By on November 17, 2010

As an automaker and union-funded think tank, the Center For Automotive Research often run afoul of TTAC during the bailout debates of 2008-2009. CAR is to Detroit’s apologists what CAR has long maintained that a failure to bail out GM and Chrysler would have resulted in the total destruction of America’s entire industry, and based on that questionable assumption, it’s latest report [PDF] is claiming that the auto bailout saved the federal government $28.6b over two years. The study is an update of a report CAR issued in May which

produced estimates for two scenarios, as well: a quick, orderly Section 363 bankruptcy (which is what happened), and a drawn-out, disorderly bankruptcy proceeding leading to liquidation of the automakers.

Because those were the choices. A messy, marginally-successful intervention (with demand for GM’s IPO “through the roof”, the firm will still be worth only about what taxpayers put into it) or utter complete annihilation of the industrial Midwest. But if, as CAR takes as gospel, a halfway “normal” restructuring weren’t an option, it was only because the managers of both GM and Chrysler refused to even contemplate the possibility of a bankruptcy filing until it was far too late. And here’s where the long-term impacts get scary: by taking GM and Chrysler under the taxpayer wing, the Government may have saved some money in the short term, but it created a dangerous precedent for the future. Given the events of the auto bailout, why would the leaders of any other failing industry take the difficult path through restructuring when, with the help of think tank apologists, they could simply collapse into a publicly-funded do-over?

But this isn’t about re-fighting the battles of the past, it’s about absolving GM and Chrysler of any obligation to the taxpayers in the future. It’s not a debate over principles, it’s a fight over the bill. CAR’s Chief Economist Sean McAlinden tells Automotive News [sub]

To date, $13.4 billion in principal has been repaid on the government’s $80 billion U.S. investment in the automotive industry. The government need only recover $38 billion of the remaining $66.6 billion outstanding investment in this industry to achieve a two-year breakeven

Which is a bit like saying that you’re not obligated to compensate the owner of a building you knowingly burned down because it was insured. Or like counting every post-bailout dollar that GM spends employing Americans as a cost saved by the government. The fact of the matter is that McAlinden knows that the chances of GM or Chrysler ever being able to fully pay back every penny of their “rescue” are slim, and is resorting to semantics to define their payback point downwards. That this effort relies on a shaky construct of “best case” (what happened) and “worst case” (Armageddon) is proof of its self-serving (rather than truly informative) nature, and McAlinden’s re-writing of GM and Chrysler’s obligations to the taxpayer confirms it. This is not economic analysis, it’s pure PR.

And it’s shoddy PR as well. America’s taxpayers are neither stupid nor disinterested in this matter, and GM’s attempts to pull a fast PR move on the issue of bailout payback have gone nowhere. One has only to look at the negative response to GM’s “Payback” ad for proof. So rather than touting CAR’s suspect and self-serving numbers, GM and Chrysler would be best served by publicly committing to pay back exactly what they received from taxpayers, even if it takes ten years. This is no longer about re-fighting the battles of the bailout era, this is about healing the damaged relationship between the bailed-out automakers and the American people. The success of these two companies (and therefore of the bailout itself), not to mention America’s larger business environment depends on GM and Chrysler making a good-faith effort to make taxpayers whole, not shirking responsibility based on the semantic quibbling of a bought-and-paid-for think tank.

Get the latest TTAC e-Newsletter!

57 Comments on “CAR Claims Auto Bailout Saved The Feds $28.6b...”


  • avatar
    FleetofWheel

    Well stated article.

    You’ll get the circular argument from the apologists on here that GM had too many employees and deeply interdependent supplier relationships to be allowed to fail.

    So… the govt propped them up keeping GM big and interconnected thus maintaining the primary reason to bail them out again at a later date. That’s the circle.

    Then add in the ignorance about opportunity cost and sunk cost ( “We had no other choice then and we can’t give up on our investment now!”) and you’ve got the bailout mindset.

  • avatar
    Telegraph Road

    CAR is to Detroit’s apologists what CAR has long maintained that a failure to bail out GM and Chrysler would have resulted in the total destruction of America’s entire industry.

    The failure to bailout GM and Chrysler would have resulted in the destruction of half the domestic auto production–GM, Ford, Chrysler.  Perhaps more, as domestic suppliers dependent on GM’s survival also support Toyota and Honda plants too.

    And when you use the phrase “Detroit’s apologists”, your anti-Detroit bias is much too evident.
     

    Critics of “Detroit’s apologists” forget that 2008 hosted a severe financial crisis, the largest this nation has seen in 80 years. Corporations had few means of borrowing money as Wall Street firms deleveraged. Cyclical industries especially suffered. Heroic efforts of the Fed and both administrations spared the economy.

    • 0 avatar
      johnny ro

      the #1 capitalist in USA, Warren Buffet, agrees.

      i am not warren buffet. Google him and uncle sam and you can read his letter

    • 0 avatar
      MikeAR

      Johnny, I read the letter, it is a load of self-serving crap. You do know the Buffet, through Berkshire Hathaway was a big recipient of bailout money don’t you? Buffet isn’t a capitalist, he is the worst example of crony capitalist there is. He hasn’t been an investment genius for years, he just has enough money and clout to tilt the rules in his favor so that he can’t lose. He is an old fool who has his and doesn’t want anyone else to get theirs. The letter  in effect, said all you peasants be happy that your betters were bailed out so that we can continue our enlightened corporate rule over you. In fact, if you can read, read about his partner Charlie Mungers talk at the University of Michigan. It will sicken any normal person. Munger and Buffet are evil men who can’t die soon enough.

    • 0 avatar
      jkross22

      Pass me that crystal ball, Telegraph Road.  Since you can see outcomes of events that never happened or could have happened, I’d appreciate a few stock picks from you with that level of assurance.

    • 0 avatar
      Telegraph Road

      I don’t have much useful stock market advice, jkross.  The only stock I’ve owned the last two years is F in my employee plan.  :)

  • avatar

    I’m not in favor of absolving GM and Chrysler of any of their debt to the government. I’d even like to see the government achieve the profits it is due for assuming a great deal of risk.
    But I do feel that the bankruptcies went much better than I or many other people expected, and that a conventional bankruptcy would have produced a much worse outcome. Many of those involved could only be induced to take a necessary hit by the power of the government.
    It would have been nice to see even larger reforms. But I don’t think a conventional bankruptcy would have achieved these.

