I bought my first hybrid back in 2006. An ’01 Prius that was an absolute dealer queen. Oil changes every 3k. Every recommended service by Toyota performed. A brand new battery. New factory-spec tires from the dealer. It was a complete freak of nature amplified by the fact that I bought it at a time when I was the only dealer in the auction lane. The cost including the auction fee was $6650. It never left the auction. I took 24 pictures. Wrote a glorious soliloquy on eBay, and sold it to a guy from Alabama for $8800. That sale represents the only profit I’ve ever regretted.

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Regular readers will know that we’ve taken Washington Post carmudgeon Warren Brown to task for his shameless Motown cheerleading up to and through the federal bailout. You may have also noticed a huge disconnect between Warren’s blind bailout boosterism and his paper’s entirely skeptical stance on federal intervention in the U.S. automotive industry. In an ironic twist of fate, Warren’s decided to take the WaPo’s latest buyout offer—and do so with all of the grace displayed by his bailout boosting pals in The Motor City. He leaves the paper spilling vitriol all over his colleague’s rejection of Uncle Sam’s “investment” in Government Motors.

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We the people now own about 60 percent of General Motors. Thank God. I know the old joke about being from the government and here to help; I’m familiar the anti-socialist swell that’s been rising since Obama’s inauguration. I am also convinced that right now federal control of what was once the world’s largest car marker could be the greatest thing to happen to the company since Alfred P. Sloan.

Putting aside the obvious—that the General would not have survived the battles of the last 12 months without Uncle Sam’s support. A controlling interest of GM in the fed’s hands isn’t all that bad for one simple reason: the government isn’t all bad. The bad gets more press. There are lots of success stories out of Washington that for lack of drama, or surfeit of politics, don’t immediately enter the fray when the free-market arguments start.

Defeating the Nazis or putting a man on the moon are the easy ones and not all that appropriate for comparison. The outcomes matter, though. Government can work. Just look at the Federal Communication Commission.

Created by Congress in 1934, the FCC was tasked with regulating America’s airwaves. To do so, they worked with wildly competitive private companies competing in invasive technologies that would shape the progress of the whole world. That’s not terribly different that automotive industry.

The FCC did it right, allowing industry to flourish, without choking itself to death. Radio and television grew thanks to standards, not despite them. David Sarnoff, an early president of RCA said at the time, “Competition brings out the best in products and the worst in men.”  The FCC did, and kind of continues, to mitigate the worst aspects of capitalism, while allowing the best to develop.

Similar arguments can be made for the Food and Drug Administration, the National Aeronautics and Space Administration and (ahem) the Federal Reserve.

In each case Washington plays a role and the outcomes have been laudable. Ignoring an industry does not necessarily guarantee innovation. Sometimes the prescription is care and nurture . . . and that maybe the key to reviving General Motors, if not the whole auto industry.

When the government acts as an incubator, providing shelter from some—not all—market place stessors, the results can be strong. The National Institutes of Health, for example, provide funding and resources for research that is too new for the market or perceived as weak in profit potential. Genuine, important advancements in medicine, or any pursuit, frequently come from the long shots, as opposed to the safe bets. To date, the NIH has supported hundreds of raw ideas that turned into commercial ventures.

The Internet may be the best, most current example. Its core was conceived at the US government’s Advanced Research Projects Agency and based on a system pioneered by the US Air Force. Although it thrives in the force of the market, it took root well sheltered from those same forces. The original ARPANET that linked disparate labs had no business model. There would be no way to monetize the creation for next twenty years. That time gave the technology the opportunity to mature, bulk up and get ready for the world.

The exact mechanisms used by the Department of Defense or the NIH don’t transfer, but that is part of the point. The feds have, in some cases, actually been flexible. The capability is inherent in our system of government, even if it’s often ignored. In this case, there can be no cookie-cutter approach. We’ve never owned a failed car company before. But we own one now.

