DISQUS

Robert · 1 year ago

The terrifying thing is that the government is probably even worse at running an auto company than GM and Ford. It's easy for politicians and voters to say or think platitudes like "GM needs to control its labor costs" or "GM needs more competitive fuel efficient offerings." It's probably even true. But there's a huge leap from there to new union contracts or new designs. Do people really think it never occurred to Rick Wagoner that maybe his labor costs were a bit high and he might think about trimming them?

The devil is in the details. History teaches us in no uncertain terms that state-owned enterprises are invariably failures. But people seem to have gotten it in their heads that adding a dash of state direction to a bad business will magically produce a good business. It's the opposite. Jonathan Cohn's piece suffers from this delusion. He thinks that GM has made a lot of progress and federal money could push them the last few steps to sustainability. In reality, government involvement is going to involve ratcheting back GM's progress in favor of political goals. And EVERYONE SHOULD REALIZE IT. It's extremely obvious. It would be extremely obvious even if we didn't have the $700-billion farce that is the TARP showing us how government programs get distorted and twisted by lobbying pressures.

Cool Cal · 1 year ago

What I want to know is .... Why isn't there a Michael Milken around these days to do what really needs to be done?

ish · 1 year ago

As a resident of Michigan, I'm in favor of the state continuing to exist, which would seem to require some sort of intervention, whatever form that takes. But I agree Robert that much like the financials bailout, government forces seem to be focusing on the wrong solutions entirely.

I was highly amused to read the recent NYT editorial talking about how a government takeover would allow the Big 3 to start manufacturing smaller cars and how by focusing on vehicles like those in Europe they could improve MPG standard to 50 by 2015. As though the reason they weren't making these cars was because no one had forced them to do it. GM makes all of these cars and they sell them in Europe. The reason they don't sell them in the US is because no one wants to buy them.

There may be public demand for smaller more efficient cars in the US following the Oil price rises and financial panic. But had GM focused on making smaller cars like those in Europe in 2004 they would have been bankrupt 3 years ago.

I don't know what the solution is, but I am very concerned that the negative effects on the US economy (not to mention the upper midwest which would be devastated) will likely be high enough that some action should be taken. But the US Congress running GM seems like the worst option I can imagine.

dieter · 1 year ago

GM Europe isn't really the same company. It is mostly Opel, which is a german car manufacturer that GM bought in 1928 but has remained fairly independent since. Opel is highly profitable and unionized btw. GM uses Opel to dump billions of its debt each year and now demands pay cuts for german auto workers.
The situation is basically like DaimlerChrysler turned inside out, with a german subsidiary propping up the unviable american owner and both the management and the unions at Opel don't really like this abusive state of affairs.

Americans do like Japanese imports, so they probably would like to buy Opels too. The reason this isn't done doesn't seem like a sound business decision, but rather a symptom of the "not invented here" syndrome. A wise business decision would be to let the germans take over and run the show.

Since Opel is now in danger of being brought down by the whole GM fiasco, Germany is now seriously considering to step in. Proposals range from governement grants to nationalizing the whole thing. I don't see the latter happening though, unless of course GM went bankrupt finally, so the good parts would be up for grabs.

Gippergal · 1 year ago

The proposed bail-out of the auto industry should be considered criminal activity. Not only would it waste taxpayer money, it would do so for the purpose of the liberal illuminati mollifying the labor unions of Detroit, which will lose their cash cow if the Big 3 go under.

KJ · 1 year ago

I find it pretty funny that the market fundamentalists seem to have missed the very obvious fact that the foreign car makers are doing better and this is despite their governments being much more invested and involved in their business. While spouting widget theories over here Germany owns over 20% of Volkswagon and Korea and Japan heavily subsidize R & D for their industries. And of course there are the health care and pension subsidies. But no, its the unions fault! hehe. Silly fundamentalists.

Ben · 1 year ago

I'll admit to not being an auto industry expert, but it seems to me that your government ownership logic is somewhat oversimplified. Just because government funds own a piece of a business does not mean that (a) the business is nationalized or (b) that the government acts differently than any other profit-seeking group. You use the example of R&D subsidies -- that's a good example of how a government stake would induce the government to improve its investment's profitability, but, not only do I doubt that R&D explains the large cost gap between the Detroit 3 and other manufacturers, I think that what a government stake in a business means is that the government is actively controlling the costs of production -- forcing worse terms on labor and suppliers.