  • avatar
    John Horner

    Today: “A messy, marginally-successful intervention (with demand for GM’s IPO “through the roof”, the firm will still be worth only about what taxpayers put into it).” I think this is called walking back earlier statements.
    TTAC Oct 4, 2010: “In short, this GM IPO has “flop” written all over it. The US government may regret alienating Chinese investors as it seems they were only people with any interest in buying GM stock.”
    TTAC Sept 2, 2010: “GM’s IPO is turning out to be another fear-based play in which preserving the status quo (politically this time, rather than economically) overrides any other concern, such as responsibility to taxpayers. Should we have expected anything else?”
    TTAC Oct 12, 2009: “GM Backs Off From 2010 IPO”
     
     
     
     
     

  • avatar
    thornmark

    A superlative column related:
    http://www.washingtonpost.com/wp-dyn/content/article/2010/11/12/AR2010111204494.html

  • avatar
    bd2

    Don’t think anyone is happy w/ the bailouts for GM and Chrysler (or for Wall St. for that matter), but one factor that TTAC may be overlooking is the effect that the ending of GM and Chrysler as operating entities would have had on suppliers, particularly, those shared w/ Ford.

    Also, there aren’t too many other industries which play an impt. role in the economic health of a nation like the auto industry.

  • avatar
    JonKessler

    Assume (1) minimal opportunity cost to taxation and (2) zero productivity from idled resources absent government intervention and there is no what you can justify.  Whatever you think of the bailouts, this is a silly piece of policy analysis.

  • avatar
    PeriSoft

    Without the bailouts, Ford would be crippled. Without Ford, my biggest customer would be cripples. And without my biggest customer, I’d be out of business.

    No bailout would have -directly- cost me five hundred thousand dollars. And that money paid (and still pays) local powder coat places, metal bending places, our web host, the pizza joint I go to, netflix…

    What you high-and-mighty types forget when whining about the IPO is that you’re utterly missing the point. The bailout wasn’t about making money on an investment. It wasn’t about setting future policy. It was an emergency measue intended to prevent a catastrophic economic domino effect that could well have pushed the credit crunch into a depression that would have made the ’30s look like a boom decade.

    I get it: you don’t like GM’s cars. But this was never about GM. The fact that so many of you can’t comprehend that is disheartening, to put it mildly – particularly when a big chunk of you would be standing on the unemployment line now had your own wishes been followed.

    • 0 avatar
      pgcooldad

      Very well said. What we need here is for everyone to state what you do, and in what industry , so we can see that the “against automotive bailouts” are from service industries who are dependant on core industries in order to survive.

      I’ll start:  Manufacturing Engineer-Metallurgist, Chrysler. My father retired from Chrysler, my brother is a manager for a large stamping die supplier, sister and her husband are engineers at GM, brother-in-laws are at Ford and American Axle.

    • 0 avatar
      geozinger

      “particularly when a big chunk of you would be standing on the unemployment line now had your own wishes been followed.”
       
      Yes, this is the part that seems to escape most people’s attention; with all of the bitching and moaning about non-standard bankruptcies and laissez-faire economic theories. As distasteful as I find both bailouts, they were necessary evils to keep our economy from collapsing. These folks want to have their cake and eat it too.
       
      @PGCool: I work in the printing and publishing industry (ask me about that sometime!); formerly worked for Tier 1 supplier, have family that work (and some retired from) GM & Delphi, friends who work for Chrysler. Live in W. Michigan, home to many, many suppliers (Autodie, Delphi, Lear, Johnson Controls, Magna, Gentex, etc). The company I work for prints for the supplier base. The company I worked for until last year also printed for the supplier base, we went out of business in July 2009. I was lucky to be picked up by the company that bought our customer list. 18 of my co-workers weren’t.

    • 0 avatar
      Robbie

      Well, all government expenditures have some positive effects on the economy. The taxpayer could have used the 66.6 billion to set up a perpetuum mobile research outfit in Detroit, and it would have had some positive economic effects as well. We are now in a bad budget deficit situation and the country as a whole would have benefited if our deficit had been 66.6 billion less. The positive effects of the US government sending random checks to failing corporations are dwarfed by the negative effects, and this is the reason why the US government is not routinely sending out such checks.
      If we divide 66.6 billion by the 254,000 workers GM and Chrysler have combined, then we arrive at the figure of $262,000 dollar per employee that the bailout has cost. For every citizen of the US, young and old, $216 has been sent to Detroit. On top of this, we have given large corporations the message that mismanagement will get you government funds. This has been a very, very expensive handout.

    • 0 avatar
      geeber

      Perisoft: I get it: you don’t like GM’s cars. But this was never about GM. The fact that so many of you can’t comprehend that is disheartening, to put it mildly – particularly when a big chunk of you would be standing on the unemployment line now had your own wishes been followed.

      A more accurate version of your post: Whether people like GM and Chrysler vehicles enough to buy them in sufficient numbers to enable the parent companies to survive is irrelevant, because they are really social welfare agencies designed to ensure that no one ever loses a job, and therefore the government must bail them out from their own stupidity.

      These posts reveal another problem – the belief that the U.S. economy somehow depends greatly on GM and Chrysler, and that they constitute the entire U.S. auto industry. Folks, it ain’t 1965 anymore…something that people who work for GM and Chrysler seem to have forgotten.

      The sad truth is that, all of our friends wouldn’t even consider a GM or Chrysler vehicle, and the bailouts have done nothing to change that. Both GM and Chrysler are largely irrelevant to them. THAT’S the real problem. I don’t see how the bailouts have changed that perception.

    • 0 avatar
      PeriSoft

      If we divide 66.6 billion by the 254,000 workers GM and Chrysler have combined, then we arrive at the figure of $262,000 dollar per employee that the bailout has cost.

      Yes, but if we do that we’re basing our views on a wildly oversimplified and flat-out incorrect interpretation of the situation. Did you even read what I wrote? The whole point is that the failure of the domestic auto industry would have a massive domino effect. The failure of those companies would have been a massive hit to confidence in the markets, and that alone would have cost billions, maybe trillions, of dollars worldwide. Why don’t people get this?
       
      Not only that, I’ll reiterate – the second and third order effects of a domestic auto industry collapse would be ENORMOUS. It would screw people who
      -Make Matchbox cars of US vehicles
      -Sell magazines aimed at Ford/Chevy/Chrysler owners
      -Race domestic cars with factory support, or even without it – and everyone who works for those people
      -Make snap-together models of US vehicles
      -Take photographs of cars, make posters of cars, make Corvette calendars
      -Supply loans and financial services to car buyers
       
      …and, not least:
       
      -People who have BLOGS about cars. You think TTAC would be going great guns if there were half as many reviews to do, half as many industry events and incidents to report, half as much technical work going on? Do you think TTAC’s advertisers would be happy to pay the same rates for a site with half the content? Do you think TTAC could keep its entire readership with no domestic auto industry?
       
      We’re talking about a situation which would have murdered the markets, destroyed investor confidence, tipped the economy into a tailspin, and put millions more people (like me, and other posters here, and maybe the Neidermeyers) out of work. And you’re complaining that it was “Two hundred thousand dollars per GM worker”? Are you crazy? Do you really STILL think it was about saving GM and Chrysler jobs in particular?
       
