GM Death Watch 223: I Know Why the Caged Bird Sings

When I was growing up in Rhode Island, the state was run by the mafia. Politicians, police, priests, judges, juries, firemen, trash collectors, teachers, unions– anyone who had power owed that power to Raymond L.S. Patriarca. Period. In the last forty years, the mob’s stranglehold on the Ocean State has dissipated– even if the stench of corruption remains. But it’s too late. The mob-controlled unions and their corrupt enablers destroyed Little Rhody’s industrial base. The state will never be a locus of, well, anything. And yet people call talk radio and wax lyrical about “the good old days.” Justice was for sale. Racism endemic. Violence systemic. Priests buggered little boys with impunity. “But at least you could walk the streets without fear.” This, Detroit, is your future. And you can thank your godfather, GM.

You can almost feel the anger coming from Detroit these days. The sense of betrayal radiates from hometown journalists like heat off a desert parking lot. How could Washington turn its back on us? How could they treat us like goombas? Don’t they know who we are? Yes, they do. And they don’t care. Why kow-tow to yesterday’s boss? But that’s not really the point. Detroit’s anger is fully justified. Something bad has happened. Something that could have been avoided. Should have been avoided. But this animus, this furious indignation, is entirely misplaced.

It is GM that betrayed Detroit, not Washington. Instead of sorting out their business, GM’s capos spent the last four decades dining at fancy restaurants, smoking fine cigars, flying around in Gulfstream jets and doing… nothing. And then, when they finally grasped the fact that their goose was cooked, they ran to Uncle Sam and said, “Let’s do a deal.” GM CEO Rick Wagoner faced the Senate and told Dodd et al that he’d agree to anything to secure the bailout bucks. Oversight? Car Czar? Deadlines? “I think we would could live with that.”

As a friend of ours likes to say, there is no honor in this. GM’s CEO should not have come crawling back to D.C. in a Malibu hybrid to beg for a taxpayer handout. At the very least, Wagoner should have resigned after his first, disastrous Congressional appearance. Either that or he should have poured bankruptcy expert Jay Alix a stiff whiskey and told him to file for Chapter 11. Wagoner would have spared his employer the final indignity of watching Congress and the executive branch remove GM’s ability to determine its own fate.

“But no one will buy a car from a bankrupt automaker.” Excuse the profanity, but who the fuck cares? GM is bankrupt. Its liabilities currently outweigh its assets by a factor of ten. A government loan will simply add another creditor to a long list. Head of the line, back of the line, big whoop. The fed’s $13b will keep GM on life support for what? A month? Three? And then what?

As there’s nothing GM can do to generate the profits it needs to cover its overheads, as any real turnaround would take over $100b and at least five years, sooner or later, GM is headed for more public humiliation. How much more of that can GM take?

It’s one thing to get steamed at a politician for pissing away $700b of your hard-earned money for his or her best buds on Wall Street. All you can do is not take out a loan from TARP-blessed banks (that won’t give you a loan anyway) and/or vote the offending politicians out. You know; later. But if a carmaker is blowing your taxes, retaliation is easy. You don’t buy their products. You want my business? Sorry, but I gave at the office.

Mark my words: if GM uses taxpayer money to stave off bankruptcy, and then comes back for more, executive haircuts and public equity stakes won’t do squat to mollify an enraged public. There will be a consumer backlash that will make bankruptcy seem like a J.D. Power Award.

Meanwhile, GM and its camp followers are dazed and confused. Just like the little old ladies who used to promenade up and down Atwell’s Avenue without a care in the world, they don’t understand why things have changed. They will never understand that they sat atop of a pyramid of abusive exploitation. In the same sense, GM’s customers subsidized Detroit’s sense of wealth, safety and entitlement by buying shoddy vehicles. But only because they had to.

As soon as they didn’t have to, they didn’t. And then it was only a matter of time before the old corrupt system collapsed. Reform? The man who could have created life-sustaining change for GM through C11 (albeit three years ago) is in federal custody. Powerless. Someone somewhere else is large and in charge. Depending on your perspective, you might even call it progress.