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$20 BillionLater, and GM is Still Bankrupt

by Jim Moore

After receiving $20 Billion in taxpayer money, General Motors filed for bankruptcy protection yesterday and the new plan is for the Government to add another $30 Billion of taxpayer money into the deal. Sadly, millions of families are hurting because of this failure.  I feel the worst for those who work for the suppliers of GM (as well as Chrysler) who will inevitably fall into bankruptcy as well.  Why the government feels it is such a great position to succeed when the management of the largest US automaker failed is anyone's guess.  It is likely rooted in the political desire to prevent the inevitable.  It's as if the Obama Administration believes it can prevent gravity from pulling down a financial albatross incapable of flying any longer. 

Clearly, the $20 Billion put in to keep GM solvent was money down the drain.  The Obama Adminstration is now  going Vegas style and doubling down on their "investment" while promoting its own policy agenda; smashing the property rights of independent auto dealers; and stong-arming bondholders like the elderly couple on last night's CBS news that thought they would avoid "risky stocks" and "safely" lend their money to GM.  In the end, President Obama is taking ownership of a failed enterprise. 

Perhaps the most disturbing aspect of this news is that the US Government will own 60% of GM and the Canadian Government will own another 12%. How this ownership interest will affect future public policy decisions remains to be seen, but I've always felt that the only thing scarier than big government  is big business working in concert with big government. 

Comments (1)

GM stands for Government Motors
written by Gordon Hanson , June 02, 2009

Yes concentrating more power into fewer hands with big government working in concert with big business is frightening for two reasons: 1) Concentrated power leads to abuse, and 2) The wisdom of the decisions is questionable as everything gets so bureaucratic.

We have already seen evidence of poor decision-making from the government looking over the shoulder of GM. GM made a hasty decision to shut down the Pontiac division under deadline pressures from the government. But look at the facts. Pontiac was the third highest volume GM division, after Chevrolet and GMC. Pontiac’s volume was significantly higher (about double) over Saturn, Cadillac and Buick. Was any market research done to see where the Pontiac market will go? There doesn’t seem to be any evidence of it. There is no guarantee that GM will retain the majority business of its third highest volume division.

But here’s another disturbing thought. If a buyer came forward for Pontiac, would the government-run GM allow it to be sold? A Michigan car dealer has indicated he would like to organize an investor group to purchase Pontiac. The response: It’s not for sale. They’d rather just shut it down.

If an investor group would like to purchase Pontiac and make it a stand-alone company, I think they should have the chance. Perhaps injecting some good old fashion entrepreneurial spirit back into the auto business would do more to energize it than all of the government subsidies. Why won’t GM/government allow this to happen. Perhaps they’re scared of the competition.



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