The benefit of which: insulation. The number one pressure corporations feel after they go public comes from the heat generated by quarterly reports. The stock market can provide a lot of energy to a company, and then too much. Investors focused strictly on three-month prospects, often do so to the determent of long-term goals. The market—especially in the hyper-capitalist USA—tends to make management near sighted. In an industry with relatively long development times, like automobile building, the trait can be disastrous.

With the federal government holding a solid majority of stock, General Motors will be more immune to daily market fluctuations. Our car company is no longer a slave to the quarterly report. It can look farther down the road; an attribute frequently sited as part of Honda and Toyota’s success. New GM can plan, hedge, execute and achieve.

And then we sell. I’m no Marxist. I just think big projects can do well with a big caretaker and there’s no one bigger than big brother. You want to establish the First (or Second) Bank of the United States, build a canal in Panama, an interstate highway system or re-establish a manufacturing icon, don’t be afraid of Uncle Sam. He is, after all, us.

But still can’t touch the domestics. An Edmunds press release (via Business Wire) reveals current incentive levels for the major automakers in the American market. According to Edmunds’ analysis, “premium sport cars had the highest average incentives, $6,865 per vehicle sold, followed by large SUVs at $4,267. Subcompact cars had the lowest average incentives per vehicle sold, $1,096, followed by compact cars at $2,117.”

California’s zero-emissions vehicle law could cost Toyota, darling of the environmental crowd, up to a billion dollars reports Bloomberg. That’s more than any other automaker is looking at. Why? Because by 2012, California will require that 3 percent of unit sales over a three-year period be zero-emissions models. Since Toyota has over 24 percent of the California car market (nearly double Honda, which is number two at 12.9 percent), it’s facing far stiffer requirements. And unlike Honda it doesn’t have a hydrogen fallback (although Honda’s FCX Clarity is not yet on sale). According to Bloomberg, Toyota will have to sell 16,000 plug-in hybrids (PHEVs) and EVs come 2012. “If you’re only discussing the cost of batteries and other components, a $1 billion cost for Toyota may be a stretch,” says Brett Smith of the Center For Automotive Research. “Add in all the things needed to support these vehicles — service, dealer training, marketing, warranties, new manufacturing equipment to get them into production, and [$1b] sounds reasonable” Toyota is declining comment on the exact cost of CARB compliance, but has already questioned whether PHEV demand will live up to enthusiast expectations.

Far be it for me to extend TTAC’s reputation for putting a negative spin on news trumpeted as a sign that the auto industry’s dark days are coming to an end. But this story—“Toyota sees turnaround, boosts U.S. output”—is making the ’rounds, and it bears closer examination.

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Shark number one is Ford, which is making a concerted effort to steal sales from its cross-town rival. Automotive News [sub] reports that Ford is rolling out a regional incentive program aimed at existing Chrysler owners. Ford is offering Chrysler owners an additional $500-$1,000 on the purchase of a new Ford to owners of Chrysler vehicles older than the 2006 model year who have had service work done at Ford dealerships in the past three years. However, Ford is keeping the program as targeted and low-profile as possible. “We’ve been very cautious and certainly not predatory with regard to this,” say Ford spokesfolks. Which is smart. Domestic buyers seem to prefer other domestics, and Ford can only benefit from the uncertainty surrounding the other Detroit firms. Still, Ford should probably consider sending Chrysler owners an update on ChryCo’s attempt to welsh on its legal liability. Meanwhile, Automotive News [sub] reports that Ford is increasing production, as it angles for Chrysler’s declining market share. Toyota is, too, says AN [sub]. Let the feeding frenzy begin!

Gosh that sounds bad, doesn’t it? Honda’s silver lining is (sorta) legit though, since the big H set an all-time sales record in May 2008. Toyota has no such excuse. Besides, falling sales are salling sales. So let’s put the lipstick away, and take a good, hard look at this pig.

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It might be a bad day for GM but it’s a much worse one for Toyota. Really. The days (decades, really) of weak domestic manufacturers shooting themselves in the foot with bad design, poor assembly, and non-existent customer satisfaction in passenger cars are coming to an end. Toyota didn’t have to outrun the bear, it just had to stay ahead of GM, Ford, and Chrysler. Years of producing huge profits in North America hit the wall for Toyota in 2009, and they’re likely not to return. Ever. The game has now changed—and it’s not good for Toyota.

