The only job that merger would have preserved was Rick Wagoner's.

GM can't even manage to put together an acceptable business plan on it's own. How do you think they could pull it off while also absorbing Chrysler?

Another in the series of "the government should give GM a blank check" posts from formula79. I'm noticing a pattern here

 

I am not saying a "Blank Check"...though companies like AIG basically have gotten one for things way more fraudulent than GM ever came near.

I am saying that GM and Chrysler had very deep structural issues that would have had to be addressed at some point. GM's biggest structural issue is/was retiree benifits which is much like the issue we have with social security. Our government has allowed the US automarket to be wide open to foriegn competiton over the last 40-50 years, and as a result (no problem with that), our automakers have lost market share...simply because the pie is split in more peices. Now you have one worker for every 4 retirees...and simply no company can support that. The costs added by the retiree benefits (plus giving a little too much to the union) is what has caused GM to skimp on things, and allow their product to fall from the forfront of the market. As they lost market share, they laid off or bought out workers, which makes the retiree mess that much worse. I don't care who you have running or managing the company...anyone with the kind of competive cost disadvantage will be in a slow death spiral.

If GM cannot support it's retiree's..it is the government that pays the bill...and it would be a bit more than the bail out has cost.

Make no mistake about it..if you were to saddle Toyata with the same legacy costs GM has accumulated the last 20 years by being a good citizen and taking care of it's employees it would be facing bankruptcy too.

And I am not even touching on the nonsense regulations that the government has forced on automakers to compound the issue. CAFE is a joke. Hell...obesity is an issue, so why not limit the amount of double quarter pounders with cheese McDonalds can sell.

 

formula79 -- I think you're basically correct, but a major contributing factor was GM's "We're Number One" business model dependent on moving as much barely-profitable metal as possible. They went into a "death spiral", as you put it, because they were constantly two steps behind restructuring to a small enough core that they could operate profitably.

Buying Chrysler (with taxpayer money) was GM's last-ditch attempt to corner the fleet sales market, and would have done nothing to resolve the core issues on either the cost or the demand side.

Putting it another way, if the government just erased GM's legacy costs, Pontiac would probably still be shut down because GM wouldn't feel the need to flood the market with entry-level cars. There's some problems even a blank check can't solve.

I would much rather see a smaller, focused and profitable American auto industry than what we've put up with for the last 10 years. And it looks like that's what the government is going to produce. Understandably, if you were a happy customer, you might think differently.

 

The thing is, fixing the domestic automakers and creating an industry that can survive another 100 years is a process that will take time. It may be a decade or more before people even stop thinking of GM and Chrysler as bankrupt, much less consider buying a car from them.

And that is the thing...our politicians do things with nothing in mind but political gain, and making it through the next election. They don't care if GM makes products that customers want. They don't care that by forcing GM and Chrysler into bankruptcy they are just reinforcing most American's already negative views of American cars. They have no issue spending to bail out and American compnay, and then giving it away for free to a foriegn company, as long as it saves a few union jobs to make unprofitable small cars in the US. In the end, all they want to do is be able to talk in a debate about how they saved union jobs, and made it so there are more green cars no one want.

You don't see a major bank getting forced in to surgical bankruptcy to rid itself of bad investments. They get the gaurentees they need, a little tough talk and that is that. Wanna know why the banks and financial industry get such a smoother ride? Because they are the people with money who grease the political machine.

 

formula79 -- GM's problems (at least) are a far deeper than something that can simply be papered over. The public thinks of them as bankrupt because they are bankrupt. Blotto. They're on the dole, and everyone knows it.

And I agree it will take a long time to rebuild their relationship with the customer and regain people's trust. The way to do it is have the appropriate resources that every product is a winner. People need to trust that the domestics can produce a good car all of the time, not just now and again.

One positive thought is that GM should come out of bankruptcy with a solid product lineup from top-to-bottom. I don't think that's ever been true for my entire lifetime. And it wouldn't be true if they were still trying to support Pontiac and Saturn.

Also I've seen no indication that the government is going to stop them from making cars that customers want. (Unless you think customers want Pontiac Grand Ams, in which case you'd be wrong.) The Volt is something GM itself thinks is hugely important. If anything, the politicians are trying to take credit for GM's innovation.

As for the financial industry, I'm not exactly happy about it either. But the government has forced numerous mergers and consolidations, and AIG is being more-or-less dismantled. In the banking sector, the government has much more power to order companies around, and they don't need to use the bankruptcy courts.