As someone who's a bit pro-market, I would much prefer unions demanding terms rather than the government exercising its supreme authority to force workers and suppliers to charge less, regardless of how "profitable" (one wonders how "profitable" to society if society as a whole is forced to charge less just so a few select businesses can benefit) that result is.

Jason O. · 1 year ago

Watch out, KJ, you just identified some seriously inconvenient truths for the anti US auto industry advocates:

The Bank of Japan has vigorously pursued a weak yen policy for 3 decades to facilitate their exports to the US.

When you get an MBA, there's one point when everyone gets down and bows to the Kaizen philosophy...but what you don't learn about is that the Ministry of Finance dictates what large tier 1 suppliers (like Denso) must charge OEMs for their components. Then the MOF dictates what the tier 2 suppliers charge the tier 1 suppliers...and so on. That's not just price fixing...it's the central government fixing prices.

And the larger point that is always missed by the anti US industry crowd is that the Japanese/German fully loaded per unit labor cost advantage is because the Japanese and German governments are single payer health care systems,

A Japanese/German advantage, that is, until the new US OEM/UAW contract kicks in and takes health care and other post employment benefits off the OEMs' balance sheets and into a VEBA trust operated by the UAW. A creative free market solution to the issue of rising health care costs that the free market fundamentalists now want to destroy...

...and send at least a million people into the waiting arms of the unemployment line/welfare state.

I'm sure that libertarians and conservatives are proud of their principled stand on this issue. I'm sure that some of Pyrrhus's advisors praised him on his principles as well.

quadrupole · 1 year ago

Germany does not have single payer health care, they have employer provided health care (albeit with strong regulation and a universal safety net to pick up the poor).

Micha Ghertner · 1 year ago

If Japan/Germany/Korea want to take from their own citizens in order to subsidize cars purchased by American consumers, I fail to see the problem from the U.S. consumers' perspective. Free stuff is cool. As long other countries are willing to give us cheaper cars than we can make ourselves, I say we take the freebies and call it a day.

Mario Villarreal · 1 year ago

Government will certainly have the incentives to intervene, in order to –supposedly- save jobs, regions, or whatever other questionable reason they may have. That’s a fact. We may have a better chance trying to influence how they intervene. So far, some have argued that the capital injection to the auto industry will be a loan, not a gift. That is sort of fine so far. My proposal is that the loan goes to Toyota and Honda, so they can buy GM and Ford. I know. I am dreaming.

charlie · 1 year ago

americans will buy opels?

What?

See: Cadillac Catera, Saturn Aura. Saturn Vue, Saturn Astra.

The Aura is an opel, and its American sized cousin Malibu outsells it by 10x. The Vue is dead in the Water. I have yet to see an Astra on the street, despite it being on of the best selling cars in Europe.

Need I continue? The new Saab 9-3 is basically an opel and is a sales dud, except for the convertible made for the American market. The Caddy BLS is mocked by American car journalists, but it an Opel, and Caddy won't sell it here for fear of public ridicule.

The rest of GM's Europe lineup is mostly re-badged Korean cars.

dieter · 1 year ago

Only the Astra is a true Opel and these come as sedans and station wagons with a variety of engines including diesels and smaller engines. The Saturn Astra seems to be marketed as a hip, sporty european car. Over here it is considered to be a boring, normal, sensible car, like a Corolla. The sporty versions are driven by car modding proles.

Anyway, Corollas, Civics and Accords sell like crazy in the US. These are the cars the Astra, the Corsa and the Vectra/ upcoming Insignia are competing with in many markets, so they should be able to be competitive in the US market as well.

P.S.:
The Cadillac Catera seems to be an Omega. The Omega was not a success and has been discontinued. Opel could never establish itself in the luxury segment.

truck parts · 10 months ago

I think they got some high ranking people that don't give good decision. With that investment we all suffer the effect.

toyota camry parts · 7 months ago

GM will not survive just with bailouts they need to do more to survive. I think Ford have ways to get some money. All I know is GM is still in big trouble.