Thanks to US and Canadian taxpayer support, GM and Chrysler are about to get a new start. They’ll enjoy fresh balance sheets, with minimized legacy liabilities and serious money earmarked for new products. (The taxpayers are paying for Fiat to develop cars for North America; you didn’t really think that the Italians would take this risk on their own did you?) Ford, by dint of luck or smart management, borrowed what it needed years ago to make the transformation outside of court oversight.

By the end of this year, all three Detroit automakers will be restructured, resized to match production with demand, and re-energized. They will reenter the market as the lowest cost producers inside the U.S. market, with slimmer, trimmer product lines. These automakers are getting ever-closer to 100 percent capacity utilization.

Looking at product, Ford’s passenger car line up just keeps getting better. The 2010 Taurus looks hot, the Fiesta test drive campaign is generating good press with the Twitter/Facebook crowd, and a new Euro Focus will be here in a two years. Slowly but surely, more Americans are considering a Ford passenger vehicle. Its trucks still lead the category and will continue to do so. Better products, increasing quality, and slowly increasing market share is building FoMoCo momentum.

GM’s go forward brands—Chevrolet, Buick, GMC, and Cadillac—still have some vehicles that don’t cut the mustard with consumers. But the balance is starting to tip back towards the positive. The Malibu and Camaro represent some better efforts. The gorgeous new Buick Lacrosse might give the new Taurus a run for the money. Cadillac will extend the CTS line and bring a new SRX to the market shortly. The Corvette still leads the pack in dollar performance value. And maybe, just maybe, the Cruze and Viva will live up to GM hype machine.

GM’s perhaps two to three years behind Ford with its product development cycle. But it can now concentrate on fewer models. Recent successful launches suggest that GM just needs time to plug the holes for the weak sisters. It now has the money to do so and you can bet (if you’re taxpayer, you already have) that the efforts on fuel efficient passenger cars will receive the bulk of the dollar spend. GM won’t abandon trucks (no matter what Nancy Pelosi thinks) and volume wise, GM leads.

Chrysler can’t do anything under their new pasta-fed management until the re-tooled imports arrive here for production two years hence. Its cars still (mostly) suck, except for the higher-performance versions of its LX cars. But it isn’t going away and will still find some buyers for its products at the pace of the recent past. So this company will just hang on . . . and on . . . and on.

Now, stop and think about this. What has Toyota done for you lately? Is there one single passenger car from Toyota that excites you?

Let’s keep the new Prius out of this discussion for the moment; it’s not a car for drivers but techno-geeks and greens mostly with excitement provided by the fuel gauge, not vehicle dynamics. The Camry might lead the C/D class in sales for now, but will this continue? What happens when Americans actually consider a Malibu or Fusion-based product instead? In terms of design appeal, the Camry looks dowdy or boring (take your pick) and its reliability isn’t any better than the Fusion. Put a four-cylinder EcoBoost engine in that Fusion and Ford wins.

Go through the rest of Toyota’s passenger car line up and compare each vehicle to the current and near future offerings from GM and Ford. The question is: will Toyota customers do the same?

Toyota (or Honda) products have been the default choice. That “Easy Button” is starting to get harder to press for buyers. Yep, Americans will begin to come back to consider Detroit products (at least GM and Ford), and that’s not good for Toyota. And we’ve really never left Detroit for our big pickups and SUVs, whle the Japanese are still mostly playing catch up.

Yep, it’s a bad day for Toyota and a great day for America. You can look forward to a new Detroit that will be competitive, if not lead, in cars and trucks for mass market Americans. Count on it.

“It’s not something we would bring up on our own, and we don’t know enough about the restructuring plan,” Toyota’s President Katsuaki Watanabe told a small group of reporters, one of them writing for Reuters. Ever so polite, they would never suggest something like that on their own. But . . . “If some talk about supporting GM comes up, we would like to consider it earnestly.” Fritz Henderson, two magic words: Tasukete kudasai. Help me, please.