      And do you really think that the world markets would say, “Oh, a massive chunk of the US economy is being destroyed and the credit crunch exacerbated hugely, but it’s OK; they’re investing in a mobile research outfit in Detroit”?
       
      Plus, your fixation on $66b in deficit belies a total misunderstanding of the scale of the US economy. In 2004 the deficit was $412b; it was $248b in 2006. Your argument is that a  ~20% increase in the budget deficit is worse than the damn-near annihilation of the US (and probably world due to follow-on effects to the credit crunch issues at the time) economy?
       
      $60b is nothing on the scale of the US economy. You’re talking about 60 billion as if it’s a big deal – the US GDP is around 14 THOUSAND BILLION. The 2008 (pre-crunch) US budget – the amount of money the government spent – was a hair under 3000 billion. Think about that – 66 billion vs. 3000 billion. 2.2%.
       
      For Christ’s sake, just the Joint Strike Fighter program is costing five times that much!
       
      Talk about not being able to see the forest for the trees. Sigh.

    • 0 avatar

      Perisoft: As I stated in the piece, this isn’t about re-fighting the battle of the bailout (and it’s definitely not about my opinion of GM’s cars), it’s about seeing the bailout in its proper context after the fact. You can make the argument that the bailout “wasn’t an investment” all you want, but the simple fact is that GM and Chrysler owe the American people. My argument is simply that they shouldn’t shirk this responsibility (the path CAR is desperately trying to justify for them)… they should embrace it.
      The bank bailouts have turned the taxpayers a profit, and there were still proposals to put a “TARP Tax” on them. Why would GM and Chrysler assume the American people are going to just give them a free pass on their billions in obligations? Repaying every penny isn’t about politics, it’s about PR with the consumers in one of your biggest markets. It’s the only way they’ll put this chapter behind them, period.

    • 0 avatar
      PeriSoft

      Ed, I wasn’t arguing with your article per se, but with the myopic denizens of this forum who claim that the bailout never should have happened and that its tiny expense is somehow a huge deal.
       
      As I said above, I suspect they hate Chevy and are using their utter ignorance of economics as an excuse to justify their absurd hatred for anything any government does any time anywhere. It’s the quintessential cut-off-your-nose-to-spite-your-face attitude – and as I wrote below, like putting up a sandbag barrier to save your house from a flood, and then saying it wasn’t worth it because you can’t sell the sandbags for a profit.

    • 0 avatar
      geeber

      Perisoft,

      You accuse another poster of using “wildly oversimplified and flat-out incorrect” information regarding the cost per-employee of the bailout, and yet expect us to accept YOUR figures, which includes the supposed collapse of the diecast car industry, and reduced traffic at bloggers, because there won’t be any GM or Chrysler cars anymore?

      You absolutely cannot be serious. Including those figures in your calculations is simply ridiculous. (If it was meant as satire, and I missed it, please forgive me.)

      If you look at the diecast toy industry, the automotive magazine sector, the plastic model kit industry and the calendar industry, the vast majority of them use OLD GM and Chrysler vehicles for models, articles, etc. Even if GM disappeared tomorrow, Hot Wheels can still release a model of the 1963 Corvette Stingray or a 1999 Camaro.

      Super Chevy magazine won’t stop writing about owners who modify 1965 Impalas.

      There will still be plenty of cars for people to blog about, and Paul Niedermeyer can still write up wonderful “Curbside Classic” stories of old Chevys, Pontiacs, Buicks, Oldsombiles, Cadillacs, Dodges, Chryslers and Plymouths.

      Hot Wheels will not shrivel up and blow away because there might not be a 2015 Malibu around to include in its line-up.

      Perisoft: Do you think TTAC could keep its entire readership with no domestic auto industry?

      For the 5,720th time – GM, Ford and Chrysler no longer constitute the domestic auto industry. They haven’t for the past 15-20 years, which is a big part of the reason that GM and Chrysler were in big trouble. The domestic auto industry now includes Honda, Hyundai, Nissan and Toyota.

    • 0 avatar
      Robbie

      Perisoft, I am sorry if you took offense at my post, but I cannot help feeling that the bailout was a mistake. I cannot discover in your posts an argument that cannot be used to justify *any* government bailout. It is best to agree to disagree.

      Your notion that the bailout had a huge set of positive secondary consequences is, in my opinion, false. A bankruptcy would have forced the American auto industry, suppliers, and Detroit to regroup itself and reappear stronger than ever, or disappear. One carmaker goes under and fires workers; another more efficient car maker – or perhaps a different type of industry with more value added – starts hiring like mad, to fill demand; cheap labor activities disappears from the US to China, and we sell the world CDs with Microsoft Office, pharmaceuticals, and Hollywood movies in return; this is all how capitalism works and exactly this is what makes America strong. The bailout is *more* expensive for America than the 66.6 billion the taxpayer spent, because America is left with a weaker industry than the one it could have.

  • avatar
    mikey

    @ John Horner & PeriSoft…….+1

  • avatar
    OldandSlow

    It may not be laissez-faire capitalism, but I’m happy to see GM and yes, Chrylser still in business.  For one thing, laissez-faire capitalism and the current global economy are two different concepts.  China is an example.  More importantly, GM and Chrysler are still supporting a lot of retirees.
     
    We are not out of this recession, yet – but bail out of the domestic auto industry prevented the recession from being a whole lot worse by saving jobs and retiree benefits that put a lot of money back on Main Street.
     
    It does fly in the face of laissez-faire and creative destruction – but the tens of billion the US taxpayers put into propping up it domestic auto industry are a pittance compared to the funds that went to prop up Wall Street.

  • avatar
    TrailerTrash

    The entire point is missed.

    Look, we are supposed to be a nation of laws.
    We have contracts by which we need to place out trust. Without the basic trust, business…and life itself…becomes chaos.

    The simple fact that it was illegal is the point.
    When we begin to brake laws and use it simply as a “suggestion” and can be ignored whenever “money” or profit is the goal, you can forget about an orderly society.
    Contracts were broken, simply washed aside as if they were sand castles on a beach, in the name of urgency.
    “Theory” became the rationale.
    IF these businesses were allowed to fail, the earth would part and we would fall into the abyss!

    It was illegal.
    Plain and simple.

    It doesn’t matter even a bit about the remaining rationale.

    They threw all the Japanese Americans into frozen, barbed wired buildings during WW2 JUST because the President said so.
    Here a real contract with the nation was abandoned.
    Tossing away the constitutional rights is clearly a horror we should not allow in pursuit of profit.

    • 0 avatar
      John Horner

      “It was illegal.
      Plain and simple.”
      Too bad multiple courts all disagree with you. Part of being a nation of laws is that we have a multi-layered court system to rule on such matters.

