Monday, November 17, 2008

GM to US: 'Spare some change buddy?'

In these troubled times, there has been quite a lot of talk of bailouts. With $700 billion already in the pipe to save creditors, or bankers, or real estate (whoever it is this week) the federal government has committed a lot of resources to getting the country back on its feet.

As well it should. After all, even President Bush, who has a penchant for being out to lunch when it comes to policy, has pointed out that without decisive action on the part of governments, the world economy could sink below the level of the Great Depression.

Mr. Bush's sudden uptick in government check-writing led some TV pundits to label him as America's first socialist president. Nothing could be further from the truth. He's not a socialist; just a (really) big-spender. Socialists are usually in favor of supporting people, not companies. That's a typical Republican strategy.

So is the $700 billion going to homeowners? The unemployed? Infrastructure projects? No. It's going to banks. And the bankers and insurance agents get to go to spas with the proceeds.

Of course, from a policy standpoint, there are a multitude of reasons for the bank bailout. There are certainly reasons not to bailout corporations--and the interesting policy question addresses the balance between these sides of the debate. But let's not argue about the bailout. That's water under the bridge.

But there are new people seeking handouts these days. It appears that General Motors is the proverbial beggar in sheep's clothing hanging around the Capitol steps. That's right, in an era of high gas prices, the manufacturer of the Hummer is asking for help because it can't seem to foist these cars off on consumers. This isn't a new quagmire for Detroit.

In the 1970s, with gas lines stretching around the block, GM was making cars the size of small tugboats. By the turn of the century, they'd graduated to marketing cars based on the idea that in an accident, they'd flatten anything else on the road. And a few years ago, when gas prices were starting to inch upwards, they introduced the H3 as a smaller version of their suburban assault vehicle.

Excuse me? The H3--a more fuel efficient Hummer? The whole reason people bought Hummers was to show your neighbors that you didn't care about trivial things like gas prices and saving the environment. Doesn't a (more) fuel efficient mini-tank defeat the purpose?

Anyway, now it looks like up on the Hill, conservatives and liberals alike are leaning toward a GM bailout. Because corporate Darwinism is apparently not enough. A company which has over time proven itself unable to adapt to building anything other than the largest cars on the road deserves life support in the eyes of Congress.

And it's certainly understandable as to why. After all, GM employs over 250,000 people and is a major employer for Michigan. Were the company to go under, it would deal a devastating blow to the economy. But a blank check certainly doesn't seem to be the right way to go. If the past is any indication, they'll use the government money to finance the construction of something that takes even more money to fill up.

But besides the obvious tilt toward financing our auto- and oil-addicted society, the whole premise of corporate bailout rankles me. After all, for the past several decades conservatives have derided programs like Workfare as socialism. Bailouts stemming from corporate malfeasance, however, is treated as good policy.

And GM certainly has a history of malfeasance. Beyond poor decision-making in terms of car models, they were also convicted in a conspiracy to dismantle transit networks across the United States. Harvey Wasserman over at Common Dreams thinks that GM should be forced to rebuild what they destroyed as a condition of being bailed out. That's not such a bad idea.

Perhaps it's time for the transit industry to get a serious infrastructure program. What if 2009 was for transit what 1956 was for highways?

In this time of change, dare we dream big? I think so.


uthanda said...

Let me get this out of the way first: I agree with you on the bailout of GM. In a sense, they've made their bed and now they get to lie in it.

However, I would like to point out that GM does make some very fuel efficient and generally decent vehicles. They just happen to sell them in Europe (Opel/Vauxhal).

One way they could have handled this transition better would have been to bring these models over (the Corsa for example). However, because of how our auto regulations work, that would have required a complete recertification process.

Maybe DC could help by allowing things like NCAP certification to substitute for NHTSA crash testing (easy) or modifying emissions regulations to allow for European emissions to apply here (harder).

Of course, GM should have started this effort a while back (as they did with the new Opel/Saturn Astra), but a loosening of these restrictions could have allowed more flexibility in importing other designs and bringing them to market faster.

adam hartung said...

Markets are going through major shifts related to advances in digital solutions and global access to low-cost resources. Those companies that will thrive are those that will create new solutions which adjust to these shifted markets. Just because a company survived last year and has a few bucks does not mean it will succeed in 2009 and onward. It requires innovation to deal with these major changes, and only those companies that innovate will create returns allowing them to emerge as strong, viable competitors. Read more at

aiyipianni said...
This comment has been removed by a blog administrator.
aiyipianni said...
This comment has been removed by a blog administrator.