What do you get for leaving Toyota and kneeling to Chrysler CEO Bob Nardelli? How does a townhouse in NYC at 178 East 64th Street sound to you? The New York Observer (“Nothing Sacred But The Truth”) reports that Jim Press decided to splurge on a $13.5 million four bedroom house in the Big Apple during his first month with the little C. The fringe benefit came complete with, “a grand marble foyer, an oak-floored living room with an antique wood-burning French fireplace, a full-floor master bedroom suite, a den with a wet bar and humidor, plus a finished basement with a gym and a 1,000-bottle, temperature-controlled wine cellar.” However now with the bankruptcy in full swing, Jimmy wants to unload his load. To the tune of $15.7 million. Oh wait! it’s NO LONGER FOR SALE. Sold! At 14,995,000! If only Press could have helped Chrysler make that kind of money.

How do you write an obituary for an entity that’s been dead for seventeen years? Like that high-school Biology frog-leg experiment, GM’s twitching since 1992 was due to externally administered stimuli. Yes, I would have much preferred to write GM’s obit in ’92. Back then, the guilty party was merely GM’s brain-dead management. It would have been easy just to rag on about all the lame cars they built. But it’s become a lot more complicated and uglier. Now we all have blood (and red ink) on our hands. And it’s not going to wash out easily.

While we rub on our damn spots, let’s refresh our short collective memory. In 1992, GM posted a $23.5 billion loss, coming off multi-billion dollar losses the year before. It was the culmination of GM’s most disastrous decade ever. Market share collapsed from 45 percent in 1980, to 34 percent in 1989. Share price was down 90 percent from its all-time (adjusted) peak of $358 in 1965. GM’s bonds lost their vaunted AAA rating. The whiff of bankruptcy was in the air. If only the plug had been pulled then. It would have spared us all hundreds of billions and untold agony, not to mention well over 250 General Motors Death Watches.

Up to ’92, it was pretty much all GM’s own (un)doing too, from Astre to  John Z. DeLorean. Nobody else to blame. Well, mostly, anyway. Some of the “artificial stimulus” had already begun, in the form of 1981’s Japanese (not at all) Voluntary Export Restraints (VER) deal. Denial and the blame-game were high on GM’s agenda, and curbing Japanese imports was going to fix Detroit. It turned into a classic example of “be careful of what you wish for.”

The Japanese responded with higher prices, and reinvested the resulting outsized profits in Lexus and Marysville, Ohio, among others. Is that what the Motown boyz had in mind when they beggared Washington for relief? And who paid for it all? The consumer, of course. Japanese car prices jumped some 15 to 30 percent during the VER era; Detroit’s, not. Somebody was paying for the development costs of that Caddy-killing Lexus LS400.

The Lexus was overkill anyway; by 1985, the pathetically-shrunken Cadillac DeVille was just a mutated Chevy Celebrity. This self-inflicted damage was mortal, too. GM’s premium brands had been their money printing press since the 1920s. Reel in the consumer in with a cheap Chevy, but make the killing when they trade up.

GM could live with Ford or Plymouth getting into Chevy’s pants once in a while, as long as Mercury, Edsel, Lincoln, DeSoto and Chrysler kept their hands off their “golden girls.” Having managed to keep them chaste for decades, they proceed to royally fuck themselves with ugly look-alike dwarves in 1985. I could go on (and have), but need I say more to explain GM’s death as an auto-maker in 1992?

Going forward from 1992 is an oxymoron. Since the mid eighties, the domestic automobile industry, as well as much of the domestic economy, has been all too heavily influenced by government policy, or the lack of it. What might have seemed good for the US might have also seemed good for GM, but . . .

Let’s call the lack of political will to implement a steadily rising gas tax to curb demand and stimulate long-term investment in an appropriate (and stable) fleet mix of vehicles Exhibit A. Alan Greenspan’s repeated downward pressure on interest  rates in the face of both the stock bubble of the late 90’s and the subsequent real estate bubble makes Exhibit B.

