the new jobs are. The last time I checked, there is no law preventing people from following opportunities.

    This is the core of the misunderstanding. There is this dumb concept within the free market philosophy that free enterprise will always produce optimal results. Deceptively simple and enticing, sure, but quite ridiculous especially in light of all the evidence to the contrary in this very topic.

    You will note that pretty much all the successful industrial nation have more or less centrally planned policies to tackle the future (just look at the competitors who’ve overtaken the d3).

    It really takes something special to persist poor ideas that have just been shown to be provably wrong on about everything.

  • avatar

    It’s quite clear that the gov has been far more competent in the last couple months than the private d3 has been in years and years, and yet some folks will NEVER EVER admit this because it means total destruction of their entire belief system which is based on the meme at the beginning of this paragraph.

    The government is quadrupling an already humongous deficit, printing money, and still not dealing with structural problems with Social Security and you want us to believe that the folks in Washington are competent because your guys are now in power?

    When I look at the attempts of the government to run businesses (USPS, Fannie & Freddy, Amtrak) I’m not impressed with their competence.

    The United States was established by people who wanted to limit the power of government to those things that were absolutely necessary.

    You, on the other hand, are a statist.

  • avatar
    agenthex

    You, on the other hand, are a statist.

    No, I just want the job to be done well. If the market repeatedly proves it can’t do so, then apparently some statists need to step in to show them how it’s done.

    Conservatives are just bitter because their precious “private ownership” is getting schooled by bureaucrats.

    -

    The government is quadrupling an already humongous deficit, printing money, and still not dealing with structural problems with Social Security and you want us to believe that the folks in Washington are competent because your guys are now in power?

    That’s the price you pay for letting the market dictate the terms instead of statists. Remember the OTS issue I dropped in another thread because I didn’t want to embarrass geeber too much? You should look up who they were allow to regulate for a laugh. Hint for the lazy: it’s all geeber’s favorite banks and whatnot.

  • avatar
    Lokkii

    It’s quite clear that the gov has been far more competent in the last couple months than the private d3 has been in years and years

    Yup – they’ve made the problem which developed over decades so simple an unexperienced 31 year old who almost graduated from college can fix it.

    That’s pretty impressive.

  • avatar
    Dynamic88

    Everyone can complain about the government, but the fact remains is that the feds have done more to address the issues in a short period of time than GM management was willing to do in decades. There’s no assurance that it work, but this is the closest thing that GM has had to a workable plan for a very long time.

    This bears repeating.

  • avatar
    Happy_Endings

    the fact remains is that the feds have done more to address the issues in a short period of time than GM management was willing to do in decades.

    With all the things GM’s management has done wrong over the years, the fact that the gov’t is doing better than them isn’t really an accomplishment. In fact, it’s just a Tall Midget Award.

  • avatar
    hltguy

    First of all thanks to TTAC for the excellent coverage of the GM/Chrysler trainwreck and calling the BK years ago. Outstanding work. TTAC also allowed me to seem brilliant to my friends who I have been telling for years the 2.8 was not going to survive and then give them chapter and verse, truth is I was reading TTAC daily, now they ask me what other insights I have. I give them the usual: USA is going to go bankrupt, the dollar is going to collapse, and hyperinflation is headed our way. And don’t buy a GM, no way, no how.
    Next this I expect from our dear leader Obama is if you donate to his relection fund, you get a voucher for free rust undercoating on your next pruchase from the “new GM”.
    What a stupendous mess.

  • avatar
    brettinlj

    Mr. Sparky: “The purpose of Bankrupt 2 was not to save the US auto industry (that’s Ford’s job). The purpose was to slow the destruction down to a manageable level during the greatest economic contraction since the Great Depression.”

    This is the truth that so few get. Fortunately Obama gets it and is a president that is wise enough to do the right thing in the face of negative perception and political pressures. I really would not have understood this if not for the graduate level economics courses I had in the past year while getting my MBA. Not slowing the death could have resulted in a slippery-slope economic catastrophe that makes the one we’re in now look mild. Had it not been for the existing recession, the government could have let GM just die without any government bailout.

    BTW, sorry MBA-haters, but most of those responsible for this economic crisis did not have MBA’s contrary to the popular talking points. They were just the most visible and easiest to blame.

  • avatar
    BDB

    The United States was established by people who wanted to limit the power of government to those things that were absolutely necessary..