      Oh, and what about the argument which was made that due to the way the government behaved as GM’s lender of last resort, the capital markets would never again make money available to the auto industry?

    • 0 avatar

      I’m right there with ya, TT. (And my personal moral and ethical standards have little to do with what our puppet courts may rule is “legal.”)

      Thing is, as time passes… I just don’t really care about Government Motors anymore. Don’t get me wrong, I’ll still never buy another GM (or UAW-manufactured) vehicle again in my lifetime — but I have to respect the sheer audacity of what the past two years have shown to us.

      So, fine, let them con the American public into saving the company, losing billions, and now buying their shares. One could argue our public deserves the inevitable result for being so damn ignorant.

      It’s the same as my views on Fox News — after a fashion, I’ve gone from righteous indignation over the sheer gall of how that organization operates (despite the fact the network’s views largely mirror my own) to grudging admiration for their ability to pull it off. Ditto GM and their hired goons in the federal government.

    • 0 avatar
      TrailerTrash

      John,
      Thanks for responding to my post.
      However, I am scratching my head to remember when this ever completed a legal course through the courts.
      If my memory serves me right, there were interpretation made in the TARP legislation that played funny with the original written bailout.
      I believe that the “government”, or the White House, determined that the original bailout was for any financial institution.
      They then declared GM to be a financial institution and proceeded with the transfer of funds.

      Now, John…I am not real sure about the standing today of this procedure in the courts, but this was to me, plain and simple, illegal…not to mention wrong.

      Can you remind me again what courts exactly pronounced this to be legal?

    • 0 avatar
      TrailerTrash

      ROB F

      I have nothing against the UAW.
      I do against their leaders.
      Not really against unions, but I am for the forced unionization of companies.
      For example, the attempted force of open ballots in union voting is very, very wrong.

      Intimidation is a force that lights a fire in my rebellious belly.

      I drive a few UAW cars, one of which I love…the MKS.

      I do detest being bullied or lied to or have my government play word games and ..THIS IS IMPORTANT…APPLY FAIRNESS AND PROTECTION RANDOMLY.

      NOTE TO GOV….Allowing some American businesses to fail, allowing some valiant entrepreneurs to suffer the cruel realities of capitalism…but then bail-out others is simply wrong.
      And in my humble opinion…an illegal application of American law.

    • 0 avatar

      TT: “I have nothing against the UAW. I do against their leaders.”

      Tomato, tomah-toe. We’re judged by the company we keep. If UAW members feel their leaders don’t properly represent them, they can vote the crooks out. That will never happen… so the workers should indeed be lumped in with leadership, and share (suffer?) the same fate.

      I drive a few UAW cars, one of which I love…the MKS.

      And I love my Flat Rock, MI-produced “Karma Kar.” Which I bought before the time of bailouts, or that I gave a rat’s rump about the UAW. Times change, and so have my preferences. I don’t think I’ll miss much never owning another GM, Chrysler, or US-built Ford. (It’s sad when I’d rather buy a car built in Mexico, than one built in Detroit. But there it is, and the UAW is solely to blame for that.)

      NOTE TO GOV….Allowing some American businesses to fail, allowing some valiant entrepreneurs to suffer the cruel realities of capitalism…but then bail-out others is simply wrong. And in my humble opinion…an illegal application of American law.

      Exactly.

       

  • avatar
    Conslaw

    Ed, you wrote:
    “But if, as CAR takes as gospel, a halfway “normal” restructuring weren’t an option, it was only because the managers of both GM and Chrysler refused to even contemplate the possibility of a bankruptcy filing until it was far too late.”
    Maybe this is your indirect way of fessing up that you were wr, wr, not exactly right.  The private capitalist managers of GM and Chrysler f-d up.  The investors f’d up – they should have thrown the bums out long ago.  They made a lot of bad decisions.  It happens.  Then markets failed.  There were no capital markets that would have kept Chrysler and GM assets (physical and intellectual and labor) from being stranded and becoming worthless.
    Classical free market economics notions of efficient allocation of resources rely on a bunch of assumptions that often don’t end up being true.
    Far from being a “dangerous precedent”, the fact is that the government took a bold and reasoned (albeit improvised) approach to addressing a market failure and in doing so prevented or at least mitigated an economic calamity.   This is a positive precedent.   Too bad the government isn’t showing the same cojones in taking a proactive response to the mortgage mess.
     

    • 0 avatar
      John Horner

      “Classical free market economics notions of efficient allocation of resources rely on a bunch of assumptions that often don’t end up being true.”
      Ding, +100!
       

    • 0 avatar
      MikeAR

      Read this, if you can read. http://online.wsj.com/article/SB10001424052748704648604575620982583079458.html

      Anyone who thinks GM deserves to live and the bailout was legal or a good idea is illiterate and shoudln’t have the rights of a citizen. In other words, too stupid to vote.

    • 0 avatar
      PeriSoft

      @John Horner – yep, exactly.
       
      And classic free market economics breaks down with edge cases like this. Supply and demand don’t work very well when you’re talking about vicious cycles on a global scale.
       
      Newtonian physics works just fine on a planetary level; trying to apply it to black holes and quasars is folly. One of those critical assumptions is investor rationality, but that’s gone in cases like this – the tragedy of the commons. It’s in each investor’s individual interest to behave in a way that will ruin all of them, a bit like a bank run on a massive scale. If nobody withdraws his money, it’s fine – but as a given individual, you can’t predict what others will do, and so the only way to minimize your own risk is to take your money out. Everyone else does the same, and the bank collapses, which ends up being worse for everybody.
       
      Pressure external to the market is the only way to stop this kind of thing, because the market by its very nature cannot self correct beyond a certain point. That point was long past during the credit crunch.

    • 0 avatar
      PeriSoft

      @MikeAR
       
      I think you’re the one who isn’t reading. That article focuses entirely on GM’s current viability. That’s completely irrelevant. The issue is what would have happened had the bailout not happened when it did.
       
      Be serious. You’re saying that we’d have been better off destroying the entire US auto industry than having a Motley Fool analyst say he wouldn’t invest in GM? What the hell are you smoking? The IPO and taxpayer return are completely irrelevant!
       
      Oh, but I guess I’m too stupid to read or vote. Carry on – I’m sure it’s much easier to feel good about your irrational outrage when you studiously ignore reality and focus on trifles.
       
      Your position is like someone being pissed off because a sandbag barrier saved his house from a flood, but he can’t sell the sandbags for a profit.
       
       

    • 0 avatar
      geeber

      I’m not seeing where classical economic theories didn’t work.

      They didn’t work the way people liked them to – their favorite companies were on the verge of bankruptcy because they failed to adapt to changing consumer tastes and built too many subpar products.

      That doesn’t mean free market theories don’t work. It means that certain people are crying the blues at being on the receiving end of those theories.

