The Conversion Of a GM Bailout Opposer
Megan McArdle initially opposed the GM bailout. But now, in an article in the November Atlantic Monthly, the magazine’s business and economics editor paints a positive picture—with a little bit of help from Jack Baruth and TTAC.
Before the bailout, McArdle writes, quoting David Cole of the Center for Automotive Research, GM faced “a cost penalty of more than $1,000 per car between its production costs and the competition’s.” GM dealt with that, McArdle writes, by chipping away at its cars. The government-backed bankruptcy has changed all that, she writes. The closing of 13 plants, the shedding of 25,000 union jobs and 1,500 dealerships, the shifting of retiree health costs from GM’s balance sheet to the UAW’s and various other adjustments have reduced GM’s costs per car by $4,000 to $6,000, according to Cole. And in the Chevy Cruze, at least, “GM is already using that advantage to deliver higher quality, even in the small-car market,” she writes, paraphrasing Cole once again. And then she quotes Baruth: “It’s well-positioned against the Civic and Corolla. I believe that it beats both of those cars in significant, measurable ways.”
Nonetheless, the new CAFÉ standards, 39 MPG by mid-decade, could cost $2,600 per car, McArdle writes, citing National Research Council data, erasing most of the new cost advantage, and one set of legacy costs, pensions, still puts a drag on GM. All this could make dealing with new UAW wage demands “particularly sticky.”
As for the bailout, a libertarian economist “of my acquaintance” considers it to have been “surprisingly successful,” McArdle writes. She then quotes that economist that the bailout was “not necessarily a good idea, but far from the worst thing the administration has done.” We the people may not get most of our money back, but as McArdle says, a billion dollars represents less than the cost of a venti latte per American. Thus, if GM’s IPO fails to pull in the $70 billion needed to repay us, we’re out less than two C-notes, each. (Nonetheless, that’s potentially a lot for a working class family of four.)
McArdle concludes as she began, with a paean to the Buick Enclave. While it’s not my idea of anything special, according to Consumer Reports, satisfaction with the Enclave is “better than average.” Still, I’d have more confidence in GM’s future if I knew that they’d shaken up their sclerotic bureaucracy.
http://www.theatlantic.com/magazine/archive/2010/11/can-gm-get-its-groove-back/8247/
I'm a freelance journalist covering science, medicine, and automobiles.
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My employer had a long-term contract with GM, and they weaseled out of it when the government did the bailout. I wouldn't trust them to honor any contract, even a warranty.
Megan McArdle is one of those Ayn Rand (medicare is for losers) libertarians who just happens to be a GM bailout booster. Anyone see the inconsistency? Megan McArdle's fiance is also a paid shill of Freedomworks. See more inconsistency with the meaning of libertarianism? Turns out the Atlantic has been getting some money in exchange for their editorial bent. Here's TalkingPointsMemo's expose of the Atlantic whoring out its editorial policy:
The Atlantic has held approximately 100 of them since 2003, according to Zachary Hooper, a spokesman for the magazine. “The corporate sponsor…comes to us and says, ‘We’re interested in having a discussion on a certain topic.’” The magazine’s business staff, said Hooper, takes things from there. The Atlantic flier makes clear that the “salons” are paid for by corporations and focused on a public-policy issue in which the corporate sponsor has a major stake. It offers the following “sampling of salon dinner sponsors and topics”: AstraZeneca on “Healthcare Access and Education” Microsoft on “Global Trade,” GE on “Energy Sustainability and the Future of Nuclear Power” Allstate on “The Future of the American City” Citi on “The Challenge of Global Markets” Hooper declined to say how much these corporations put up to sponsor the events. And just as with the Post, the Atlantic dinners are strictly off-the-record, and not open to the public. The flier describes them as: Private, custom, off-the-record conversations of 20-30 key influential individuals, moderated by an Atlantic editor, designed to bring a thoughtful group together for unbounded conversation on key issues of the day. http://tpmmuckraker.talkingpointsmemo.com/2009/07/not_just_wapo_atlantics_corporate-sponsored_salons.php Shameless, just shameless. The next time some libertarian comes around and supports a bailout, you may be a bit more cynical. These editorials also don't bode well for the sanctity of the fourth estate. It's as if the nefarious forces of plutocracy have infiltrated and co-opted the mechanisms that theoretically should help keep them in check.