US Ownership of GM is a Huge Mistake
The US government should not be running GM. While the government can be capable of managing large programs effectively, running an auto company is not among them.
This is a good intention gone bad. While keeping General Motors afloat is a worthy goal, the plan won’t get us there.
You’ve got to ask yourself what’s really changed as a result of the bankruptcy. Same leaders at GM, but with one huge change: government guys now sit in the executive suite. This doesn’t give me confidence. While GM has made some good decisions and developed some successful products in recent years, overall they were in a death spiral. And this descent occurred while people who actually knew something about cars ran the company. Put bureaucrats in charge who have no experience running an auto company, and who may have a social agenda of wanting to get more fuel efficient cars on the roads, you get a recipe for a company that will not be able to respond quickly to the needs of the marketplace. GM has never been nimble, and governments (by design) are less-than-nimble.Strike one. And you can’t build cars based on an environmental philosophy with the hope that people will buy what you are selling. Sadly, that doesn’t work. (Once gas prices started dropping last year, consumers had a renewed interest in bigger cars. Governments should set standards and companies should decide how to best sell what they’ve got to sell given those standards. You can’t very well mix the two.Strike two.
As Yogi Berra, said, “It ain’t over ’til it’s over.” Let’s hope that wiser heads prevail before strike three is called.
Tell me I’m wrong about all this, because I would love to be wrong on this one.
June 9th, 2009 at 11:16 am
Joseph Logan wasn’t able to log-in to my blog, so here is his comment:
Couldn’t seem to find a way to log in to the blog, but I thought you might find this tidbit from Kottke useful:
So $83,000,000,000 is what New GM would have to be worth in order for us to break even on our investment.
But $56,000,000,000 is what GM was worth at its all time peak in 2000.
And it’s only worth about $7,300,000,000 now.
jl
June 10th, 2009 at 4:22 pm
Not sure what the problem is with my blog, but here is a thoughtful comment from my friend, Bill Palmer.
The government will not be running GM in anything like the sense you suggest. Unless the folks on the Fed’s Auto Task Force are lying or deluded, (A possibility I suppose I must concede) the government will for the most part be a silent partner. Decisions about which vehicles to produce and how will be made by day to day management, not the US government. And the cycle time on development of new vehicles–even if they are cobbled together from existing models, a not unheard of practice in the car business–is so long–at a bare minimum two years, that the government people will be long gone because: a) GM will have had at least some success, or b) GM will have been liquidated in continued failure. GM is doing now what Ford wisely did several years ago: bring in a new CEO from outside the industry to change the culture and the processes. Mullally came from Boeing and knew nada about the car business but relative to the other US manufacturers, Ford is doing quite well. Whitacre from AT&T can do the same thing with GM.
The bankruptcy allows GM to shed debt and dealers from which it can never recover, and though it certainly is not public policy I’d like to see in an ideal world. It’s far better than a Chapter 7 liquidation of the company. But if GM could not shed that debt and other obligations–sadly many of them to their workers and retirees–it could produce the best, most desirable cars in the world tomorrow and it would make no difference.
Yogi also said, “When you get to a fork in the road, take it.” This says something about the choice the government was facing. All bad choices, indeed, but this is the least bad of them all.
Anyway, it’s fun to talk politics and business, and I hope you’re well and happy.
**
I wrote back to Bill that I hoped he was right, but that I was quite doubtful. Let’s hope Bill is correct on this.