What's Good for GM Is Good for the Government
Bankrupt General Motors Corporation has begun its conversion into an arm of the government in advance of the subsidies it must receive in order to "survive" (for the present managers to keep their jobs). In yesterday's Wall Street Journal (subscription required), Holman Jenkins wrote an article in which he explains that the company lavishes hundreds of millions on development of the Volt, its electric car, so that it will have a basis for demanding subsidies both direct and to intrepid consumers who are willing to try driving a government car.
You can bet those folks never test-drove a(n East German) Trabant or Wartburg.
Comments (13)
Ah, those memories coming back :) The Skodas which at the hot summertimes we drove with the heating turned up to the max or else the cooling water of the engine boiled away and the car stopped. And poured concrete into the front bumpers to pull the weight center of the car forward a bit, in order to make the steering at least somewhat stable (as it had the engine in the back).
Published: July 3, 2008 9:55 AM
Jenkins' essay is free on-line as is most of the editorial content of The Wall Street Journal.
Published: July 3, 2008 9:56 AM
Ah, those memories coming back :) The Skodas which at the hot summertimes we drove with the heating turned up to the max or else the cooling water of the engine boiled away and the car stopped. And poured concrete into the front bumpers to pull the weight center of the car forward a bit, in order to make the steering at least somewhat stable (as it had the engine in the back).
Published: July 3, 2008 9:58 AM
not to mention the lada, which was almost always with the car with the bonnet up at the lights.
Published: July 3, 2008 10:16 AM
The most dangerous things in government is a president in search of legacy. And when the presidency is a complete disaster the legacy part is all more important. Bush will bail out GM and everyone else EXCEPT the poor consumers of cars and tax payers who will get screwed. Remember the cars of the 70s We are headed that way.
Published: July 3, 2008 1:31 PM
The most dangerous things in government is a president in search of legacy. And when the presidency is a complete disaster the legacy part is all more important. Bush will bail out GM and everyone else EXCEPT the poor consumers of cars and tax payers who will get screwed. Remember the cars of the 70s and fuel prices and lines at pumps and 20% inflation. We are headed that way.
Published: July 3, 2008 1:32 PM
The most dangerous things in government is a president in search of legacy. And when the presidency is a complete disaster the legacy part is all more important. Bush will bail out GM and everyone else EXCEPT the poor consumers of cars and tax payers who will get screwed. Remember the cars of the 70s and fuel prices and lines at pumps and 20% inflation. We are headed that way.
Published: July 3, 2008 1:33 PM
GM will not be Bush's problem. That bailout will come from Obama and the Democrats.
Published: July 3, 2008 9:28 PM
Actually, "You can bet those folks never test-drove a(n East German) Trabant or Wartburg" would be a perfectly good criticism of a Skoda or a Lada, but as it happens the Trabant and Wartburg were perfectly sound as cars, and the test drive itself would never have shown up their real problems. Those were pollution, poor fuel economy, and poor cost effectiveness in the methods of construction. But they worked perfectly well by 1950s and '60s standards and needed little maintenance, something that would have been a huge problem for a western car being used in eastern bloc conditions. The East German engineers had made perfectly rational choices within the distorted conditions that didn't care about fuel economy (as they had artificially cheap fuel), pollution and manufacturing labour cost (as they had directed labour), but did care about lack of after "sale" technical support. The approach was a sound response to a stupid situation, not stupid in itself as well.
Published: July 3, 2008 9:31 PM
Subsidizing failure with taxpayer money
The government can't bailout anybody. The government doesn't have any money. The government can only give GM what it has taken away from someone else. Government subsidized technology is always sub-optimal. Look at the ethanol subsidy fiasco. I never thought I would here my self saying this but I agree with Ralph Nader on this!
This is crony capitalism at its worst.
Published: July 3, 2008 11:27 PM
interestingly, the ground has already been prepared by "who killed the electric car?", a documentary where the usual bad guys (bush, cheney, big oil) line up against the good guys - tom hanks, ralph nader etc.
walt d - in the film, ralph nader and others point the finger at gm for killing the electric car in favour of the hummer.
one wonders how the grid is going to accommodate the extra demand without substantial new capital outlay. i suppose that's the prelude to nationalization.
Published: July 3, 2008 11:56 PM
Perhaps you didn't do enough research on this subject. Take a look at "My years with General Motors" of Alfred Sloan. GM has made risky bets in the past, to go after some major techological advance. The automatic gear box and the suspension are two of the ones that made them leaders. The air cooled engine is one that went disastrous and almost took them to bankrupt. The gasoline with tetraethyl lead was a huge discovery that eliminated the rattling of the motors and they shared it with the rest of the industry. They are used to take risks. That's probably the reason why the stockholders still support the current CEO. He has made a bet for a new electric car that could become an affordable car for millions of new drivers in the world and would give GM a great edge over competitors. The Hummer was a tiny ridiculous project. It didn't involve any research, just making a military jeep without the armor.
They don't need the government to save them, they just need to strike luck in the development of the cheap electric car. Besides, in the worst scenario they can still get much more than 10 billion dollars by selling one of the business units, like Buick for example, and keep working with the rest of the company.
If I had the money I would run to buy GM stock. It is still a safer bet than playing lotto.
Published: July 7, 2008 10:47 AM
Speaking of researching the subject, take a look at GM's financial statements. Anyone who invests in the stock of this company is basically gambling, no question. You may as well go to the casino. GM's current debts exceed their current assets, and their cash flows have essentially been coming from revolving long term debt for more long term debt. From an operational perspective, they are absolutely doomed and have been for quite some time. Their business model is unsustainable. Not to mention the multitude of SPEs and VIEs (see "Enron") that they have set up.
Published: July 7, 2008 5:52 PM