12 thoughts on “The GM Bailout”

  1. Yep. And one more point: The American government didn’t learn from the experience, some years earlier, of another company across the pond – British Leyland. Another company that had grown by acquisitions and for that reason had immense duplication of plant and staff. Another company a large proportion of whose products were utter and complete garbage – either in design or in execution of their design, or both. Another company with grossly overpaid staff, with over-powerful Luddite unions and decades-out-of-date working practices. And that company went under, too. After being bailed out for exactly the same reasons as was GM.

    And the bits of the company that actually made decent products? Well, they are now in the hands of people who know how to make and sell cars. Landrover, other Rover marques and Jaguar are examples. Nobody wanted Austin and Morris cars, or the factories that made them. Why? Because they were garbage.

  2. Excellent post, Fletcher Christian. I have only one question: Who are you, and what have you done with our Fletcher Christian?

  3. Most people I know think that the government made money on the GM bailout. This includes people who oppose Obama at every turn. What’s amazing is that this myth continues even after the administration itself has admitted that the net cost to the U.S. is $14 billion.

  4. Oh, and Fletcher…apparently some people still want Morris cars, because the Morris Minor is still manufactured — in Sri Lanka.

    My parents had one when I was an infant, and it was one of their favorite cars. It could not be purchased new in the United States, because it would never meet safety or emission standards.

  5. I think it’s telling that Obama has been touting the “rebirth” of the American auto industry, but is only talking about GM and Chrysler – while Ford is having record profits and sales, with cars that are getting really good reviews and stacking up well against the foreign and domestic competition, despite taking zero bailout money. Ford should be the poster child for the American auto industry, not GM and Chrysler. But that wouldn’t tell the redistributionist narrative, would it?

    BTW, I just finished reading David Mamet’s new book, The Secret Knowledge, about his conservative conversion. Very well written as you would expect (whether you like his stuff or not, almost all would agree that Mamet is a damned good writer), and he quotes lots of good conservative / libertarian heros, Hayek and Sowell in particular.

  6. The original article cited has a huge whopper in the first paragraph of the “fairy tale” section, where it claims that GM and Chrysler had not renegotiated their labor contracts. GM, Chrysler and Ford all had the exact same labor contract.

    This labor contract, BTW, is why the UAW got stock in the failed firms – it was in lieu of cash owed to them to handle retirees’ health care costs.

    Later on, the article talks about restructuring vs. liquidation bankruptcies. What Zywicki fails to mention is “debtor in possession financing.” In other words, in order to restructure the failed company, somebody needs to come up with working capital. Nobody was doing that in 2008.

  7. Actually, the original article mentions nothing about contract negotiations in the first paragraph or any paragraph.

    The second article does mention the UAW contracts and is wrong on timeline. The article suggests Ford had a different contract by Dec 2008, but actually, the Ford/UAW renegotiation happened in Oct 2009. However, there is very little doubt that Ford had made moves prior to Dec 2008 that prevented it from having the financial problems of GM and Chrysler. If Gerrib thinks that’s a whopper; perhaps Gerrib can explain why Ford never went bankrupt.

    In other words, in order to restructure the failed company, somebody needs to come up with working capital. Nobody was doing that in 2008.

    Gerrib needs to go back to that paragraph he misread. Ford got rid of unprofitable subsidiaries. This gave Ford the working capital to restructure even prior to bankruptcy. Gerrib’s correct, GM and Chrysler were not doing that in 2008. What Gerrib doesn’t explain is why then it was the responsibility of the taxpayers to provide GM and Chrysler the working capital?

    In short, Gerrib’s argument is that although GM and Chrysler ran themselves into the ground; they (and their labor) were the best choice for correcting mistakes. All they needed was more money from Uncle Sugar. They got it, and taxpayers lost $14 billion (and both companies still went bankrupt and thousands of jobs were still lost).

  8. Leland – taxpayers only lose $14 billion if we sell GM stock at a loss. The only reason we’re considering doing that is so people like you will stop screaming “socialism.”

    Were it my call, I’d keep GM stock and let you scream. But then I’m not running for political office.

  9. MfK – OK, didn’t know about that one. I believe there is a 1954-design car called the Hindustan Ambassador being made in India, too. But does this really affect the argument?

  10. taxpayers only lose $14 billion if we sell GM stock at a loss.

    Taxpayers should never have had GM stock.

    Were it my call, I’d keep GM stock

    You can buy GM stock right now. Use your own money.

  11. I liked how he put socialism in scare quotes. Those goalposts must be exhausted by now.

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