General Motors Death Watch 209: Reality is the New Perception

The average American has no idea that GM is run by a bunch of nimrods. And even if they knew about the Machiavellian machinations behind the automakers’ recent struggle for survival– including hiring a raft of ex-treasury officials to lobby their former employer for tens of billions of GM bailout bucks– they wouldn’t care. That’s all Inside Baseball stuff. Joe the Public has enough on their proverbial plate just running the kids to school, keeping food on the table and putting a roof overhead. But when it comes to buying a new car, well, that’s a horsepower of a different color.

As they should, American car buyers have acted– and will continue to act– in their own automotive self-interest. You can debate about the “perception gap” between GM and its rivals’ products until you’re blue in the state, but the bottom line remains: consumers prefer transplants’ products. It is this sharp end decision that has effectively (if not legally) bankrupted GM. And there’s no indication whatsoever that General Motors has the weaponry needed to reverse this trend.

In fact, there’s little reason to suspect that GM will EVER have the products needed to sustain the 20 percent plus market share it needs to justify its existence. I repeat: no matter how many tens of billions GM– or GM-Chrysler– sucks from the federal taxpayer, it has no chance of staunching the wounds that are draining its lifeblood. Too big too fail or not, taking money from American taxpayers who have exercised their freedom to buy what they want to sustain a company who cannot produce what they want to buy is a special kind of madness; on a scale that dwarfs even the UK’s British Leyland debacle.

Morality, ethics, principles and pragmatism aside, there’s history here as well. GM’s decision to marry its fate with Chrysler to stay afloat is pregnant with irony and foreboding. If Chrysler hadn’t suckled on the federal tit back in ’79, and then paid back its loan guarantees, GM’s current plea for federal assistance may have lacked sufficient credibility to succeed. Thanks to Snoop Dog’s golfing buddy, GM can point to Chrysler as a successful model of government intervention in the U.S. automobile industry.

It’s a simple idea that resonates well even (especially?) with an uniformed public: you did it before; you can do it again! Hell, you guys even made a profit from the Chrysler bailout– uh, guarantees! Yes, well, one small problem: Chrysler’s about to go away. Assuming GM merges with Chrysler– hoovering any remaining ChryCo cash and releasing 2 Big 2 Fail’s song “Obama’s Yo Mama”– the argument that Chrysler is a template for recovery kinda sorta disappears. In other words, the deal transforms the success of the last bailout– uh, loan guarantees– into an abject failure.

Sure, GM won’t touch Chrysler initially– for that very reason. But the media ain’t dopes. They’ve already picked-up the scent of the story that gives them an instant, persistent info-stiffie: job losses. As TTAC commentator thalter points out, “spending government money to facilitate layoffs is not going to sit well with the American people.” That’s doubly true if and when GM’s monumental management compensation and Cerberus’ deep pockets come to light.

GM is counting on speed and stealth to get their bailout bucks before the truth hits the public consciousness (a.k.a. public hearings). CEO Rick Wagoner and his minions know they’re already behind the eight ball from a PR perspective; the average American reckons all this trouble is Detroit’s own fault, for building gas-sucking SUVs rather than… something else. As sure as eggs is eggs, bailout fatigue, a genuine conservative backlash and the post-election diminution of Michigan’s political power are all coming down the pike.

And just like the $700b bailout bill, the chances are good that GM will sneak under the wire and get their money. But here’s the thing: it will be a Pyrrhic victory. The attendant publicity may paint GM as a victim, but it will also paint a big ass L (for loser) on every single one of its 1,274 products. Even as GM makes its case to reporters (under the guise of anonymous sources), wooing the politicos and Powers That be, they’re stigmatizing their products to the only people who really matter: car buyers.

Zoom back into the micro-level, and this soon-to-be highly publicized bailout will hand American consumers yet another reason not to buy a GM product. Protect American jobs? Of course. But… If, indeed, no one wants to buy a vehicle from a bankrupt automaker, it’s also true that not everyone wants to buy a car from a “troubled” one. Not to put too fine a point on it, when it comes to family finances, there’s no such thing as a sympathy fuck.