    I’d like to know who is to blame for the “all the Founders were homogeneous in their beliefs, and all were Jeffersonian” trope so I can flame them. Alexander Hamilton and John Adams were for central banking, a centralized federal government, massive government supported infrastructure projects, protective tariffs, deficit spending, and what would be today called an “industrial policy”. You know, “statist” stuff. They were also more pro-military while the Jeffersonians hated, hated the idea of a standing army, but conservatives claiming his legacy gloss this last bit over.

    Also, those who slam Amtrak haven’t been on it. For A-to-B trips over 150 miles and under 400, it’s much more pleasant than flying (and, depending, can be more so than driving as well).

  • avatar
    agenthex

    and state and local tax and regulatory policies are reasonably friendly to businesses.

    Just to pile on even more about how ignorant (and wrong) the free marketers are, the transplants are in states which are federally subsidized.

    So, “business-friendly” to free marketers actually mean being parasites on the whole country, just like they’re forcing the banks and GM to be now.

    Of course they’ll pretend to want to prevent this, but that’s just because like most crackpots, they can say whatever they want when there’s nothing on the line for them.

    -

    BTW, sorry MBA-haters, but most of those responsible for this economic crisis did not have MBA’s contrary to the popular talking points. They were just the most visible and easiest to blame.

    No, a lot of them did have MBA’s. But who cares about the edumacation when there’s money to be made.

    -

    the fact that the gov’t is doing better than them isn’t really an accomplishment.

    It’s not just them. These are record pace breaking re-orgs compared to any private industry. I have to admit being a bit amazed myself.

  • avatar
    geeber

    agenthex: It’s exact what’s being said, in this very thread. Hell, even the editorial says it. Being wrong comes so naturally.

    You need to understand the difference between people investing their own money and government investing taxpayer money in a failed enterprise.

    agenthex: Nobody ever said this was guaranteed to work, so you’re wrong again.

    Odd, as you seem to be proclaiming it a success already in earlier posts, congratulating the government for work well done and arguing that it has shown more competence than the management of GM has. (Never mind that a regular bankrutpcy court would have done the same things – that’s the relevant comparison. GM could only take many of these actions IN bankruptcy, so please stop congratulating the Administration for taking steps that GM management COULDN’T take without a bankruptcy filing.)

    The ultimate test is whether this works – i.e., GM is profitable and gaining marketshare in the coming months and years, not whether you agree with the actions of this Administration.

    agenthex: In fact, the topic of discussion was whether this was even relevant, so off track yet again.

    No, it is relevant. Sorry, but you can’t change the argument just because you don’t like it.

    agenthex: The government already does this in the form of pollution, another externality (which even ardent conservatives have stopped decrying, btw). So by ignoring and dodging prior points you only continue to be wrong.

    Completely off base, and shows total ignorance of the Clean Air Act, which has applied to General Motors facilities and products for several decades now.

    Incidentally, if you are really worried about pollution, you would advocate shutting down all of its plants (shuttered plants don’t pollute) and ceasing the production of all GM vehicles (less polluting vehicles pouring forth from factories and on to our roads).

    agenthex: This must be the kind of idiotic prediction you mentioned.

    Unlike you, I characterized it as a prediction, so I haven’t passed off one of my predictions as a fact.

    agenthex: Need I continue to mention that the current folks in charge have made good on every claim they made? Did anyone, even their supporters, ever believe they’d clear chrysler out in a month? The incompetents need to stfu and watch the pros do work, maybe they’d learn something.

    Need I continue to mention that a bankruptcy court would have done the same thing?

    agenthex: Did you also forget the point about subsidies for pretty much every form of transportation in the US? I originally only posted it to mock the AMTRAK fools. So even in the worse possible case, it’s par for course.

    You must really be desperate if you are casting subsidies for AMTRAK (which is a de facto monopoly) in the same light as government aid for GM and Chrysler.

    If AMTRAK goes away, there may not be rail service in those areas. If GM and Chrysler go away, there will still be plenty of cars for people to buy.

    agenthex: This is the core of the misunderstanding. There is this dumb concept within the free market philosophy that free enterprise will always produce optimal results.

    The misunderstanding is your ignorance of the benefits of free market represents.

    The free market doesn’t mean that there will be sunshine and roses for everyone all of the time.

    Under the free market, bad companies get punished, and that means that some people may lose jobs or investments.

