General Motors Zombie Watch 7: One Way Out

Robert Farago
by Robert Farago

I can’t decide whether GM’s “reinvention” will fail through government action or inaction. On one hand, I share the commonly held belief that GM’s product portfolio will be skewed towards small cars, to satisfy the Obama administration’s love of all things green and beautiful. Even without express orders to do so, GM’s craven executives will seek to please their elected overlords’ politically-driven desires. On the other hand, paralysis. The last thing GM’s cumbersome, dysfunctional management needs is another layer of command and control—especially one where accountability is measured in votes and patronage, rather than dollars and cents. The tendency to do nothing slowly, as is the way of all government, is great. If I had to guess which way this is going to go, I’d say both.

There’s a superabundance of evidence that the Obama administration will actively intervene in GM’s affairs. First and most incontrovertibly, the feds are on the brink of nationalizing the company, assuming a sixty percent share of “New GM.” In fact, the administration’s promises to be a “hands-off” owner reminds me nothing so much as Rasputin’s philosophy: sin is the key to redemption. We have to be hands-on to be hands-off. You have to wallow in sin to know the value of repentance. We had to fire the CEO to find a CEO who could operate effectively without government influence. Same deal.

More metaphorically, the feds have broken their interventionist cherry. Why not continue to fuck with GM? The government’s already bobsledding down that slippery slope; from appointing the entire GM Board of Directors to killing brands to killing dealers. The Presidential Task Force on Automobiles (PTFOA) says the changes are necessary, but that it will back off when post C-11 GM finds it sea legs. In this case, momentum speaks louder than words. Once a pattern of behavior is established, continuing it is easier than changing it.

Ah, yes, change. In announcing its one trillion dollar health care reform package, the Obama administration is once again showing us its willingness to enter a realm formerly reserved for free enterprise. Just as Obama wants a federal health care program to go toe-to-toe with private insurers, a federally owned GM will be soon be competing with privately held automakers.

The rationale underlying Obama’s intermingling of private and public organizations: Something must be done! As Obama said today, “the status quo is untenable.” GM can’t fail. Health care can’t fail. Same deal. Here’s another quote:

The German and American New Deal may have been merely whatever Hitler and FDR felt they could get away with. But therein lies a common principle: the state should be allowed to get away with anything, so long as it is for “good reasons” . . . It represents the triumph of Pragmatism in politics in that it recognizes no dogmatic boundaries to the scope of government power.

Author Jonah Goldberg is dismissed as a right wing crank by his many detractors, but there’s no getting around the fact that president Obama is shunning free market principles to boldly go where Chrysler’s previous elected saviors didn’t dare go before (federal loan guarantees are a far cry from public ownership). The conflict of interest in is inherent. The same government that regulates the entire automobile industry will now have an enormous stake in one of its biggest players.

This will undoubtedly lead to unwelcome distortions, and, ultimately, disaster. Because even as the feds attempt to literally reform GM, they will be unable to institute the dramatic changes GM needs to survive. It’s not just a matter of political meddling, of which there will be plenty. It’s also a question of corruption.

If you think GM’s previous Board of Bystanders was incapable of policing GM’s arrogance, stupidity and sloth, wait to you see what won’t happen when Uncle Sam is paying the bills. Actually, there’s no need to wait. In today’s New York Times, we learn that the United States trustee overseeing GM’s bankruptcy case (another layer of management) called the fees collected by GM’s bankruptcy consultants “staggering” and “excessive.”

In one year, Alix Partners and Evercore soaked the taxpayer to the tune of $130 million, including a $17.9 million “success fee.” Oh and an as-yet-unknown “discretionary fee” with “no boundaries in amount and scope . . . calculated in an unknown manner.”

As anyone familiar with government procurement knows, that’s small beer. Suffice it to say, in this regard, New GM will not be a microbrewery. Anyone who thinks that the feds will cancel these fees—or institute the kind of product planning, brand building and financial controls that New GM needs to earn a profit—is as delusional as a government that thinks there will be a graceful exit strategy for this unbridled adventurism. There’s but one way out of this mess, and the Obama administration isn’t even looking for the door.

Robert Farago
Robert Farago

More by Robert Farago

Comments
Join the conversation
2 of 55 comments
  • Kowsnofskia Kowsnofskia on Jun 25, 2009
    "So, have you ever actually worked for the government? I mean, I’m sure you probably feel the DMV is slow, and sometimes it is. Sometimes, though, it’s actually pretty quick and relatively efficient. When I need my license renewed, I mail in the form, and a few weeks later my brand new license comes in. Should this be a faster process? What about the stuff that really matters? Have you worked for child support? My friend is an agent there and he works his ass off — does a pretty good job too. What about the IRS? NASA? Any of the government defense groups? For all the claims that you make about how inefficient government is, I have yet to see any evidence." If you seriously think that the way the US government operates is "efficient", then you need to look more closely. For every supposedly "hardworking" government employee like your friend, there are at least ten that are lazy as hell and act perturbed whenever they're called upon to actually do their jobs (think postal workers). The IRS? Efficient?!? Where the hell have you been?
  • Dolorean23 Dolorean23 on Jun 26, 2009
    If you seriously think that the way the US government operates is “efficient”, then you need to look more closely. For every supposedly “hardworking” government employee like your friend, there are at least ten that are lazy as hell and act perturbed whenever they’re called upon to actually do their jobs (think postal workers). And this is different from the hundreds of executives that worked at GM or Goldman-Sachs? Or the thousands of drones who sit like Dilbert clones effortlessly tweeting or blogging away instead of actually working? My mistake. The government is obviously the hydra of communist corruption and big business is the shining example of American values. Again I'll state that my happy ass has been a gov't employee for years now and just like any other job, you have your good ones and you got your douchebags. You mean like all the botched prostate surgeries in VA hospitals? Doctors in a government health plan, like the VA, don’t have to worry about malpractice suits, nor do their hospitals. Yeah we got our bad ones, just like HMOs. You would be surprised at how many good doctors the VA does have for the simple fact that they no longer have to pay out the ass for malpractice insurance.
  • Scott Miata for the win.
  • Kwik_Shift_Pro4X On a list of things to spend my time and money on, doing an EV conversion on a used car is about ten millionth.
  • TheEndlessEnigma No, no I would/will not.
  • ChristianWimmer If I want an EV then I’ll buy an EV. For city use a small EV with a 200-300 km range (aka “should last for a week with A/C or heater usage”) is ideal. But I only have space for one daily driver and that daily driver also needs to be capable of comfortable long-distance cruising at high speeds and no current EV can do this without rapidly draining its battery charge.
  • SCE to AUX I prefer original, no matter what the car is. If the car has some value, then an electric drivetrain lowers its value. But if it's just a used car, why spend a fortune to install an electric drivetrain?
Next