I don’t often agree with David Brooks, but he has a good diagnosis today of why Government Motors is doomed to fail:
First, the Obama plan will reduce the influence of commercial outsiders. The best place for fresh thinking could come from outside private investors. But the Obama plan rides roughshod over the current private investors and so discourages future investors. G.M. is now a pariah on Wall Street. Say farewell to a potentially powerful source of external commercial pressure.
Second, the Obama plan entrenches the ancien régime. The old C.E.O. is gone, but he’s been replaced by a veteran insider and similar executive coterie. Meanwhile, the U.A.W. has been given a bigger leadership role. This is the union that fought for job banks, where employees get paid for doing nothing. This is the organization that championed retirement with full benefits at around age 50. This is not an organization that represents fundamental cultural change.
Third, the Obama approach reduces the fear that impels change. The U.S. government will own most of G.M. It would be politically suicidal for the Democrats, or whoever is in power, to pull the plug on the company — now or ever. Therefore, the current managers can rest assured that they never need to fear liquidation again. There will always be federal subsidies for their own mediocrity.
As a taxpayer, I want to divest immediately.
[Update a few minutes later]
Related thoughts from Jim Manzi:
The US government is now the majority owner of the nation’s largest car company. The government has chosen GM’s CEO, Fritz Henderson, and will directly select numerous board members. It will be all but impossible for Congress and various regulatory agencies to avoid meddling with detailed operating decisions.
There is already enormous pressure on GM to abandon the vehicles that make it money — gas-guzzling SUVs and pick-ups — in order to focus on fuel-efficient cars that lose money. I doubt we’ll see many production facilities sent offshore, even if this would make economic sense for GM’s shareholders.
This is a terrible harbinger for the US economy, especially when combined with the Obama administration’s apparently heavy-handed negotiating tactics in favor of Chrysler’s unionized employees at the expense of bondholders.
We appear to be headed for European-style industrial policy circa 1975, with a complicated set of favors being traded between elected officials, government bureaucrats and corporate bureaucrats in semi-private companies.
Great.
[Update a couple minutes later]
[Late morning update]
Obama is busy not running GM:
…while Obama is busy “not running GM” he still has time to make calls to the mayor of Detroit to assure him that GM’s headquarters won’t be moving to Warren, Mich., as it was offered to, but that it will be staying in Detroit.
You know, when the president says he doesn’t want to run GM? I don’t believe him.
[Update a couple minutes later]
Obama says that he has to destroy the village in order to save it:
After a while, the endless, “I have no intention to run GM” pledges begin to sound a bit like the guy insisting he means to eat healthier and cut back on the fatty foods… in a little while.
He actually used the line, “I’m not spending this amount because I want to spend taxpayers dollars; I’m doing this to protect taxpayers”, which I suspect will stir a combination of incredulousness and mockery. Most people who loudly pledge that they don’t want to do something don’t do it.
The wilful suspension of disbelief about this guy from the Dems and the media is astounding.
SUV’s made money because of the financing. GMAC was innovating financing tricks for 10 years. GM was described in 2003 as “A bank that owns a car factory”. How have SUV sales done in the last year?
when the market switched to efficient cars, detroit was flat footed.
The current plans seem to be:
1) Kill the unprofitable cars.
2) Kill the gas-guzzlers.
3) Kill sizable retail outlets.
4) Kill marketing.
5) Ban Opel, GM’s “small efficient” foreign line.
6) Realize that step #1 killed all the cars that they currently make that have sane fuel economies.
7) Realize that step #2 killed all the models that have -ever- been profitable for GM.
8) Wonder WTF?
Can we get a more intelligent troll than jack?
First he claims:
SUV’s made money because of the financing. GMAC was innovating financing tricks for 10 years.
So for 10 years, SUV’s were only successful because of finaincing. We are just suppose to believe jack.
Second claim:
GM was described in 2003 as “A bank that owns a car factory”.
So 6 years, someone supposedly made a comment that jack found interesting. It provides nothing to the other comments being made, but there it is anyway.