    But it also means that efficiency is improved over the long haul, as the factories used to produce products nobody really wants will either be shuttered, allowing the resources to be employed more efficiently, or taken over by some person or some organization that will do a better job of utilizing them.

    agenthex: You will note that pretty much all the successful industrial nation have more or less centrally planned policies to tackle the future (just look at the competitors who’ve overtaken the d3).

    There is no proof that their success stems from the home country’s policies…note that Japan, for example, has experienced an economic slump for well over a decade. I would hardly argue that Toyota’s and Honda’s success is a reflection of Japanese economic policy. And the Japanese government agency in charge of the auto industry initially tried to discourge Honda from making cars.

    They succeed in spite of the home country’s policies, not because of them.

    France has a much more centrally planned economy than the U.S. does, and, the last time I checked, there were no Renault, Peugeot or Citroen dealers in the U.S.

    Most Japanese and German automobile companies have been moving production to either the U.S. or Eastern Europe, to escape the high cost of doing business in the parent country.

    agenthex: It really takes something special to persist poor ideas that have just been shown to be provably wrong on about everything.

    When you prove other posters wrong, please let us know, because your posts certainly haven’t provided any evidence of achieving that feat.

    agenthex: Just to pile on even more about how ignorant (and wrong) the free marketers are, the transplants are in states which are federally subsidized.

    The “subsidies” come in the form of military bases located in those states, the fact that most of them have federal waterways, disaster relief and Social Security and Mediare payments, because many are retiree havens.

    They aren’t getting money to spend on industrial development. So, try again!

    You also do realize that Michigan, for example, has offered subsidies and and tax abatements to GM and Ford when they upgrade facilities within its borders? Even though it has been a “donor” state regarding federal spending?

    agenthex: Remember the OTS issue I dropped in another thread because I didn’t want to embarrass geeber too much? You should look up who they were allow to regulate for a laugh. Hint for the lazy: it’s all geeber’s favorite banks and whatnot.

    Thanks for today’s laugh. You’ll have to do a much better job if you want to embarrass me!

    Boring me, on the other hand…you’re doing quite a good job of that!

  • avatar

    Conservatives are just bitter because their precious “private ownership” is getting schooled by bureaucrats.

    Since the bureaucrats have the power of the state behind them, it’s hardly a fair competition.

    Frankly your slavish admiration for bureaucrats is rather troubling in an Orwellian sense.

    In terms of restructuring GM, the same people are still in charge, there’s been no change in GM’s corporate culture, the plant closures and model & brand euthanizing are the same things that RF, DeLorenzo and other GM critics have been saying for years, so what, other than putting up the money and dictating the equity distribution of New GM, are those bureaucrats doing that is new or a contribution?

    What successful business ventures have any of the bureaucrats before whom you wish us to genuflect ever started or managed?

    When a bureaucrat, in his official capacity (Einstein, after all, was a bureaucrat in the patent office), develops a Corvette ZR1, or even a Tata Nano (which has some very clever engineering to keep the costs down), or makes any kind of technological innovation, I’ll consider the possibility that a bureaucrat can school anyone on anything other than red tape. Almost all of NASA’s innovations were the product of contractors.

    As for what conservatives say, mainstream conservative opinion (National Review, Weekly Standard, and the like) has been almost uniformly opposed to bailing out the auto industry, as well as criticizing how the TARP has morphed from buying toxic assets to flush them out of the system into a tool for nationalizing finance and industry.

    I blame the Senate Republicans. They could have had a deal with congressional oversight.

  • avatar

    Fortunately Obama gets it and is a president that is wise enough to do the right thing in the face of negative perception and political pressures.

    No hero worship or cult of personality there. Nope. None at all.

    Political pressures? If the media was any deeper in the tank for Obama they’d get sucked into the undergravel filter. The Pres. has a 60% approval rating, and controls both houses of Congress.

    I realize that hero worshipers need to magnify the deeds of their heroes, but Obama has dealt with very little political pressure over his nationalization of GM & Chrysler.

    I really would not have understood this if not for the graduate level economics courses I had in the past year while getting my MBA.

    False modesty and argument from authority.

  • avatar
    BDB

    I realize that hero worshipers need to magnify the deeds of their heroes

    I remember when National Review was hawking bronze busts of George W. Bush, and how K-Lo over at their blog was practically having orgasms when Bush was on the flight deck on Mission Accomplished Day. Spare me.

    Also: naming everything down to the toilets in federal buildings after Reagan. No sir, no hero worship there!

