17 November 2008
On Why Throwing More Money at GM and the Other Big 3 US Automakers is a Bad Idea
The big three U.S. automakers are circling their wagoneers and SUVs and hovering over the bailout trough. And Democrats want to reward their labor votes by letting the big three feed off the TARP.
Even President-elect Obama, speaking on CBS News 60 Minutes last night, said we can't let the big three fail. At least he offered conditions.
"We need to provide assistance to the auto industry. But I think that it can't be a blank check," Obama told Steve Kroft. He wants an answer to the question "what does a sustainable U.S. auto industry look like? -- so that we are creating a bridge loan to somewhere, as opposed to a bridge loan to nowhere."
I don't think a sustainable U.S. auto industry includes GM. They've been failing for years, and their hubris, along with some bad negotiations with the UAW, have gotten them into this mess.
Bailing them out now will just postpone the inevitable. These dinosaurs are going to die -- in fact, they are already dead.
Other industries have gone through the restructuring offered by bankruptcy and emerged, why can't the auto industry? It's a viable alternative.
Why should we trust losers like GM Chairman and CEO Rick Wagoner, who told an industry trade publication that he won't offer to resign should he successfully scarf up some of the TRAP, er, TARP funds.
He won't resign? What part of failure doesn't he understand? They should make General Motors (GM) and Wagoner an example and let them go bankrupt.
GM has had a failure of imagination (except for self-interest) for more than half a century, ever since they destroyed the light rail and trolley car industry in the 40s and 50s.
Alfred P. Sloan, then GM president seized a great opportunity, "We've got 90 percent of the market out there that we can somehow turn into automobile users. If we can eliminate the rail alternatives, we will create a new market for our cars. And if we don't, then General Motors' sales are just going to remain level."
The documentary film film "Taken for a Ride" (1996) tells the story of that sordid affair in GM's history.
GM has never cared about us -- ever -- why should we care about them?
Oh, sure, I hear the whining about all the downstream jobs that may be affected by the failure of the big three -- one of which, Chrysler, is a privately held company. But, I've got news for you: the automakers don't give a shite about those downstream suppliers and parts manufacturers. This is about keeping business as usual going for as long as they can.
Mark my words, Wagoner and his cronies will take the money and run, just like they did when the Clinton administration created the taxpayer-funded $7 billion "Partnership for a New Generation of Vehicles" to help jumpstart fuel efficient technologies capable of 80 mpg.
That effort was scrapped for the more profitable lines of SUVs GM and others cranked out when oil was cheap. (The government's own PNGV website devoted to that project is no longer live.)
And then there was the EV1, the subject of the documentary film "Who Killed the Electric Car?" According to the film and its sources, GM made a tremendous effort to erode demand for their own product and then killed it. Literally. GM allegedly took back every EV1 and disposed of them, a few ended up in museums, but almost all were found to have been crushed.
Wagoner, told Motor Trend magazine in 2006 that the worst decision of his tenure at GM was "axing the EV1 electric-car program and not putting the right resources into hybrids. It didn't affect profitability, but it did affect image."
Now GM has the Chevy Volt, FlexFuel SUVs, and are working on other hybrid technologies. They are making progress, but kicking and screaming the entire way.
Volt has so many issues they will be lucky to get any on the road by the end of this decade, and its projected price will be out of the range of most Americans.
And with <$60 per barrel oil, I've seen more than one GM dealer pimping their backlog of SUVs again, with good terms.
They haven't learned and never will. They can't. Because the problems of GM have to do with 30 years of management mistakes that now has them having to grow for the sake of growing. That is not a winning strategy.
As Wagoner himself told Business Week in 2003, "We have a huge fixed-cost base. It's 30 years of downsizing and 30 years of increased health-care costs. It puts a premium on us running this business to generate cash. Our goal is to grow. We don't care who we take it from."
We don't care who we take it from. Now, that's a winning outlook and proof positive that we'll be throwing bad money after more bad money by investing in the future of GM.
It's time to let them go bankrupt and let the smart survive. And let's invest the money in a better car company made for the new green economy.