The next chapter
Whither General Motors? Robert Farago offers a scenario, and it’s not pretty:
As there’s nothing GM can do to generate the profits it needs to cover its overheads, as any real turnaround would take over $100b and at least five years, sooner or later, GM is headed for more public humiliation. How much more of that can GM take?
It’s one thing to get steamed at a politician for pissing away $700b of your hard-earned money for his or her best buds on Wall Street. All you can do is not take out a loan from TARP-blessed banks (that won’t give you a loan anyway) and/or vote the offending politicians out. You know: later. But if a carmaker is blowing your taxes, retaliation is easy. You don’t buy their products. You want my business? Sorry, but I gave at the office.
Mark my words: if GM uses taxpayer money to stave off bankruptcy, and then comes back for more, executive haircuts and public equity stakes won’t do squat to mollify an enraged public. There will be a consumer backlash that will make bankruptcy seem like a J.D. Power Award.
The public’s already a bit peevish over Washington’s acute case of checkbook abuse; one could argue, I suppose, that the amount proposed for diversion to Detroit is insignificant in the grand scheme of things, but if there’s one thing the government doesn’t execute well, it’s grand schemes.
I’m starting to think we should just turn the whole lot of them over to the Slovakians. They may not have much experience actually owning car companies, but with Kia, Volkswagen and PSA Peugeot Citroën now operating plants there, I’m pretty sure they know how to build the darn cars.
Charles Pergiel »
15 December 2008 @ 8:03 pm
The public is just now getting peevish? I don’t get it. The US gummit has been spending/squandering billions on all kinds of stuff (mostly Iraq related) for years, and NOW they are getting peevish about some penny ante bailouts? (okay maybe they aren’t penny ante, but when has the public ever been able to tell the difference between a hundred dollars and a trillion?) Where’s the spin doctors when you need them? I smell a rat.
CGHill »
15 December 2008 @ 8:31 pm
A trillion here, a trillion there, as Ev Dirksen used to say, and pretty soon you’re talking about real money.