  • avatar
    agenthex

    The test of “competence” is whether this works – i.e., GM is profitable and gaining marketshare in the coming months and years,

    That’s not the purpose of the exercise. Many posters here have already explained their primary goal, I recall doing it months ago, and some people are still too dumb to grasp it. GM’s success would only be icing on the cake, and the gov seems to be doing an optimal job of it thus far.

    -

    Completely off base, and shows total ignorance of the Clean Air Act, which has applied to General Motors facilities and products for several decades now.

    My posting style only works when being unerringly accurate. You’re trying to make assertions in the same manner, but unfortunately they don’t make any sense.

    -

    Need I continue to mention that a bankruptcy court would have done the same thing?

    For example, this statement doesn’t make any sense. They used a bankruptcy court, had a great case, and pulled it off in record time. So what exactly is the issue here?

    I really would not have understood this if not for the graduate level economics courses I had in the past year while getting my MBA.

    False modesty and argument from authority.

    He makes a good point, tho. The whinos in this case (same group of people usually) are generally pretty ignorant of any econ knowledge.

    as well as criticizing how the TARP has morphed from buying toxic assets to flush them out of the system into a tool for nationalizing finance and industry.

    So basically they want the taxpayer to pay all the money and end up with no ownership. Predictable really from the self-serving greedy bastards.

  • avatar
    geeber

    BDB: I remember when National Review was hawking bronze busts of George W. Bush, and how K-Lo over at their blog was practically having orgasms when Bush was on the flight deck on Mission Accomplished Day. Spare me.

    When I read posts on this site from people who act as though GM and Chrysler are now the road to health, and this is already a big success, I realize that they are as clueless as those who initially thought Iraq would be a cakewalk.

  • avatar
    BDB

    Geeber–

    That’s a good point, but is anyone really saying that? They’re saying they have a chance, maybe, of coming out of this healthy, but if they don’t at least the government lessened the blow. If you think $30 billion is a lot of money, try putting every ex-domestic autoworker in this country on welfare, or try having them competing for menial jobs with the unskilled poor in a time of recession. Do you really want unemployment to rocket into the stratosphere in the industrial Midwest?

    It is the difference between giving a cancer patient chemo and giving him a chance of turning out ok, and just saying “screw it” and going for assisted suicide right out of the gate.

  • avatar
    geeber

    agenthex: That’s not the purpose of the exercise.

    You certainly don’t know the purpose of this exercise; as it changes, based on the successful counterarguments proffered by other posters.

    agenthex: Many posters here have already explained their primary goal, I recall doing it months ago, and some people are still too dumb to grasp it. GM’s success would only be icing on the cake, and the gov seems to be doing an optimal job of it thus far.

    When we argued that GM could still fail, and we would be on the hook for all of those external costs, plus the money sunk into the company by the Bush and Obama Administrations, we were told that the “new” GM would not fail.

    Some of us then showed that the “new” GM’s vehicles will be a difficult sell in a tough market, making the chances for long-term success dicey at best, so we are now being told that success isn’t the primary goal.

    Well, that’s a relief!

    I wonder what tomorrow’s rationale will be…?

    agenthex: My posting style only works when being unerringly accurate.

    You either need a new posting style, or more attention to accuracy.

    agenthex: For example, this statement doesn’t make any sense. They used a bankruptcy court, had a great case, and pulled it off in record time. So what exactly is the issue here?

    You’re being disingenous, at best; this was hardly a traditional bankruptcy filing. And it doesn’t change the fact that GM management could not take many of the actions you praise the Administration for forcing unless it did file for bankruptcy.

  • avatar
    agenthex

    They aren’t getting money to spend on industrial development. So, try again!

    By offering extremely generous “business friendly” deals, they are purposely lowering the potential tax intake overall for selfish gain, all the while leeching off other states. It’s quite simple math. I could provide the arithmetic if you’d apologize for being wrong afterward.

    -

    I would hardly argue that Toyota’s and Honda’s success is a reflection of Japanese economic policy.

    Or korea’s. Or china’s. Basically from zero/nothing to domination in dog years (they got unions, too, btw, except china). Basically any place with successful industry requires substantive government support. You can compare with nations with less central planning like india, or that libertarian paradise somalia.

    -

    The free market doesn’t mean that there will be sunshine and roses for everyone all of the time.

    Under the free market, bad companies get punished, and that means that some people may lose jobs or investments.

