General Motors Zombie Watch 15: Volt Jolt for Dolts

Robert Farago
by Robert Farago

It’s been a while since I’ve written a General Motors Zombie Watch. Time keeps on slipping, slipping . . . into the future. Only when you’re dead, there is no future. You’re dead. Oh, I know: New GM’s got new plans for new cars with new advertising that will win new (old?) customers. And the new Board of Directors’ Chairman Ed Whitacre is busy threatening to fire New GM’s old (new?) execs if they don’t get their shit together. But they haven’t, as their farrago of product plans and the botched launch of the new Buick LaCrosse prove. In fact, the current crop of GM suits will be fired. And?

And nothing. As I’ve said before, Uncle Sam kept CEO Fritz Henderson and the GM Lifers on center stage for one reason: to throw them off when taxpayer tomatoes start hitting RenCen’s windows. Which will be soon after GM’s third quarter financials hit the press. When it becomes abundantly clear that GM will burn through ALL of its taxpayer loot within two years. Or less.

Politicians from both sides of the aisle (though one more than the other) will proclaim that something must be done! And something will: the management that should have been shit-canned when GM was nationalized—actually long before, but that’s another story—will be shit-canned. The feds will press an entirely theoretical reset button.

New suits will take over. The fact that the auto industry is on a three to five-year cycle, the fact that New GM’s new brooms face dust devils the size of Montana, the fact that any genuine GM turnaround would take a decade and over $100 billion in addition funds, will be lost in the shuffle.

Never mind. The corporate cull will achieve its intended goal: it will unleash the puppies of prognostication. The media will be abuzz with speculation about the new new new new new new new New GM, for another financial quarter. Maybe two. Possibly three. Meanwhile, the feds will continue readying the GM pig for its IPO, lipstick and all.

You want to talk about a perception gap? The Obama administration’s Presidential Task Force on Automobiles is trying to widen the gap between the perceived value of General Motors and the actual retail price of the government’s automotive showcase. Mark my words: the feds ain’t done propping-up the unproppable. They’ll shovel more and more money at GM, dressing-up the nationalized automaker for the Great Pre-Mid-Term Election Sale.

Lest we forget, GM is counting on—as in factoring into their current balance sheet—a $10.3 billion loan from the Department of Energy’s Advanced Technology Vehicles Manufacturing loan program. It’s the same money previously denied the American automaker. You may remember that GM was deemed non-viable by someone figured out that 1 minus 120 billion is something less than one. Guess what’s changed.

Nothing much. While GM has shed a mountain of debt, restructured its labor contracts, dumped dealers, paid lip service to cultural change, and found another sucker to foot the bills (thank you, America!), it’s still taking in less money than it spends. And we all know how that picture ends.

Before the closing credits, we’ve got to sit through a chase scene between Chevy’s plug-in electric/gas hybrid Volt and the Toyota Prius.

There’s no way GM can catch ToMoCo’s four-wheeled planet cooler. Even if GM can get the Volt to work, they can’t sell it for anything even close to the Prius’ $22,000 price tag. Unless . . . Unless . . . Government Motors does it anyway and takes the hit.

Of course, a “hit” is not a good thing for a company that wants to offer shares to the general public. So . . . how about we subsidize the shit out of the car so that it appears as if the car is somewhat profitable-ish? Or, at the very least, take the costs off GM’s books?

The federal government has already cash-injected the battery makers developing the Volt’s power supply, to the tune of $100 million plus. Your elected representatives are going to use your taxes to subsidize the plant making the car [see: DOE loans above]. And the car itself (via a $7,500 tax credit). Not to mention signing over $62 billion to a company that can’t even set a timeline for the Volt’s potential profitability.

Before a hundred or so hand-built Volts hit Chevy showrooms, the feds will re-up the battery research grants and find some other eco-friendly way of “helping” the halo car that the Presidential Task Force on Automobiles rejected as delusional, pre-nationalization.

Yes, there is that. It can’t be said enough: the feds own GM. The GM zombie has no will of its own; it’s controlled by its political taskmasters. When the truth about its [most recent] parlous finances are revealed, GM will become far more than a failed automaker turned undead manufacturer. It will become a political liability. If you think GM shareholders were slow to abandon ship, you’re right. If you think the Obama administration will be slow about jettisoning its GM-shaped political baggage, you’re wrong.