      And please stop whining that there was a recession. Last time I checked, Honda, Ford, Toyota, Nissan, Hyundai, BMW and VW were all hit by the recession, too. But they weren’t on the verge of bankruptcy.

      Perhaps they were operating in some sort of alternative parallel universe that was separate from the one that contained GM and Chrysler? That doesn’t prove that classical economic theories don’t work. It just proves that apparently there is more than one dimension to our existence.

    • 0 avatar
      MikeAR

      Perisoft, GM’s current viability is the entire issue here. Why bother recuscitate soomething that will fail again. GM hasn’t changed, the same sick corporate culture is there, the same unions are in place and more powerful than ever and the market is more hostile to GM thna ever before. And don’t tell me how well the IPO is doing when most of the buying so far is foreign and TARP bailoutees spending our tax money.

      You need to get over your blind GM is perfect and the governement knows best attiude.

    • 0 avatar
      PeriSoft

      Why bother recuscitate soomething that will fail again…You need to get over your blind GM is perfect and the governement knows best attiude.
       
      Oh, for f*ck’s sake. What does it take? Read my posts!
       
      “That article focuses entirely on GM’s current viability. That’s completely irrelevant. The issue is what would have happened had the bailout not happened when it did.”
      “But this was never about GM.”
      “The bailout wasn’t about making money on an investment.”
       
      OK, read that about a hundred times. Now read it again. Now read it one more time for good measure. Is it sinking in yet? GM’s viability *outside the context of a massive credit crunch and economic disaster* IS NOT RELEVANT!
       
      Jesus H. Christ! What about “This isn’t about GM” don’t you get?
       
      IT. WAS. ABOUT. PREVENTING. A. DOMINO. EFFECT. AND. A. CRISIS. OF. CONFIDENCE.
       
      When I say that, do you see me saying, “GM is perfect and the government knows best”? Well, if you do, then I give up, we’re f*cked – because it would at least prove that the public education system has failed utterly at even middle-school level reading comprehension.
       
      I’m going to go shoot myself in the face now.

  • avatar
    Conslaw

    For those who think capitalism inherently allocates assets to their most efficient use, how do you explain China? China is communist by definition, but capitalist when it is convenient.  While consistent economic doctrine is hard to discern from China, there appears to be one over-riding principle: Keep everybody busy.   With a population of more than 1 billion, this results in a huge economic engine.  In the past two decades, when the US has thrown trillions on foreign wars and on a standing military structure far larger than China’s, China has kept busy building a highway and high-speed rail system from scratch.  China has built thousands of power plants including (controversial) large-scale hydro-electric projects.  For much of this boom, China had no real stock market.  Strategic investments were often driven by government mandate.
    While US cities have become hollow with structural economic blight; China has built massive new cities from scratch.   In a generation, China has transformed itself from an agrarian society to a modern industrial powerhouse.
    I’m not saying I’d rather live in China.  I’m not discounting the lack of personal freedoms or the inherent problems in a population that is several times too large for sustainability, but in terms of allocation of resources over the last 20 years, China has done far better than the United States.
    What countries have done the worst in terms of economic development?  Largely the ones with no government or minimally functional governments.   Somalia is about as capitalistic as you can get.   If you want to live somewhere with limited government, you can probably get a house in Somalia dirt-cheap. In Somalia, you can have as many guns as you want, any kind of gun you want.  It’s a real tea party paradise. Of course, your house will probably be made of dirt, and it won’t be more than a day or two before somebody with more guns than you takes whatever you have, but damn it, you’ll live in a proper capitalist country.
     
     
     
     
     

    • 0 avatar
      geeber

      Somalia is not capitalistic. Your argument falls apart right there. There are no free markets. It is a thugocracy. The local warlord can appropriate your property and money – even your wives and children – if he is so inclined, and is powerful enough to do it.

      People lose all credibility when they claim that Somalia is a libertarian paradise or a capitalism in action. Anyone who says that knows nothing about capitalism or libertarianism.

      As for China – you are assuming that all of those roads and power plants and dams represent the most efficient use of resources. The old Soviet Union built lots of infrastructure during its heyday, and impressed a lot of people in this country. Turns out that a lot of that infrastructure was unnecessary, driven by as much by political considerations as real need, and shoddily built. And the Soviet Union has large areas of environmental devastation, caused by government projects, that make our Super Fund sites look like nature preserves.  

      You also seem to forget that we have already built a system of interstate highways, we have large mass transit systems in our largest cities, along with airports, and we have several dams sprinkled throughout the nation. We might not have built as much in the past 20 years as China, but that is because we already had a great deal of infrastructure in place. And opposition from environmental groups, and federal and state prevailing wage requirements, favored by unions, have driven up the cost of projects.

      Here in Pennsylvania, a proposal to dredge the Delaware River to make the port of Philadelphia more attractive to business has been fought tooth-and-nail by environmental groups in court and in the press.

      China has a solution to that sort of opposition. It’s called “house arrest” if you are lucky, and “jail” if you are not. Last time I checked, Pennsylvania Governor Ed Rendell (a Democrat), who favors the project, hasn’t thrown the head of the state chapter of the Sierra Club in jail.

    • 0 avatar
      Robbie

      The lack of a well functioning capitalism is the very reason why the Chinese boom will eventually end with the average Chinese having an income of 50-60% of the average American, and not more than that.

    • 0 avatar
      Telegraph Road

      Capitalism’s doctrinaire manifestation, “market fundamentalism”, is becoming the state religion, at least in the red states.  I don’t think even Adam Smith would bless it.

    • 0 avatar
      geeber

      The fact that the market doesn’t work the way you would like – or that you cannot understand how it works, so you simply criticize those who do – does not mean it doesn’t work.

      And the last time I checked, the biggest “blue” states – Claifornia, New Jersey, New York and Illinois – are basically fiscal basket cases. So perhaps it’s best to not cast stones at those red states.

      I can understand why, as an employee of one of the Big Three, you would want to denigrate residents of those states. They have, at the transplant factories, been assembling vehicles that are superior to what you have produced, and informed customers realize this. It must be galling to know that, despite the official bluster.

  • avatar
    Conslaw

    Ok, Geeber – give me an example of a classically capitalistic country with limited government that is performing well.
    Singapore and Taiwan aren’t doing too badly and are largely capitalistic.  That being said, it seems to me that they are both mixed systems similar to what we have in the US.  Oh yes, they both have national health insurance.

    When it comes to environmentalism, it seems like you are talking out of both sides of your mouth. You (properly) criticize the Soviet Union for environmental disasters. Of course that omits the fact that private companies unchecked have been known to create environmental disasters of their own (Love Canal). You also criticize the review and public comment portions of American law that are meant to avert environmental disasters before they occur and – according to proper efficient markets capitalistic theory – internalize all the costs of an enterprise onto that enterprise.

