The average American has no idea that GM is run by a bunch of nimrods. And even if they knew about the Machiavellian machinations behind the automakers’ recent struggle for survival– including hiring a raft of ex-treasury officials to lobby their former employer for tens of billions of GM bailout bucks– they wouldn’t care. That’s all Inside Baseball stuff. Joe the Public has enough on their proverbial plate just running the kids to school, keeping food on the table and putting a roof overhead. But when it comes to buying a new car, well, that’s a horsepower of a different color.
As they should, American car buyers have acted– and will continue to act– in their own automotive self-interest. You can debate about the “perception gap” between GM and its rivals’ products until you’re blue in the state, but the bottom line remains: consumers prefer transplants’ products. It is this sharp end decision that has effectively (if not legally) bankrupted GM. And there’s no indication whatsoever that General Motors has the weaponry needed to reverse this trend.
In fact, there’s little reason to suspect that GM will EVER have the products needed to sustain the 20 percent plus market share it needs to justify its existence. I repeat: no matter how many tens of billions GM– or GM-Chrysler– sucks from the federal taxpayer, it has no chance of staunching the wounds that are draining its lifeblood. Too big too fail or not, taking money from American taxpayers who have exercised their freedom to buy what they want to sustain a company who cannot produce what they want to buy is a special kind of madness; on a scale that dwarfs even the UK’s British Leyland debacle.
Morality, ethics, principles and pragmatism aside, there’s history here as well. GM’s decision to marry its fate with Chrysler to stay afloat is pregnant with irony and foreboding. If Chrysler hadn’t suckled on the federal tit back in ’79, and then paid back its loan guarantees, GM’s current plea for federal assistance may have lacked sufficient credibility to succeed. Thanks to Snoop Dog’s golfing buddy, GM can point to Chrysler as a successful model of government intervention in the U.S. automobile industry.
It’s a simple idea that resonates well even (especially?) with an uniformed public: you did it before; you can do it again! Hell, you guys even made a profit from the Chrysler bailout– uh, guarantees! Yes, well, one small problem: Chrysler’s about to go away. Assuming GM merges with Chrysler– hoovering any remaining ChryCo cash and releasing 2 Big 2 Fail’s song “Obama’s Yo Mama”– the argument that Chrysler is a template for recovery kinda sorta disappears. In other words, the deal transforms the success of the last bailout– uh, loan guarantees– into an abject failure.
Sure, GM won’t touch Chrysler initially– for that very reason. But the media ain’t dopes. They’ve already picked-up the scent of the story that gives them an instant, persistent info-stiffie: job losses. As TTAC commentator thalter points out, “spending government money to facilitate layoffs is not going to sit well with the American people.” That’s doubly true if and when GM’s monumental management compensation and Cerberus’ deep pockets come to light.
GM is counting on speed and stealth to get their bailout bucks before the truth hits the public consciousness (a.k.a. public hearings). CEO Rick Wagoner and his minions know they’re already behind the eight ball from a PR perspective; the average American reckons all this trouble is Detroit’s own fault, for building gas-sucking SUVs rather than… something else. As sure as eggs is eggs, bailout fatigue, a genuine conservative backlash and the post-election diminution of Michigan’s political power are all coming down the pike.
And just like the $700b bailout bill, the chances are good that GM will sneak under the wire and get their money. But here’s the thing: it will be a Pyrrhic victory. The attendant publicity may paint GM as a victim, but it will also paint a big ass L (for loser) on every single one of its 1,274 products. Even as GM makes its case to reporters (under the guise of anonymous sources), wooing the politicos and Powers That be, they’re stigmatizing their products to the only people who really matter: car buyers.
Zoom back into the micro-level, and this soon-to-be highly publicized bailout will hand American consumers yet another reason not to buy a GM product. Protect American jobs? Of course. But… If, indeed, no one wants to buy a vehicle from a bankrupt automaker, it’s also true that not everyone wants to buy a car from a “troubled” one. Not to put too fine a point on it, when it comes to family finances, there’s no such thing as a sympathy fuck.