But first, GM CEO Fritz Henderson and his motley crew will be packed off in their golden lifeboat, so that the illusion of change can be re-energized. Like any good magic trick, the “GM will pay back it federal loans” routine depends on a suspension of disbelief. As Tufts University supporter P.T. Barnum said, you can’t fool all of the people all of the time.

When the IPO time rolls around, real investors (as opposed to taxpayers dragooned into paying for GM’s nationalization) will not want to own GM stock. Why would they? So the government will have to subsidize THAT boondoggle as well. In other words, papers will be shuffled once again, the taxpayer will still be on the hook, and GM will continue wandering through the wilderness.

One way or another, sooner or later, what’s left of GM will fall into the hands of its rivals. A few names will be all that’s left of what was once the world’s largest automaker, and the world’s most profitable company. But make no mistake: this is less of a transition than it seems. GM is already dead.

Robert Farago
Robert Farago

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  • CamaroKid CamaroKid on Sep 06, 2009
    Huh? There is NO FWD Impala clone coming to Cadillac. The STS is being redesigned on a stretched CTS chassis. I also doubt very highly that the CTS wagon will steal sales from the SRX - two very different markets there. Keep in mind that the current downturn in sales at Cadillac is part of a bigger story - the ENTIRE luxury segment is taking a beating right now. Even Lexus is way down. With some luck and new product, Caddy will be well positioned when the downturn ends. Wrong o!... Google the new Cadillac XTS It will share its platform with the replacement for the Impala (Epsilon II/Super Epsilon) The Caddy is expected in late 2010, the Impala a year later. It has been CONFIRMED by Cadillac that it WILL be FWD (AWD as an option) and it will be a V6 ONLY car. You are also wrong on the STS... it will be canceled after 2011... No new work is planed for the CTS chassis. The STS-V is already dead. The current STS is selling in the less then 500 per month range... AKA major Dog! The Wagon Market in America is minuscule... Maybe the CTS Wagon will prove to be the "minivan" of luxury cars and create a market that no-one thought existed... but I wouldn't hold my breath. And the downturn at Cadillac isn't new news... The down turn started in 2004 during a BOOM economy... Cadillac has been loosing 15-20% of their customers per year compounded year over year. Yes things got really bad this year... but this isn't a new trend. Cadillac is not positioned... It is in worst shape then Pontiac or Saturn were last year... and look where they ended up.
  • Achevroletman Achevroletman on Sep 08, 2009

    With Toyota announcing they will not compete in the electric car market, things are looking great for the Volt. Chevy is ahead of schedule on the Volt and at 230 MPG it has no competition. When the economy rebounds, fuel costs will steadily rise making the Volt more attractive. The feds should be subsidizing companies that are inventing breakthrough car technology. GM knows alot is riding on the Volt and they will get it right, and after a 7500$ tax credit the Volt will price out in the Mid30s and cost of ownership will be very low due to phenomenal MPG. It is really sad how many gloom and doomers there are that would rather talk of failure of an American company than its' potential success. Simply check out the quality, fuel efficiency, and styling of the Malibu,2010 Equinox, and Silverado Hybrid and Tahoe Hybrid. GM will be back stronger than ever with Chevrolet leading the charge. If you do not at least shop American brands before buying, then you are the problem, not the American Manufacturer.Long live Bowtie Pride and God Bless America.

  • Mike Some Evs are hitting their 3 year lease residual values in 6 months.
  • Tassos Jong-iL I am just here for the beer! (did I say it right?)
  • El scotto Tim, to be tactful I think a great many of us would like a transcript of TTAC's podcast. 90 minutes is just too long for most of us to listen. -evil El Scotto kicking in- The blog at best provides amusement, 90 minutes is just too much. Way too much.
  • TooManyCars VoGhost; I was referring more to the Canadian context, but the same graft is occurring in the US of A and Europe. Political affiliation appears to be irrelevant.
  • The Oracle Going to see a lot of corporations migrating out of Delaware as the state of incorporation. Musk sets trends, he doesn’t follow them.