    But it also means that efficiency is improved over the long haul, as the factories used to produce products nobody really wants will either be shuttered

    I’m quite well aware of their idiotic theories, especially since they seem so fond of flaunting their simplistic one-lines. The problem is that there are pretty much no examples of their successful application.

    I’ve issued the challenge in several threads to compare successes, and no challengers thus far.

  • avatar
    geeber

    BDB: If you think $30 billion is a lot of money, try putting every ex-domestic autoworker in this country on welfare, or try having them competing for menial jobs with the unskilled poor in a time of recession.

    I see your point, but we are already beyond $30 billion, and I doubt that what we have invested in these companies will be enough.

  • avatar
    agenthex

    You certainly don’t know the purpose of this exercise; as it changes, based on the successful counterarguments proffered by other posters.

    You should post examples of this, another challenge if you will. I know I haven’t done it, but maybe you’ll get lucky and someone else slipped up. Get to it!
    -

    You either need a new posting style, or more attention to accuracy.

    Find the inaccuracies, please! I point out so many every day, return the favor.

    -
    You’re being disingenous, at best; this was hardly a traditional bankruptcy filing.

    I remember once asking you to read similar cases to spot the differences to educated everyone here, and you didn’t reply.

    -

    There’s a trend here. Perhaps you can break it here very publicly and show us all the depth of free market ideology.

  • avatar
    geeber

    agenthex: By offering extremely generous “business friendly” deals, they are purposely lowering the potential tax intake overall for selfish gain, all the while leeching off other states. It’s quite simple math. I could provide the arithmetic if you’d apologize for being wrong afterward.

    That’s nice, but it doesn’t prove that they are offering these deals because of they receive more federal dollars than they pay. Alabama, for example, cannot divert Department of Defense money to pay for industrial development.

    As I said, Michigan offers them, too…and it is a donor state. So, for that matter, does New Jersey and New York.

    agenthex: Or korea’s. Or china’s. Basically from zero/nothing to domination in dog years (they got unions, too, btw, except china).

    Please show me the number of Chinese vehicles sold in the United States, or where Hyundai dominates any market segment in this country. They are making headway in the rental car market, but that’s hardly the path to world domination.

    agenthex: Basically any place with successful industry requires substantive government support. You can compare with nations with less central planning like india, or that libertarian paradise somalia.

    You are aware that India is growing rapidly, and Somalia is hardly a libertarian country…?

    agenthex: I’m quite well aware of their idiotic theories, especially since they seem so fond of flaunting their simplistic one-lines. The problem is that there are pretty much no examples of their successful application.

    I’ve issued the challenge in several threads to compare successes, and no challengers thus far.

    I guess you’re completely unaware of the development of the development of the auto industry in this country in the early 20th century, then…?

  • avatar
    geeber

    agenthex: You should post examples of this, another challenge if you will. I know I haven’t done it, but maybe you’ll get lucky and someone else slipped up. Get to it!

    Sorry, but I have better things to do than search through the threads for your posts.

    A better and ultimately more productive exercise for you would be to stick to one argument.

    agenthex: I remember once asking you to read similar cases to spot the differences to educated everyone here, and you didn’t reply.

    Sorry, but that wasn’t me. Your memory appears to be faulty. I did not have the exchange with you.

  • avatar
    BDB

    Geeber, I wish the government (or an objective think-tank of some kind) would crunch the numbers on the cost to taxpayers of a bailout vs. total liquidation and double digit unemployment in the heartland (and the indirect social cost of all the social consequences that would likely result from it, ex. crime rates, alcoholism).

  • avatar
    Matt51

    Toyota is in deep shit. A car company has to run their plants near capacity or costs are out of line. Toyota now has twice the capacity in North America for what they are selling. GM and Chrysler are cutting excess capacity using taxpayer dollars. As they emerge from C11, Toyota is dead.
    Look at Tundra. Toyota has canceled their diesel engine, has “temporarily” closed their Texas and Indiana truck plants. They don’t sell even with $4,000 rebates. My guess is neither plant re-opens. Toyota has to start permanently closing excess capacity or they are dead.

    Has anyone seen an uglier, more overpriced car than the current Camry? How can they expect to sell it over a Mazda or Honda?

    GM will survive. They have better looking, more desirable cars than Toyota (dead man walking).