But, GM would get the bailout bucks without merging with Chrysler. Cerberus, maybe not so much, but we can take them to court for neglect. But, GM? America’s GM? They don’t need to team up with anyone to get money. GM will not be allowed to fail in this political and economic climate.
guyincognito :
GM will not be allowed to fail in this political and economic climate.
While I agree with the principle, a week is a long time in politics. And it seems that GM has put all its bailout eggs in this merger basket. If it falls through… that’s a GMDW for another day.
Also, “America’s GM” is not such a powerful concept anymore. “GM” means little to the average voter. It’s simply “an American automaker that provides a lot of jobs (but not necessarily my car).”
The real connection comes via the brands: Chevy, Cadillac, HUMMER (ha!), Buick (ha!), Saturn (who?), Saab (huh?), GMC (what?) and Pontiac (har-har!). Most of these brands have generated precious little good will upon which GM can build political support. Save Buick! Uh-uh.
So, let me make sure I understand all of this…..
GM is going in the crapper, merger with Chrysler or not; and the Feds will step in and bail it out with untold billions. No one on the current Board of Bystanders will be held to account, and GM will become the American version of British Leyland.
But BEFORE that even happens, Uncle Sam has to kick in 10 Bill to help GM merge with Chrysler; just in order to get them to the point where we have no choice to bail it out even further??
Just checking…
bobkarafin :
Exactly.
Robert, you said what I have said here a couple times but did it better. If anyone buys a car from one of these losers, well, what can I say?
GM is toast- they cannot survive given their current structure. The rational for the this “bailout” is keeping jobs and supporting pensions.
As for jobs, UAW welcome to the real world. Why should the auto industry be different than any other industry?
As for the pensions- how much are we talking about?
The government would be better of “supporting” these pensions with a few billion dollars instead of saving a lost cause GM. GM and Chrysler are dead from their own doing, let them go. Toyota, Honda, VW and maybe Ford are going to be the mainstream brand.
Robert Farago: In fact, there’s little reason to suspect that GM will EVER have the products needed to sustain the 20 percent plus market share it needs to justify its existence. I repeat: no matter how many tens of billions GM– or GM-Chrysler– sucks from the federal taxpayer, it has no chance of staunching the wounds that are draining its lifeblood.
Very true. I’m not in favor of this bailout or merger, but it looks as though both will happen, regardless of who wins next Tuesday.
Any bailout will have the best chance of succeeding if it were focused only on GM, and it used the money not to merge, but to slim down – eliminate factories, workers (the Jobs Bank) and divisions (basically everything except Chevrolet, Cadillac and maybe a combined Buick and GMC).
But this is completely unacceptable – from a political standpoint. The UAW would howl, as it can’t take a hit in membership numbers, even if the workers do receive nice buyouts (although this will increase pressure on Congress and the President to make it easier to unionize the transplant operations whether workers want it or not – card check legislation, anyone?).
Dealers would scream bloody murder, and each Congressional district has several.
We’re going to get the worst of all possible scenarios – lots of taxpayer money shoveled at a merged Studebaker-Packard, oops, GM-Chrysler, and all of it used to maintain the status quo for as long as possible. We are getting our own version of British Leyland.
Maybe Chevrolet should just rename the Cruze the Chevrolet Allegro, and the revamped LaCrosse the Buick Marina…
I disagree.
The media is in the tank for Obama.
If he wins, we will have a (brief) period much like the Kennedy “Camelot” era where everything is rosy.
President Obama cruising up to the inauguration in his Caddy limo is exactly the image to sell some GM wheels.
Once the govt gets some serious skin in American Leyland, they’ll be all about unionizing the transplants and import tariffs. Just the threat of those actions will temper marketplace competition from T/H/N.
