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Who Wins At General Motors?
by James Glaser June 2, 2009 General Motors is gone. I don't know what their new name will be. I don't even know what cars they will continue to build, but I do know the federal government take over of the largest corporation this country has ever had is a real blow to our way of doing business. American companies need individuals and groups of investors, like retirement funds and endowments to buy their bonds so they can finance expansions and new product lines. Getting those people to invest in American business just became a lot harder now that the federal government has said bond holders are no longer first in line when a company declares bankruptcy. American corporation bonds are no longer a safe or attractive way to invest long term or short term. Investors don't have the security they once had. There is a reason General Motors is no longer a solvent company. I don't know when they decided to make cheap cars, but General Motors had a name for that idea. It was called "Planned Obsolescence." General Motors decided that they could build cars that would fall apart in a few years, and that the American public would never catch on, and those car buyers would have to buy a new car... from General Motors. Well, the American public did catch on, and they learned that almost every other car built was better than a GM product. The New York Times reported yesterday that General Motors was $179 billion in debt, and that was after all the billions Obama's White House poured into them. Just like Washington has ruined our country's reputation with the way they treat other countries, General Motors lost their reputation by the way they treated America's auto buying public. At one time, back in the 1950's ,60's, and 70's America was thought of as the good guy by most of the world. At that same time General Motors was sitting at the top of the auto industry world, with record profits, and the most employees of any corporation in the world. Then like all corporations, the bottom line and profits blinded this American company, and America's #1 car maker started building plants and cars overseas. No longer was a Chevy a totally American product. GM was no longer American in design, in quality, or in feel. Every car made started looking like every other car. That sedan in front of you at the stop light could be a Chevy, Ford or even a Honda. Other than a different tail light and an emblem, all cars started looking alike. At one time there were American cars and foreign cars, and they were easy to spot. Then American cars became foreign cars in looks, but still they fell apart in a couple of years. Americans saw the difference in quality, and brand loyalty shifted from the domestic car industry to the much better foreign cars. GM and Detroit never recovered. So, who wins with the federal takeover of General Motors? Not the auto worker. It is reported that about a dozen GM plants will shut down with tens of thousands of lost jobs, and some brands like Pontiac and Saturn will cease to exist. Not the Bond holders who invested in GM, because it was a "blue chip" stock you held for the long term. Those people and their investment funds got pennies on the dollar after Washington dictated the terms of GM's bankruptcy. Everybody loses, especially the American people who are stuck with GM's debt. Sure, we get 70% of the company, but GM's stock was down to less than a dollar a share. The company is now run by Washington. Does that instill any confidence in the future of the company? Remember $400 dollar hammers and $500 dollar ash trays for the Pentagon? Think about the fact that Washington just loves no-bid contracts. You thought GM's reputation was shot before Washington took over, well think again after all the jokes start coming out about government cars and Senate designs. GM should have been allowed to have a dignified death, and the product lines that had value would have been bought up by auto industry insiders who could have made a profit with them. The way it is now, General Motors has an inside track to Washington's printing presses, and no incentive to do well. So, who wins with General Motors taken over by Washington? The company lost, the workers lost, the investors lost, and now you and I will loose, too. Yesterday, there was talk of another $50 billion in bail-out money, and that is just the start. |
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