    I never advocated a communist system. I am a proponent of a mixed economic model with a pragmatic government structure that can intervene in markets when markets aren’t working or when the markets are only working for the benefit of a few leaving the costs for everyone else.

    • 0 avatar
      geeber

      Conslaw,

      I think we are mixing apples and oranges here.

      You are correct that no country is purely capitalistic – if we define that as meaning that the government relies on the private sector for virtually everything short of maintaining armed forces and a court system.

      Government can provide services because people in certain areas would bear the much higher costs of bringing the vital service to that area (postal service, for example, which would be prohibitively expensive in rural areas) or the undertaking is too big for private companies (building and maintaining a road system). 

      Those are entirely different endeavors from having the government bail out and then temporarily run a company that provides expensive, non-essential consumer goods to the public. And, make no mistake about it, an automobile is this type of consumer good. Consumer goods require frequent updates, are purchased as much for style and other factors (prestige) as utility and are often subject to big swings in demand. We don’t have to buy a new car every year, but a hot new model can encourage people to trade in a perfectly good car. 

      It can be pretty safely said that most people agree that the government should not be in the car-building business. Even France has tried to reduce its stake in Renault over the years, and France is hardly a country that looks to the U.S. for guidance on the proper relationship between government and business. The Obama Administration, which is hardly a conservative Republican one, was reportedly not too happy that it was faced with the prospect of having to become heavily involved in the operation of GM.

      The next question is whether the government should become involved when a company in a sector becomes “too big to fail” and does, actually, fail. And that is where the controversy lies. While anti-bailout folks do, in fact, gloss over the short-term pain that collapse of GM and Chrysler would cause, the pro-bailout folks are given to wildly exaggerrate the effects of a collapse (see Perisoft’s post above) and ignore the long-term negative effects of a bailout.

      The bailout prevented a badly needed culture change at GM – even now, GM defenders who work in the industry on this very site blame the recession for the company’s collapse, not 30+ years of abysmal leadership. Never mind that BMW, Ford, Honda, Hyundai Nissan, Toyota and VW were all hit hard by the recession, too.

      The UAW is itching to get back what little concessions it has made. The company has not had steady leadership, and there is always tension between what the government wants and what the market wants. Plus, the process used by the government rewarded allies (the UAW) while beating down those it didn’t believe deserved as much (bondholders and stockholders). The basic process may have been followed by the government, but there is no doubt that some parties made out MUCH BETTER than they otherwise would have, and this is because they had an ally in the White House.

      Over the long-term, the lessons learned are:

      1. Grow your company as big as possible, and then you don’t worry about how well it is run, or whether it has a viable long-term business plan. Why? Because it will be too big to fail.

      2. Make sure your group is favored when government decides who gets the gold and who gets the shaft. Any relationship to actual claims on the company, let alone the role played by said organization in driving the company to its present state, will be completely ignored.

      3. A few cosmetic changes in leadership will be enough to bring about “change.” No need to really worry about changing the corporate culture that led to the problem in the first place.

      4. Ignore whether the money, in the long, used to prop up a failing company could have been used for more productive purposes. Both GM and Chrysler were a drag on the economy. They DESTROYED wealth, not created it.

      As for your other points:

      Conslaw: When it comes to environmentalism, it seems like you are talking out of both sides of your mouth. You (properly) criticize the Soviet Union for environmental disasters. Of course that omits the fact that private companies unchecked have been known to create environmental disasters of their own (Love Canal). You also criticize the review and public comment portions of American law that are meant to avert environmental disasters before they occur and – according to proper efficient markets capitalistic theory – internalize all the costs of an enterprise onto that enterprise.

      I am pointing out that one reason we don’t have as many public works projects in this country today is that it’s a lot harder and more expensive to do them. And one reason for that is environmental review procedures and, at times, outright opposition to projects from environmental groups. These add costs and can, at times, completely kill a project.

      Sometimes, that is good. Not all projects are necessary, and, in this country, can be driven as much by political factors (somebody wants to “bring home the bacon”) as opposed to actual need.

      But China doesn’t have these roadblocks. If the government wants it, the project is done. People who object can be sent to jail. This is why your comparison of China to the U.S. in this regard isn’t entirely fair.

      As for Love Canal – the Hooker Chemical Company had permission to bury those chemicals from the other company that owned the site. This was a common disposal procedure in the day (1930s and 1940s). The local school board wanted that land for development, but the company warned that it was not safe. The school board threatened to claim the property through the process of eminent domain, so Hooker Chemical Company capitulated and sold it for $1.

      Love Canal is hardly an example of free enterprise run amok. It’s more an example of government not listening to a private company when it should have.

      Conslaw: I never advocated a communist system. I am a proponent of a mixed economic model with a pragmatic government structure that can intervene in markets when markets aren’t working or when the markets are only working for the benefit of a few leaving the costs for everyone else.

      “Markets not working” really means “not working in the way I would like” or “not working in a way that benefits me.” The markets were working for autmobile customers – the people who really matter. GM and Chrysler built subpar products; increasing numbers of customers shunned them for the superior competition; those companies went broke. Customers benefited through the availability of superior cars. That’s the free market in action.

      The chief culprits here – management and the UAW – did exactly what you decried. They looted those companies over the years, and, when those companies went belly up, they stuck everyone else with the costs (the cost of the bailout). But your preferred course of action REWARDED the bad actors here.

    • 0 avatar
      jkross22

      Geeber,
       
      Well said.  + 1
       
      So the people in favor of the bailouts appear to either be people directly benefiting from the bailout or those that felt we looked into the abyss and almost fell in, and believe the bailouts (banks, AIG and Big3) prevented the fall.
       
      The assumption made was that GM and Chrysler going through a real bankruptcy would cease production and everyone would be out of a job at one time, with no one filling the void.  This is the anti-pollyanna vision that was cleverly crafted and eaten up by the decision makers.  Regardless of this vision’s complete disconnect from reality, it ruled the day.
       
      To Geeber’s point, we now have a new-old-new GM with much of the same problems the old one had (tin eared leaders with either no auto experience or those with a track record of failure, poorly managed marketing campaigns, rebadge jobs that don’t account for where consumer demand is, pricing not in line with consumer perception, etc., etc.).  This could have been avoided had GM entered a real bankruptcy and gone through the painful structural, leadership and contractual changes necessary.  Instead, we appear to have a house of cards with a prima facie clean BS, but are left questioning if those in the finance dept. have a handle on where their company sits financially.

    • 0 avatar
      geozinger

      “While anti-bailout folks do, in fact, gloss over the short-term pain that collapse of GM and Chrysler would cause, the pro-bailout folks are given to wildly exaggerrate the effects of a collapse (see Perisoft’s post above) and ignore the long-term negative effects of a bailout.”
       