The displaced UAW workers could always apply for work at one of the transplants, it’s not like they don’t have factories here. The problem is they are not unionized to the degree they are used to and it will involve relocating and taking a compensation cut.
Sort of like what most Americans have dealt with for years. Your chosen job or career field goes away and you move on to something else. I’m not doing what I went to school for 25 years ago, I’m probably not going to be in the same business 15 years from now when I retire. The difference is I don’t hang onto the same piece of driftwood expecting a ship to come along. I paddled to shore twice in my career.
GM is toast, despite the size and scope of their product lines. They can’t make a go of it and we should not finance the retirement GM.
GM will get the money they seek and they will do it again and again, but ultimately even that will eventually end.
How long did British Leyland last? How long will this economic crisis last. GM is disguising their ineptness under the convenient cover of the economic debacle we are experiencing now.
At some point after oh say the third bailout there will finally be some real debate and media coverage on what is really going on at GM and questions will finally be raised on the lack of change and accountability of the board, and management and even the on the lack of government oversight with the bailout money. My guess is three bailouts in five years and GM finally going CH7
GS650G,
I agree with you. I graduated 20 years ago with a BME from Ga Tech and am since on my third career. Job/career changes can be done. It’s scary, requires hard work, retraining, and often taking an initial pay and benefits cut, but in the end I’m glad that I went through it.
Nobody forced any UAW member to work in an auto assembly plant. That was their choice. When times are good, they accept the benefits. When times are hard, they need to accept the risks.
Robert –
I agree with a lot of what you write, but you need to tone down your anti-domestic OEM bias. The latest untruth is shown below:
“But when it comes to buying a new car, well, that’s a horsepower of a different color.
As they should, American car buyers have acted– and will continue to act– in their own automotive self-interest. You can debate about the “perception gap” between GM and its rivals’ products until you’re blue in the state, but the bottom line remains: consumers prefer transplants’ products.”
Last I looked, the domestic OEM’s still have the majority of the US car market and have for many years. Has it been reduced, and significantly, sure – but lets stick to the facts, not hyperbole.
From what I’ve heard (and this is strictly through the grapevine), the transplants avoid hiring any blue-collar workers associated with the UAW.
“I disagree.
The media is in the tank for Obama.
If he wins, we will have a (brief) period much like the Kennedy “Camelot” era where everything is rosy.
President Obama cruising up to the inauguration in his Caddy limo is exactly the image to sell some GM wheels.
Once the govt gets some serious skin in American Leyland, they’ll be all about unionizing the transplants and import tariffs. Just the threat of those actions will temper marketplace competition from T/H/N.”
I don’t think there will be any “Camelot” era. The economy will continue to dog whoever wins.
Same Caddy they used the last few inaugurations; didn’t help then, won’t help now.
GM will get something, probably under the guise of loan guarantees, but it will not be a popular decision with the public. That will make any further action a poison pill. People already see a failing GM as mismanagement coupled with a greedy union. They’re not going to go for remaking the transplants in the image of failure.
anoldbikeguy : ‘
Last I looked, the domestic OEM’s still have the majority of the US car market and have for many years. Has it been reduced, and significantly, sure – but lets stick to the facts, not hyperbole.
You need to look again.
UPDATE: From Credit Suisse projections:
• Foreign brand sales should fall sharply in October as well, but will be supported by a 0% financing program at Toyota. We expect large sequential share gains for the foreign brands, to north of 52% from just under 48% in September.
Why is there no one, as far as I can see, in the media or in congress…
Oh, never mind. What’s the point.
Sherman Lin – you’ve raised a good point. Once the govt money starts it becomes nearly impossible to switch it off. Just look at British Leyland in the ’70s. Everyone knew that company was dead and just keeping it going was damaging the other UK manufacturers (Ford and Vauxhall – part of GM!). It took the Thatcher govt to virtually give away what was left of the company before the taxpayer got out from under. I suspect your estimate of 3 bailouts could be optimistic.
