Sunday, February 15, 2009

Paying For A Vehicle I Didn't Buy


I bought a new car recently. As it happens, it wasn't a GM model. But it doesn't matter, because it's increasingly likely that we'll all be paying GM anyway.


General Motors Corp., nearing a federally imposed deadline to present a restructuring plan, will offer the government two costly alternatives: commit billions more in bailout money to fund the company’s operations, or provide financial backing as part of a bankruptcy filing, said people familiar with GM’s thinking.

The competing choices, which highlight GM’s rapidly deteriorating operations, present a dilemma for Congress and the Obama administration. If they refuse to provide additional aid to GM on top of the $13.4 billion already committed they risk seeing an industrial icon fall into bankruptcy.


None of this is especially surprising, of course. The problems that GM is facing were decades in the making and there was no way that they could turn it around without finding a way to lower their operating expenses. And that cannot happen as long as GM is on the hook for all the guaranteed benefits and pensions that they agreed to with the UAW years ago. And the UAW ain't biting. And why would they? There's no incentive to make these hard choices as long the government is willing to keep funding things.


If GM goes into bankruptcy, it would force the hard decisions. A lot of people are going to take it in the shorts on this, no matter what happens. The auto industry is hardly the only industry that is hurting right now, though. And it's awfully difficult to see why GM and the UAW should be insulated from the consequences of their actions and the vagaries of the marketplace.


4 comments:

Gino said...

what is not being spoken of is the vibrant and expanding american auto industry taking place in alabama,tenessee,missippi etc...

where they are making cars that americans are willing to pay for.
yours, for example.

W.B. Picklesworth said...

Yup, it's time to let them face the consequences of their business model. There will certainly be losers, but lets not forget that there will be significant winners too: future consumers as well as the folks who have figured out how to make good cars. And maybe GM and Ford will be able to get back in the game, re-invigorated after finally getting honest with themselves.

Mark Heuring said...

Yep, Gino. Exactly. But those cars and those plants don't fit the preferred narrative.

Right Hook said...

Government interference and regulation, along with the UAW, has contributed greatly to the decline of the American auto industry for the last 40 years or so and has destroyed a piece of Americana in the process.

It hardly matters who manufactures a car today as they have become generic appliances, devoid of character, engineering creativity, and individualized styling of the classic highway cruisers of 40-60 years ago.

There is generally very little difference between the offerings of the different manufacturers within a given category of vehicle as all have to meet government imposed safety, environmental, and CAFE standards that greatly constrain stylists, engineers, and designers into producing the silly little generic upholstered roller skates that pass for cars today.