      This is where I take exception with many folks perception of what happens when an industry collapses. Coming from steel country, you cannot imagine the devastation when whole companies evaporate (for lack of a better term) and the amount of energy invested in the hopeless pursuit of another industry or industries to come in and replace the ones lost. I would like to know what basis these people are using for recovery. I grew up in areas that were once vibrant manufacturing centers, after the fall of the basic metals industry that are now ghost towns. The jobs were never replaced, and like textiles and many kinds of electronics, the capital is now largely in the ownership of foreigners.
       
      I love the fantasy (and that’s all it is folks) that competitors or ‘someone else’ would swoop in and buy up these assets and restart production. There was no other lender of a size big enough to finance someone like a car company. Where were our big banks? They sure weren’t lending, no matter how much money the Fed was giving them.
       
      About this purchase and restart: How long would this take? Who would have the capital to do so? Do average commenters on this site realize just how capital intensive this level of manufacturing is? Could we (collectively) have afforded to take Herbert Hoover’s hands off approach to the economy on the brink of a (by all accounts) rather large recession? In 2008 or 2009 could we have survived a dramatic increase in the number of unemployed?

    • 0 avatar
      geeber

      geozinger: This is where I take exception with many folks perception of what happens when an industry collapses. Coming from steel country, you cannot imagine the devastation when whole companies evaporate (for lack of a better term) and the amount of energy invested in the hopeless pursuit of another industry or industries to come in and replace the ones lost. I would like to know what basis these people are using for recovery.

      That is why a municipality should not depend on one industry. And one reason that new industries don’t come in to replace the old ones is because the home state is not a right-to-work state. Like it or not, most new manufacturers do not want to hire union members, especially ones from an industry that was at least partially ruined by a spoiled, entitled union. Sometimes I don’t believe that people who have lived most of their lives in a union-dominated environment realize how investors and people who run start-up companies view unions.

      geozinger: I grew up in areas that were once vibrant manufacturing centers, after the fall of the basic metals industry that are now ghost towns. The jobs were never replaced, and like textiles and many kinds of electronics, the capital is now largely in the ownership of foreigners.

      The steel industry is alive and well in this country. We are still one of the largest producers of steel in the world. The old, unionized “dinosaur” mills are gone, but there are plenty of mini-mills left producing higher quality, specialized steel. The industry didn’t disappear, it just evolved.

      Just like what is happening with the auto industry. The old oligopoly of GM, Ford, Chrysler and the UAW is dissolving. It is being replaced by an industry with more players (and each player claiming a smaller share – the days of one company selling 45-50 percent of all vehicles in the U.S. are long gone) and workers are compensated based on their skills, not on the fact that they belong to a powerful union. 

      In many respects, the bailout was an attempt to stop this process.  
       
      geozinger: About this purchase and restart: How long would this take? Who would have the capital to do so? Do average commenters on this site realize just how capital intensive this level of manufacturing is?

      The facilities, dealerships and tooling already exist. Any new buyers aren’t building a car company from scratch. If the government has to get involved, it could have stepped in as the lender of last resort, while allowing the new owners to reorganize the company under standard bankruptcy procedures.

      geozinger: Could we (collectively) have afforded to take Herbert Hoover’s hands off approach to the economy on the brink of a (by all accounts) rather large recession? In 2008 or 2009 could we have survived a dramatic increase in the number of unemployed?

      Herbert Hoover was not a laissez-faire capitalist. He believed in government intervention in the economy, and strongly supported public works (that is why Hoover Dam is named after him – he championed the project in the 1920s). He did oppose “direct” relief to individuals (what we today call welfare and unemployment compenstion) from the federal government, on the grounds that this sort of program was better managed at the state level.

      He jawboned large companies to keep wages high in the wake of the 1929 crash; he signed the Hawley-Smoot Tariff in 1930 to “protect” American industry from foreign competition; he formed the Reconstruction Finance Corporation to bail out failing companies; and he raised taxes in 1932, to keep the budget balanced while paying for his programs. And the unemployment rate had hit 25 percent by 1933.

      There is something to be learned from his presidency, but not that laissez-faire capitalism caused the Great Depression.

    • 0 avatar
      geozinger

      @geeber: Our area did not depend upon one industry per se. However, when the basic industry dried up, the supporting ones left also. That had little do with unions, it was basic business sense.

      Additionally, I have lived in different parts of the country, and yes I can understand people’s views of unionization. I’ve had many conversations with my anti-union FIL, I’m very aware of how people think. The funny thing is, I’m not really pro-union. But it’s very easy to use them as a scapegoat for everything. Having worked in a number of situations, it’s not always black and white. Either way, thanks for insulting me.

      Being a right to work state does not necessarily guarantee the best workers. There are slackers in all industries. If you worked in a union shop, you’d know that the slackers in the membership are not well liked,  because they’re killing productivity. If they’re doing that, they’re usually killing the incentive plan. Many of the folks I knew were also running small businesses on the side, divvying their time between the ‘shop’ and their own ventures. Nor do all ‘unionized’ states force votes; I currently work in the printing industry in Michigan, not all large shops (+50 people) are unionized.

      Even with steel mills located in right to work states, the foreign competition can produce steel so cheaply that I doubt that specialty steel will be no great defense for the domestic steel industry. We still have tariffs on foreign steel, starting in the Bush administration and through this year.

      The bailout was a way to provide an orderly wind down (if there’s going to be a winding down) of the domestic industry without a total and complete crash. I still do not think that in 2008-09 the economy as a whole could have sustained many more people suddenly out of work. While the physical capital exists, the credit markets had locked up. We had no way of knowing how the assets from a disembodied auto industry would be distributed. No way to know if all of the suppliers would be healthy enough to continue with their operations. The government DID step in as the lender of last resort, and used a 363 bankruptcy as their mechanism.

      I still think we were on the brink of total economic disaster back then, and we still may be close, i.e. double dip recession. If the poop hits the fan now, I think there is no political will to do another bailout, as evidenced by the fact that the President has said he has little interest in running the car companies. Or as evidenced by the IPO, the fact that GM is trying desperately to become a private company again, as quickly as possible. Spin that politically any way you want, I read it as a signal that government ownership is onerous to them.

      PS: Herbert Hoover wasn’t a bad guy; I referenced him as the embodiment of the prevailing attitudes of the times. I’d agree he got a bad rap, mostly unearned.

  • avatar
    ASISEEIT

    Through GM’s eternal wisdom they have excluded their employees and retirees from purchasing “NEW” GM stock through GM’s (Fidelity) Personal Savings Plan. Fidelity is the plan as of my retirement that ALL GM employees and retirees are in and confirmed to me  by a Fidelity representative this morning.  Gm has Morgan Stanley(MSR) servicing the “NEW” GM stock funds. I don’t understand why GM seems to want  to keep their employees and retirees from adding to this very important IPO! Maybe we as a huge block will want to stop adding to the purchases of GM’s products!