Other factors with govt money is a/ the employees begin to believe that the govt will always be there so ‘why worry’, b/ the talent still in the company will bail as soon as they can, c/ getting funding for products will mean more trips to the govt meaning that the govt will have to explain to the taxpayer why yet more money is going into the company to fund new products. Yea – the employees at the transplants are going to love that one.
Like most on this site, I think the only rationale GM have for this deal is to be too big to allow to fail. As to how they’ll manage it post-merger, they’re not thinking of that. The only concern is to survive and sort out the other problems tomorrow.
The idea that a GM-Chrysler merger would create a viable company is dismissed by Morningstar’s automotive analyst. He points out that if GM has to put any cash on the table, it won’t happen. Daimler needs to sell its 19.9% stake in Chrysler for the deal to happen, although the Germans are already negotiating with Cerberus on that front. Finally, he rightly points out that if GM wants to be profitable in the North American market it needs to build cars that people will buy instead imports. Adding three more brands to a company that has too many is rubbish.
I couldn’t agree more because a merged company will spend a lot of time cutting white and blue collar jobs, trimming the product line and eliminating brands. All while the red ink continues to gush out during a recession.
Of course, GM could be planning to do what Chrysler did when it bought AMC-Renault/Jeep. They kept Jeep and shuttered AMC practically overnight and sent the French packing on the first tramp steamer across the Atlantic. Sure, there were a few years of Eagle cars, but that was a bone thrown to the CAW and the Canadian government.
“Too big to fail” is a fallacy. The only ones buying into it are GM and its employees (and the lobbyists leaches who are trying to bend the rest of us over a bicycle rack).
My liberal friends will disagree, but last time I checked, the government doesn’t guarantee employment. Put another way, employment is not a right.
People need to wake up (in some cases, grow up) and realize this company is done. If you work there, get out. Now.
Today’s Los Angeles Times (October 28, 2008) LATIMES.com has a front page story on “The Death of the U.S. Auto Industry?” While not necessarily new information to us who read TTAC, the masses are getting tuned in, can’t possibly help car sales.
The media is in the tank for Obama.
And so is the State of Michigan. If I were the powers that be over at GM, I’d be rallying the McCain vote in MI. Get some leverage over Obama…or McCain… to make sure that gov’t cash flow isn’t interruped. Here’s to hoping McCain actually wins and tells Michigan to “F-off” since they will undoubtedly give him zero help in pulling out a win.
On another note, since this election looks like the dem’s to lose, I wonder if they’ll pass Card Check with a fillabuster proof congress. Any guesses what the loss of a private vote will do for unions in the transplants shops? I have always thought the problem was product, not benefits or legacy costs. Then again, I wouldn’t put it past the UAW to destroy Toyota and Honda for their own gain.
indi500fan: President Obama cruising up to the inauguration in his Caddy limo is exactly the image to sell some GM wheels.
Yeah, and then when Obama gets shot at by some racist skinhead in his Caddy, it’ll further reduce Caddy sales… cynical though it may be, perhaps Obama should drive in a well-armoured (and armed?) Escalade. The Caddy limo didn’t work out too well for JFK.
lprocter1982 Umm Kennedy was killed in a 1961 Lincoln Continental NOT a Cadillac. You might want to go check you history buddy.
Great one Robert, unfortunately I have been grinding my teeth since I read it. This situation is really pissing me off.
American Leyland here we come. Here is to hoping you collapse swiftly and painfully and steel as little of our money as possible.
And if they get bailout/nationalized you can count me a life long member of the never buying from GM club. And to think I was crazy enough to consider that very nice G8 GT, not a chance.
In the great words of Cartman “Screw you guys, I’m going foreign”
RF-Edit is messing with me again.
GM make a few good cars (as in best-in-class, not as in acceptable) like the Solstice Targa, Corvette and G8.