Third claim:
How have SUV sales done in the last year?
Now jack wants to use only 1 year of information, that others must find, to back up his previous claims.
There’s simply no logic there. Worse, there are assertions without any sourcing to back them up.
From USNews and World Reports: Chevy Silverado, 2nd most sold passenger vehicle in the US. If combined with the GMC Sierra (same vehicle different badge), it would have outsold the Ford F-150 (number 1 best seller for 27 consecutive years) by 160,000 units.
Forbes puts F-150, Chevy Silverado 1 and 2 in 2007
Edmunds, same order in 2006 and 2005.
If GM’s number one selling vehicle in the US (and I realize there is a global market, but China and India are not demanding 39 mpg) is a pick-up truck, then dropping that line cuts heavily into total sells of vehicles.
A better argument against Jim Manzi is whether or not the plants that produce the GM 1500, 2500, 3500 platforms are really the ones being shutdown. I haven’t looked, but I doubt they are. Unfortunately, such discussions along those lines are lost in the noise.
So, Fritz Henderson is the new Orren Boyle. This is all really creepy.
Al— you left out
#8 Another subsidy!!!
Why is the wilfull suspension of disbelief so surprising? After all, these “journalists” have mouths to feed, and their employers are relying upon the President to give THEM a bailout, too.
We no longer have public servants. We have public masters, and the courtiers that rely upon them for favors.
Fortunately, no one can compel me to purchase a GM or Chysler… yet.
One positive thought: The governing structures the President is building appear to be based on the narrow foundations of his own power. Once he leaves office, they will persist, but can be eroded by his successors.
I’m very happy to hear that their maybe 16 potential buyers of the Saturn division. It was a great concept when it came out, and I owned 3 in my life. The first was a SL2, fully loaded, that my own records showed getting 35 mpg in the late 90s.
Ford should be running ads, day and night, saying ” We are not government owned”.
I’d like to see “Jack Lee” get a little league team and their equipment to an out of town ball game in 2 Priuses or haul Boy Scouts and their equipment for a camping trip. You see “Jack Lee” a lot of people have these things called families that require more room than your average matchbox car.
“get a little league team and their equipment to an out of town ball game in 2 Priuses ”
Easy. Call up Budget, rent a minvan for the weekend.
Call up Greyhound, throw the gear in the prius, and the kids on the bus.
Flexcar rents a broad spectrum of vehicles by the hour.
Budget rents by the day.
BTW Toyota has an Avalon Hybrid and a Camry Hybrid. if you have a big family those work great
Easy. Call up Budget, rent a minvan for the weekend.
Hey, stupid, I have four kids that need transportation every day, and two of them are tots in car seats so they take up an entire bench.
I paid the premium for the big car, and I pay for the extra gasoline it takes to run it, and if the price of gasoline goes through the roof, because of scarcity, taxes to pay for CO2 sequestration, whatever, I guess I’ll pay those too.
And that’s all you or any other fascist power-mad “Religious Left” scum who get off on telling other people what to do with their lives can go. I mean, not unless you want to end up dangling from a convenient tree someday, when the good folks whom you’re judging and directing finally get fed up with you.
No, #9 is “Blame Bush.” (The smiley is number 8.)
But the history of Dodge tracks this entire fiasco of CAFE standards. From the -last- time around.
Dodge -was- a -truck- company. In the nineties the CAFE standards meant they still needed to improve their -fleet- mileage. So they build some band new cars – the Neon, then Prowler. They aren’t the moneymakers – they’re there so Dodge is “in compliance.” Now it is essentially illegal to be a consumer truck manufacturer – without also being a consumer car manufacturer.
Jack, you can’t get a ‘large family’ into a Camry.
The thing you were looking for is the Toyota Highlander hybrid.
Highlander, $25k, 20/27 mpg.
Hybrid Highlander, $35k, 27/25 mpg.
A -decrease- in city mpg for $10,000. Exactly what urbanites need.