The explosion of the financial sector due to the low interest rates and the lack of regulation or enforcement is “C.”  American’s eagerness to slurp up the resulting brew of over-leveraged mini-MacMansions and oversized SUV’s with which to make their forty-mile commute is Exhibit D.

The end result: an epic F.

This unsustainable potion of cheap gas and cheaper money created the Zombie Three, with GM at the head of the pack. Even during those boom SUV years, GM’s cost structure and low transaction prices on cars resulted in profits from vehicles that were dismal, at best. In a decent year, like 1996, GM’s North American operations had a 0.8 percent return. What profits GM booked during these past seventeen years were primarily from financing and whatever overseas operations were having a good run, for the moment.

Yet investors were still willing to pay $100/share for a company that couldn’t make a profit on a car. Artificial stimulus indeed.

Meanwhile, it’s no secret that Toyota and Honda were generating around 70 to 90 percent of their global profits out of the US market alone. By building cars and light trucks.

Reality’s last hope would have been C11 in 1992, restructure oppressive union contracts, and hire Roger Penske to vacuum “the tubes” from top to bottom. Oh, and a tax-stabilized price of gas. And a genuine, effective national health care policy. And a responsible financial industry. And a functioning regulatory system. And awake consumers. And . . . so much for wishful thinking.

The inconvenient truth: for decades, GM has not been an automaker, but a wealth and capital-destroying dragon. Some $200 billion dollars in equity has been wiped out. Throw in another $27 billion in debt gone tits-up, as well as “your” contribution of some $45 billion: well over a quarter trillion dollars up in smoke. Where’s Saint George when we need him?

There was a time when we just said goodbye or good riddance to our failed companies. Studebaker was once the biggest wagon maker in the land. No more. Now we’re incapable of killing GM, and it’s too late to genuinely revive it. Just think up some new (electric) stimulus to keep it twitching.

It’s a waste of time and energy to blame GM for anything it’s done, or not, since its real death in 1992. Rick Wagoner’s immutable face is just another mask in our national tragedy play. Even worse, he’s what we see when we look in our collective mirror. In Pogo’s immortal words: “We have met the enemy, and he is us.”

The mainstream media tends to fumble the metaphorical football on the symbolic goal line. With fewer than twenty-four hours left before General Motors files for Chapter 11, the MSM is set to go back, Jack, and do it again. Instead of excoriating GM’s management for not taking in more money than they spent, they’re parsing the American automaker’s bankruptcy as a “sign of the times.” Leading this electronic charge of the heat without light brigade: P. J. O’Rourke. Writing for the Wall Street Journal, O’Rourke paints GM’s dissolution as confirmation that America’s love affair with the automobile is, finally, dead. Rubbish.

Quick digression: Yesterday, I was looking for something to healthy to eat at Six Flags New England. As you might imagine, I’d have had better luck trying to win an enormous Tweety Bird by tossing small plastic rings at the necks of custom-made, ring-aversive milk jugs. As I consumed a greasy hot dog on a butter infused bun, I thought, well, that’s the way it is.

If these teeming throngs wanted a healthy salad or a chilled fruit cup, Six Flags would sell them. The vast majority of their coaster-lovin’ customers want fried foods and sugary drinks. Six Flags has a business to run. So they give their customers what they want. Tough luck for me. The same inescapable economic logic applies to the manufacturers of P. J. O’Rourke’s diss-missed automotive “appliances.”

Contrary to the prosaic pistonhead’s rant, no one forced Americans out of their charismatic, high horsepower barges into boring and bland vehicles. Truth be told, the average consumer wanted personal transportation that they didn’t have to think about it. The automakers who best provided these vehicles thrived. The ones who could not do so, both consistently and profitably, did not.

It’s one of those ipso facto deals. If American car buyers didn’t place reliability above all, they’d still be driving union-built be-finned rust buckets that required constant mechanical attention. The fact that Toyota, Honda, Nissan and Hyundai are solvent, while GM is not, is a simple reflection of the transplanted automakers’ ability to give the people what they want.