  • avatar
    Zackman

    The government has the right to use tax money any way it pleases. In this era of globalization, there are forces at work which go far beyond local or national laws and even ideology on what constitutes what is “proper” or “improper” and the government is fully aware of what’s at stake. I agree with Ed – the automakers – or ANY industry/corporation that receives help through the government must state an obligation to repay those funds and commit to that obligation.

    I really don’t care what is commonly viewed as “right” or “wrong” in terms of how business is conducted in this or any other nation for the simple reason by my second sentence above, and it’s out of my control, anyway. I suppose one can belly-ache up one side and down the other, but it changes nothing. If someone wants to boycott their cars, that’s their right and I respect that. It’s just not the same world when the U.S. was undisputed king-of-the-hill. Maybe it still is, but with much different circumstances.

    GM and Chrysler are companies that the government feels are worth saving for many of the reasons already put forth by commentors above. I’d feel the same way if Ford was one of the companies that received money. Even though Ford turned down government money, they’re not out of the woods, either. Besides, they already mortaged themselves up to their eyeballs a few years ago – yeah, they used the private sector, but so what? It makes no difference to me. Remember the Lockheed bailout almost 40 years ago? $500.00 hammers and toilet seats didn’t help them a bit, but they were beholding to D.O.D. anyway.

    If the U.S. can retain some manufacturing ability domestically, all the better!

  • avatar
    FiveforFighting

    Let’s not ignore the multiple elephants in the living room:
    – All of those “saved” jobs are headed to low-wage, Third World countries (the southern U.S., Mexico, India, etc.) just as fast as they can be moved there.
    – The same people are still running GM.  Yes, the same ones who for decades built crap that nobody in their right mind would buy.  The only difference is the current CEO who, by his own admission, doesn’t know anything about cars.
    – The U.S. economy is moribund, if not still in free fall.  Team Obama has as much as said that 10% unemployment is the new normal.  This, of course, doesn’t count the people who have given up looking for work, are working 10 hours/week at Starbucks or are unemployable PTSD cases from Vietraq/Vietstan.  To put it another way, Wal-Mart workers can’t afford to buy new cars, and Wal-Mart is America’s largest employer and is quickly becoming the standard employment model in America.  Those people can’t afford any car, much less a new one.
    – GM has lost at least two generations of potential customers.  Generations X and Y have long since written Detroit off and are quite happy with their imports, thank you very much.  The people who were once GM’s core customers are aging rapidly and are quickly finding themselves locked out of anything except Wal-Mart employment (see above re: state of the U.S. economy).  Gone are the days when GM could sell rebadged Yugos that would sell like hotcakes to illiterate mouthbreathers who would grunt that they were “buying American!”
    I predict another trip, hat in hand, to Washington (in private jets, of course) in five years asking for yet another taxpayer bailout.

  • avatar
    PeriSoft

    Good lord. What a hopeless task. A whole freaking forum full of people who are only capable of seeing things through the lens of whether a company makes good cars.
     
    I think you could gag and tie up most of the commenters here, put them against the wall in a row, and play a tape saying, “THE ISSUE IS NOT GM NOW, BUT THE ECONOMY AS IT WAS DURING THE CREDIT CRUNCH AND HOW IT WOULD HAVE BEEN AFFECTED BY A GM COLLAPSE”, for twenty hours straight, and when you ungagged them in the end they’d all say, “GM STILL MAKES BORING CARS!”
     
    I guess all the top-end analysts, magazines, corporate (capitalist!) people, etc etc were wrong. Really they should have said, “You know what, gentlemen? The real issue here is not worldwide market confidence or the fact that parts suppliers can’t get credit to ride out a major customer collapse - it’s whether GM will be making an attractive b-segment diesel wagon in two years! My, how close we came to disaster!”
     
    *rolls eyes*

    • 0 avatar
      geeber

      The competitiveness of GM’s cars IS a factor, because if GM cannot build good cars, it will never truly recover.

      A company’s corporate culture has a direct impact on how good a company’s offerings are – see Ford for Exhibit A on that one. If the bailout prevented GM and the UAW from undergoing the necessary attitude adjustment, then we are in for more fun in about 5-10 years. Then, instead of the excuse being that GM is “too big to fail,” it will be “We’ll lose all of the money we’ve already invested in GM!”. 

      Instead of GM management saying that this batch of new cars will right the ship (as they have been saying for the past 25 years), it will be whoever occupies the Oval Office. I can hardly wait.  

      The attitude that saving the company, because of the number of jobs involved, is more important than worrying about whether what is pouring out of the factories is competitive is what guided the British government as it tried to rescue British Leyland. And we all know how that one ended.

    • 0 avatar
      jkross22

      Well, it is the truth about cars, and reality is that if GM really was building boring cars in the Toyota idiom, this discussion wouldn’t be happening.  For too long, GM’s cars were anything but.  Toyota and Nissan and Honda and others have proven you could build dull cars and make a killing doing so.
       
      I’m sorry if other’s opinions offends your sensibilities.
       
      “I guess all the top-end analysts, magazines, corporate (capitalist!) people, etc etc were wrong. ”

      Yes, that is correct.  After all, it was some of these same people that created (and in some cases within GM, continue to perpetuate) the mess.
       
       

  • avatar
    Christy Garwood

    Hello everyone, remember I work for GM as a vehicle engineer, and this is my own opinion.

    Remember Brian Deese? A few of you may want to refresh your memories about his role prior to the GM bankruptcy and the subsequent bailout from the US and Canadian Governments and the UAW VEBA. IIRC, he crunched lots of numbers that he fed to Rattner and Geithner and it was his analysis rather than the CAR that drove the decisions to bailout Cerberus owned Chrysler and GM.

    @Ed Niedermeyer, your position that GM should commit to paying back, in full, the bailout money is an interesting one.  It makes me want to do an opinion poll of our managers and see what they say. In principle I agree that each of us should repay our debts when able.  It is my understanding that US bankruptcy courts do not require such renumeration.

    • 0 avatar
      FiveforFighting

      Whether GM was building boring cars is irrelevant.  The reason they needed a bailout is that they were building low-quality cars.  Their quality history is so bad, in fact, they’ve lost two generations of customers to imports.  That’s not going to turn around any time soon.


Back to TopLeave a Reply

You must be logged in to post a comment.

Subscribe without commenting

Recent Comments

New Car Research

Get a Free Dealer Quote

Staff

  • Authors

  • Brendan McAleer, Canada
  • Marcelo De Vasconcellos, Brazil
  • Matthias Gasnier, Australia
  • Tycho de Feyter, China
  • W. Christian 'Mental' Ward, Abu Dhabi
  • Mark Stevenson, Canada
  • Faisal Ali Khan, India