Last week the grim reaper was at GM’s door.It had bled nearly 2.5 billion dollars in the last quarter and had just enough cash on hand to get by till the end of 2008.
That was the signal for GM’s arrogant and incompetent management to go with hats in hand to Washington to seek a bailout.The Democrats, led by Nancy Pelosi and Harry Reid, were sympathetic but want to wait for a signal from the new President elect before they set the wheels in motion for a bailout of the auto industry.
There is a very strong reason not to proceed with this.
THE WORLD IS NOW AWASH IN CARS.Atleast sixteen million more cars are being produced than there are customers for them each year.And more cars are being added each day.In effect, cars are becoming commodities and profit margins are under assault from a worldwide glut of cars.
So no matter what cost cutting is carried out at the margins, the industry will be starved for profits and will be living from hand to mouth for a long time.In effect,the plight of the steel industry about two decades ago has moved up the food chain.
This validates the marxist analysis of capitalist contradiction.That the ruthless efficiency practised by capitalist economies carries within it the seeds of its own destruction.
If Shakespeare were alive today, he would write “Our fault, Dear Brutus, lies not in our stars but our ruthless eficiencies’
So, the more we worship profits the more we plant the seeds of our destruction.
Two million jobs ride on this bailout. Let us proceed very carefully. Is there another option? Should the money be used to create energy efficient cars? A lot of families are surviving on the unproductive behemoth that is our auto industry. I don’t know the answer but we have to think about the people.
I agree that we must think of the people displaced by the auto industry’s plight at all times.
But,the idea that a bailout will somehow make the auto industry profitable is a mirage.
Similarly, our domestic auto industry is not that bad at energy efficiency.Many of GM’s cars give over 25 miles per gallon on the average and some models already yield 30 miles per gallon.
The problem as I say in my OP is that we have an overcapacity in the industry.Even a company with the cachet and quality of BMW is on the ropes.
To me this suggests that we must find a better avenue to deploy our resources and not continue to sink money into an industry that will consume resources without any lasting benefits.
To me there are two or three places where the money would be better spent: Health care or more precisely,Universal Health Care.Education,or more precisely, Universal Higher Education.Affordable Housing.Infrastructure.
One can write reams about how GM got to this stage.
But one thing stands out in my mind frommy direct experience with GM’s upper echelon over the years.
Robert Stempel,GM’s CEO and a well respected engineer, was deposed by a trio of accountants and finance men because he was bent on reforming GM and place engineers in charge of all product development.No longer would accountants have the power to veto any design changes because the new design cost $5.00 extra.
As a result of that coup in the mid-90s,Rick Wagoner the accountant came to power and GM’s doom was foreordained.
GM has bred a culture that threatens people who have creative ideas and rewards conformity.This is why a klutz like Bob Lutz, a discard from Chrysler was given the fancy title of Vice Chairmanand he proceeded to roll out expensive sports cars modeled after the Viper as though the market for such cars is not already saturated.Lutz is the one who proclaimed that Global Warming is a crock of shit and Hybrid vehicles are not the way to go even after Toyota could not make the Prius fast enough to meet the demand.After the writing was on the wall,GM has revealed the program to build a hybrid ten years too late and two billion dollars short of cash.
Over the past thirty years, GM has had the misfortune of handing over the reins of a technology company to accounting and finance people.By nature, these men and women are uncomfortable about technology and treat it as an expense that they should avoid at all costs instead of embracing it with fervor like the Honds and Toyotas do.That attitude trickles down to the people below and they are loath to venture into any improvements let alone any revolutionary design changes.
It is that poison that killed GM.Throwing money at them while these culprits are still perched on top will postpone D-Day but not eliminate it.
Today,GM’s stock dipped below the $4 mark, a level it had not seen since 1946.Not to be outdone, Ford fell below the $2 a share level.
Deutsche bank has declared GM to be a worthless stock and advised its clientele not to throw any more money at it.
All this only reinforces our belief that GM and Ford may be too far gone to mount any rescue operation.
The best thing that can happen to these two would be for Toyota and Honda to acquire them and keep them operating.With that approach, at least some percentage of the jobs can be saved along with the jobs at the numerous suppliers.
For the sake of the millions of people dependent on these two giants,here is my prayer that someone will come and save these two companies in time.
We will never get the Chevy Volt if GM does not survive.
I don’t want my only option at the new car dealership is to buy a Toyota.