It’s been a while since I’ve written a General Motors Zombie Watch. Time keeps on slipping, slipping . . . into the future. Only when you’re dead, there is no future. You’re dead. Oh, I know: New GM’s got new plans for new cars with new advertising that will win new (old?) customers. And the new Board of Directors’ Chairman Ed Whitacre is busy threatening to fire New GM’s old (new?) execs if they don’t get their shit together. But they haven’t, as their farrago of product plans and the botched launch of the new Buick LaCrosse prove. In fact, the current crop of GM suits will be fired. And?
And nothing. As I’ve said before, Uncle Sam kept CEO Fritz Henderson and the GM Lifers on center stage for one reason: to throw them off when taxpayer tomatoes start hitting RenCen’s windows. Which will be soon after GM’s third quarter financials hit the press. When it becomes abundantly clear that GM will burn through ALL of its taxpayer loot within two years. Or less.
Politicians from both sides of the aisle (though one more than the other) will proclaim that something must be done! And something will: the management that should have been shit-canned when GM was nationalized—actually long before, but that’s another story—will be shit-canned. The feds will press an entirely theoretical reset button.
New suits will take over. The fact that the auto industry is on a three to five-year cycle, the fact that New GM’s new brooms face dust devils the size of Montana, the fact that any genuine GM turnaround would take a decade and over $100 billion in addition funds, will be lost in the shuffle.
Never mind. The corporate cull will achieve its intended goal: it will unleash the puppies of prognostication. The media will be abuzz with speculation about the new new new new new new new New GM, for another financial quarter. Maybe two. Possibly three. Meanwhile, the feds will continue readying the GM pig for its IPO, lipstick and all.
You want to talk about a perception gap? The Obama administration’s Presidential Task Force on Automobiles is trying to widen the gap between the perceived value of General Motors and the actual retail price of the government’s automotive showcase. Mark my words: the feds ain’t done propping-up the unproppable. They’ll shovel more and more money at GM, dressing-up the nationalized automaker for the Great Pre-Mid-Term Election Sale.
Lest we forget, GM is counting on—as in factoring into their current balance sheet—a $10.3 billion loan from the Department of Energy’s Advanced Technology Vehicles Manufacturing loan program. It’s the same money previously denied the American automaker. You may remember that GM was deemed non-viable by someone figured out that 1 minus 120 billion is something less than one. Guess what’s changed.
Nothing much. While GM has shed a mountain of debt, restructured its labor contracts, dumped dealers, paid lip service to cultural change, and found another sucker to foot the bills (thank you, America!), it’s still taking in less money than it spends. And we all know how that picture ends.
Before the closing credits, we’ve got to sit through a chase scene between Chevy’s plug-in electric/gas hybrid Volt and the Toyota Prius.
There’s no way GM can catch ToMoCo’s four-wheeled planet cooler. Even if GM can get the Volt to work, they can’t sell it for anything even close to the Prius’ $22,000 price tag. Unless . . . Unless . . . Government Motors does it anyway and takes the hit.
Of course, a “hit” is not a good thing for a company that wants to offer shares to the general public. So . . . how about we subsidize the shit out of the car so that it appears as if the car is somewhat profitable-ish? Or, at the very least, take the costs off GM’s books?
The federal government has already cash-injected the battery makers developing the Volt’s power supply, to the tune of $100 million plus. Your elected representatives are going to use your taxes to subsidize the plant making the car [see: DOE loans above]. And the car itself (via a $7,500 tax credit). Not to mention signing over $62 billion to a company that can’t even set a timeline for the Volt’s potential profitability.
Before a hundred or so hand-built Volts hit Chevy showrooms, the feds will re-up the battery research grants and find some other eco-friendly way of “helping” the halo car that the Presidential Task Force on Automobiles rejected as delusional, pre-nationalization.
Yes, there is that. It can’t be said enough: the feds own GM. The GM zombie has no will of its own; it’s controlled by its political taskmasters. When the truth about its [most recent] parlous finances are revealed, GM will become far more than a failed automaker turned undead manufacturer. It will become a political liability. If you think GM shareholders were slow to abandon ship, you’re right. If you think the Obama administration will be slow about jettisoning its GM-shaped political baggage, you’re wrong.
But first, GM CEO Fritz Henderson and his motley crew will be packed off in their golden lifeboat, so that the illusion of change can be re-energized. Like any good magic trick, the “GM will pay back it federal loans” routine depends on a suspension of disbelief. As Tufts University supporter P.T. Barnum said, you can’t fool all of the people all of the time.
When the IPO time rolls around, real investors (as opposed to taxpayers dragooned into paying for GM’s nationalization) will not want to own GM stock. Why would they? So the government will have to subsidize THAT boondoggle as well. In other words, papers will be shuffled once again, the taxpayer will still be on the hook, and GM will continue wandering through the wilderness.
One way or another, sooner or later, what’s left of GM will fall into the hands of its rivals. A few names will be all that’s left of what was once the world’s largest automaker, and the world’s most profitable company. But make no mistake: this is less of a transition than it seems. GM is already dead.