Government Motors Round-up: That's all she wrote for GM, eh? Is there anybody with greater than two brains cells to rub together who honestly believes the conflagration of the Treasury Department and the UAW are going to be able to run a company that makes a profit? If I ever turn to non-fiction it will be to write a book about how wishful thinking destroyed the world. Near as I can tell, the dreamers have decided that GM can only survive by the government financing UAW salaries while building electric cars that make no money. And if you can dream it you can do it, right?
Big losers:
Us. We were told letting GM be liquidated would be too costly to the economy. The tax drain over the upcoming years will dwarf any liquidation losses.
Ford. I thought they were smart to refuse Xerxes offer of kindness and to stand when others knelt, but now they look like the last business on the street that hasn't paid Tony Soprano for protection. Legislation that benefits GM and hurts Ford is inevitable. Not only that, are they going to get a labor contract comparable to the contract the UAW negotiates with itself at GM? Will the myriad regulations and arbitrations be inflicted on the two equally? There is the potential for Ford to get buggered in a million little ways.
Michigan. Note where the GM plant closings are. Note the nasty infighting going on between Detroit and Warren for the headquarters of what's left of the company. (This battle was rendered moot when the President, who was going to keep politics out of the running of GM, decreed they would stay in Detroit.) The urban, and eventually suburban, areas of this State are going to empty out. Not that this bothers me other than to the extent I will have my taxes raised to cover their loss. I would much rather see a small population Michigan that is run along the lines of Utah or Nevada or one of the other Western States than the current disaster we have. So maybe this is just a short term loss.
Big Winners:
President Xerxes. Of course. GM becomes a positioning tool for his re-election. He can strengthen his base by pointing to his green credentials or to shore up his labor support. If he needs to look tough, he can lay down the law to GM and the rest of the country (who are resolutely against the bailout) will think that he really just wanted to give them a chance before being the stern daddy and clamping down. He is kind, the God-King, but imagine what horrible fate awaits his enemies when he would gladly kill any of his own men for victory. Exceptionally well played.
The UAW. They live another day, and with perhaps even more power. If this decrepit, pointless, corrupt monopoly knows how to do anything it's survive. It is second to none for shamelessly protecting its own interests at the expense of everyone else. I would say their ownership stake is their ultimate triumph, their endgame, but whenever you think they can't get any more surreal, they do. Again, exceptionally well played.
Karl Marx. Just ask the Russians.
It amazes me to think that when I was finishing undergrad business school -- let's call it the mid-eighties -- any of us would all have killed for jobs with one of the Big Three. You couldn't buy an appointment with one of their recruiters and the only ones who scored careers there already had family or other connections on the inside. Now those people are looking for jobs. Meanwhile, I work for what at times seems to be the only company in the State of Michigan that's profitable and hiring. Life is a marathon, not a sprint, eh?
Three more articles of interest to round out the topic:
P.J. O'Rourke thinks the US car industry was killed because driving became a chore and "pointy-headed busybodies" took all the fun out of it. I love P.J., one of my favorite writers in all history, but he's wrong about this. There is still plenty of love for cars out there.
Megan McArdle can't see how the hell a government takeover is going to work, proving she has greater than two brain cells to rub together.
Paul Niedermeyer sharply observes that GM has been a zombie for 17 years, surviving on government favoritism and GMAC finance income rather than actually selling profitable cars. All true.
