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What's Good for GM isn't What's Good For America

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So.  Alea iacta est, as Julius Caesar might have said, if there had been a major Roman chariot manufacturer in putative need of nationalization.  The nation's largest automaker, our most iconic firm, is bankrupt,  GM and Citigroup exit the Dow in favor of Travelers and Cisco. 


The first obvious thing to say is that the only alternative the US government probably had to this massively expensive reorganization was probably liquidation.  I take seriously the claims that there was no DIP financing available for the automakers.


However.  The reason there was no DIP financing available is, at least in part, that there's no obvious upside here.  The government is acting as if GM's main problem is that it stubbornly refused to enter the lucrative market for small, fuel-efficient cars.  But the market for small, fuel efficient cars is not lucrative--they're the cars with the thinnest margins.  And no one's making it up on volume, either:  at the height of last year's oil spike, when barrels of Brent Crude were being quoted in first-born sons, small cars soared to . . . 20% of the American market.  Yes, there was a glut of SUVs, but that's because American companies were making a lot of SUVs.  Foreign companies make money on small cars because they develop them for lucrative home markets before modifying them for American production.


GM's main problem is not that the market is unreasonably unwilling to finance a potentially profitable company.  Nor that it can't produce an awesome small car that shockingly few people want to buy.  (Believe me, as the owner of a tiny, ultra-efficient car, I would that there were higher demand for my rapidly depreciating asset).  GM's main problems are


1)  A terrible, bloated cost structure
2)  A terrible, bloated bureaucracy
3)  A bunch of meh car lines


Which of these is the government going to solve?  That terrible, bloated cost structure supports a bloated union whose jobs are the entire rationale for the government intervention.  Leaning on the parts suppliers just risks UAW jobs further down the supply chain.  Maybe we can take it out of the budget for copy paper and pencils.


Forgive me if I am skeptical that the government is going to show GM how to streamline its bureaucracy.  Nor do governments historically have a good record as cutting-edge auto designers.


All the government can give GM is money.  Our money.  Perhaps we should change the name to American Leyland.





What's Good for GM isn't What's Good For America

[Source: Good Times Society - by The American Illuminati]


What's Good for GM isn't What's Good For America

[Source: News Herald]


What's Good for GM isn't What's Good For America

[Source: Mexico News]

posted by tgazw @ 11:33 PM,

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