Never mind the bailout or O’Rourke’s pining for more “adventurous” times. The free market has spoken. GM must die.

Was this desire for aesthetically neutral four-wheeled appliances nurture (roadside stranding, lousy dealer service, inconvenience and expense) or nature (if I wanted to be a mechanic I’d be one)?

O’Rourke blames suburban ennui (i.e., car as cupholder) and “busybodies of the environmentalist, new urbanist, utopian communitarian ilk.” He bemoans the end of the legacy of the swaggering, charisma-loving “romantic fools” who created America’s automotive giants. Yes, well, it was these self-same car guys that condemned GM to its ultimate fate as a tax-sucking zombie.

Former GM CFO and ex-CEO Rick Wagoner is [rightly] blamed for pissing away billions on ill-advised acquisitions. He merits condemnation for refusing to man-up and declare bankruptcy when the company could have done so under its own steam. And he deserves his place in infamy for handing the keys to the executive washroom to the federal government. Still, ultimately, the beancounters didn’t kill GM. The car guys did.

The car guys failed to commit the company to designing and building the small range of bland, reliable, competitive, cost-effective automotive products it needed to survive. They were drunk on pickups. High (and mighty) on SUVs. When it came to more pedestrian metal, GM’s senior (i.e., divisional) car guys threw whatever they had against the wall to see what would stick. Not much did, and they didn’t care.

Don’t tell me that Wagoner and his predecessors tied the car guys’ hands behind their backs, forcing them to accept badge-engineered mediocrity. They were happy enough to go along for the ride. And why not? They were hugely compensated cogs in a corporate culture where failure was impossible, gorging on unimaginable riches simply for keeping the status quo. Speaking of which . . .

It should never be forgotten that Car Czar Bob Lutz squandered GM’s last remaining chance at a genuine, product-led turnaround. Lutz doubled-down on a half-assed redesign of GM’s trucks, imported sales stinkers and commissioned poorly-developed niche-mobiles without a hope in hell of mass success. Lutz’ highly-touted Chevrolet Malibu was a singular vehicle; it was also too little too late.

Here’s the funny, horrible thing: you can hear echoes of Bob Lutz in O’Rourke’s paradise lost essay. Like Lutz, O’Rourke believes that American car culture is practically dead. Both men mistake the end of a certain kind of enthusiasm—their own—for a wider malaise. They don’t understand that automotive enthusiasts will always be a relatively insignificant minority of the American public; tens of millions of motorists want cheap, reliable, comfortable, practical, safe, not-too-thirsty, not-ugly transportation.

No one’s asking P. J. O’Rourke to respect appliance drivers. But GM’s inability to do so was, in the final analysis, the death of them.

The New York Times:

For taxpayers to be made whole, the new mini-G.M. would have to produce earnings sufficient to support an enterprise value of at least $95 billion, the sum of a $69 billion market cap and its $26 billion of debt and preferred stock under the restructuring plan. Using market valuation multiples of five times that means New G.M. must generate operating cash flow somewhere in the order of $19 billion annually.

That would require both increasing annual sales to some $150 billion, almost 50 percent more than the entire company, shorn of its various financial and international businesses, is expected to generate this year, and matching the whopping 14 percent operating cash flow margin that Toyota achieved in its best year ever. It requires a vast leap of faith to believe that can happen.

Holy global overcapacity, Batman! Trading Markets reports that the world’s largest automaker is cutting Japanese production in half and overseas production by 43 percent, as it struggles to touch bottom. Toyota and its Hino and Daihatsu subsidiaries will produce 433,979 units gobally in April, down 46 percent from April 2008. Exports from Japan have been hit especially hard, dropping 70 percent (year-on-year) in April. According to the WSJ, all of the Japanese majors are dramatically decreasing domestic production on falling sales. Even without bankruptcy filings, it seems everyone in the gobal car game is facing some form of reorganization. Like Renault/Nissan’s new attempt to find another $2 billion in “synergy” savings. Try looking under the couch cushions, guys.