  • avatar
    amadorgmowner

    Just remember, the “free-market” conservatives who ran the country for most of the last 10 years, put us here. Again, there is no such thing as a “free market”. It is a media creation and talking point. Obama has done more to right this sinking ship than GM, Chrysler management would have ever done in the last million years. But the bottom line is this: If people keep losing jobs, having their wages reduced (as conservative free-market types so love to do)and can’t get credit, nobody will buy any car, truck, couch, Hawaiian vacation from anyone. A better economy will equal better car sales for all, not just GM and Fiatsler. P.S. Matt51 – right on. ALthough I am so mad at GM and GMAC for killing my local GM dealer – I might just buy a Toyota (and definitely NOT a Camry)

  • avatar
    agenthex

    That’s nice, but it doesn’t prove that they are offering these deals because of they receive more federal dollars than they pay.

    No, the point was that taking less money from business and more from the fed is hardly the free market mantra. No wait, it actually is in reality.

    -
    As I said, Michigan offers them, too…and it is a donor state. So, for that matter, does New Jersey and New York.

    Of course, that’s just competing who can be the greatest parasites! The most subsidized states win!
    -

    Please show me the number of Chinese vehicles sold in the United States, or where Hyundai dominates any market segment in this country. They are making headway in the rental car market, but that’s hardly the path to world domination.

    Do I really need to re-iterate the success of Korean conglomerates on the international stage? Or the rise of china?

    And where’s your free market paradise to counter these examples?

    -

    You are aware that India is growing rapidly, and Somalia is hardly a libertarian country…?

    India is “growing rapidly” because they happen to speak english which comes in handy in the US service sector, not due to industrialization. And Somalia is quite libertarian, but libs’ll never admit to it since their one true paradise only exist in their head.

    -

    Sorry, but I have better things to do than search through the threads for your posts.

    For such audacious assertions, there must be some in this very thread. Or you can just own up to making stuff up.

    -
    A better and ultimately more productive exercise for you would be to stick to one argument.

    Sure, I’ll even let you pick one. I generally think many examples are good, but more depth on one is fine, too.
    -

    Sorry, but that wasn’t me. Your memory appears to be faulty. I did not have the exchange with you.

    You are right on this, it was wsn. See? you can be right. I do make mistakes at times. So take the any number of simple challenges, and show everyone the correctness of your point of view. It must be trivial with the sheer number of conservatives claiming success for their ideas.

  • avatar
    agenthex

    If people keep losing jobs, having their wages reduced (as conservative free-market types so love to do)and can’t get credit, nobody will buy any car, truck, couch, Hawaiian vacation

    One thing that gets lost in this is that the D2 subsidy is also partly for the makers left out.

    A collapse of GM may very well mean the same for many parts manufacturers which the remainder depend on. So even if they didn’t bail out GM, they may have to bail out those suppliers anyway so they remain solvent for the rest of the industry.

    -
    Geeber, I wish the government (or an objective think-tank of some kind) would crunch the numbers on the cost to taxpayers of a bailout vs. total liquidation and double digit unemployment in the heartland (and the indirect social cost of all the social consequences that would likely result from it, ex. crime rates, alcoholism).

    It’s a pointless exercise anyway since the argument is all will be fine with the power of the free market to magically find the optimal solution.

    -

    I guess you’re completely unaware of the development of the development of the auto industry in this country in the early 20th century, then…?

    What a failure that would’ve been without a widespread network of roads to drive on, huh?

    Now all you need to complete the challenge is find places where auto is blooming without public roads.

  • avatar
    Geotpf

    Ronnie Schreiber :
    June 2nd, 2009 at 4:58 pm

    When I look at the attempts of the government to run businesses (USPS, Fannie & Freddy, Amtrak) I’m not impressed with their competence.

    The United States was established by people who wanted to limit the power of government to those things that were absolutely necessary.

    You just badly contradicted yourself.

    The people who established the United States also wrote it’s constitution.

    Said constitution specifically authorizes the existance of USPS as a government run entity (Article 1, Section 8, Clause 7). So, no, the people who established the United States did not want to limit the power of government in the manner you just said they did.

  • avatar
    ZoomZoom

    I just don’t want the government spending my money like this. Doing so is theft of my property; my financial assets.

    No matter what “Agenthex” or other Obama worshippers say to justify it, it’s still theft.

  • avatar
    agenthex

    I just don’t want the government spending my money like this. Doing so is theft of my property; my financial assets.

    Sorry but you’re in the wrong type of country for that. As has been repeated many times, true libertarians are looking for places like somalia.

    You can then be a pirate should you desire, and nobody tells a pirate when his bedtime is.


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