I would buy those cars from a GM that had the dignity to do a Chapter 11 restructuring and was able to provide adequate warranty protections (as any reasonable bankruptcy judge would allow them to do).
I will NOT buy those cars from a GM/Chrysler combination hastily put together for no legitimate purpose and only to enrich Cerebus stakeholders and GM/Chrysler management at the expense of US taxpayers.
I encourage everyone to boycott all GM and Chrysler products starting now (with the intensive government lobbying effort that GM has started), and ending only if they do not receive any additional government bailouts.
Now we see the brilliance of GM’s plan. Too much overhead, too many brands, too many dealers are all strategic assets!
The company that is too big to succeed is too big to fail.
Too much overhead, too many brands, too many dealers are all strategic assets!
The first thing I thought when I saw that was government agency. We are so screwed!
The thing I don’t get like everyone else is the merger, or more specifically, a pre-bankruptcy merger. The logical thing to do would be for either GM goes C11 now or both GM Chrysler go C11 together and merger. Take them one by one.
GM C11 now: in reality, this is the best time to do it. Wisdom is, C11 will hurt sales. In this market, what sales? We are at 1991 levels heading for 1981 levels. Things are about as low as they can get, so the damage would actually be less now than in better time in terms of lost sales. GM’s structural problems–dealers, brands, legacy costs, franchise costs etc. will not go away without C11. Until C11 allows them to bypass state franchise laws and labor costs, GM will always be in the circular firing line with the unions and dealers. Each one is able to kill the other off but no one can survive without someone else taking a hit. Only C11 can break that gordion knot.
Second scenario is GM merges with Chrysler, but only after C11, because Chrysler has the same troubles as GM only worse, in addition to far inferior product. I do see the wisdom of “absorbing” chrysler, but only to make it largely disappear except for the minivans and certain jeeps. This would help GM, as the domestics still dominate the big SUV and pick-up markets, which despite all the woes are still hovering in the 40% market share. Eliminating the Ram and the Dodge SUV’s would pick up some market share for GM.
Third scenario, GM/Chrysler, no C11, I can’t see how that would possibly work, because they are just taking on Chrysler’s bigger problems. Plus the only way it can work is with lots of federal money, which I don’t see coming in order to lay tens of thousands off. But what do I know? Maybe federal help on franchise and dealer laws which over-ride state laws, or federal assumption of health benefits, but I just don’t see it.
Thanks to Snoop Dog’s golfing buddy…
I also spit my Pepsi out on that one. Thanks Robert for that! Best part is you never mention the Mustang’s self claimed father by name. Better that way.
The government would be better of “supporting” these pensions with a few billion dollars instead of saving a lost cause GM. GM and Chrysler are dead from their own doing, let them go.
Reading WSJ this week it seems us taxpayers are already on the hook for this – so, even in the event of a BK we’ll still pony-up something like $14B to double the funding of some pension guarantee program (think FDIC for pensions).
It is so incredible that this rotting corpse is being kept alive because everyone is afraid to let the natural order rule.
I fell for this false Patriotism back in the early 1980’s. When Chrysler was the underdog and Lee Iacocca was a star.
So I purchased my first new car. A Chrysler K car and it was junk from day one. By the time the warranty was out it was toast.
why didnt the gummint bail out the “big steel” companies when they withered back in the 80’s? There was a good amount of dis-location involved in that. Same deal with merchant ship building. I dont see why domestic auto-makers merit such peferential treatment.
Times change, change with them or face the consequences. Over my working lifetime, I have been caught out twice due to change. Yes, it was a struggle, but you gotta do what you gotta do.
Looks like the merger is a done deal.
http://biz.yahoo.com/rb/081029/business_us_chrysler_gm.html
Nope, just the reverse, the merger was torpedoed by Treasury.
https://www.thetruthaboutcars.com/us-treasury-department-torpedos-gm-chrysler-merger/