I came really close to banging my fist on the steering wheel when it became very clear that the government intends to bailout General Motors. What? How is this a good plan? And why is it my responsibility to rescue them? So, today brings us another post in the That Makes Me Stabby series.
Why General Motors Wants a Bailout
Basically, GM wants a bailout because they failed to run their business properly. Unlike Toyota, which operates efficient factories in non-union towns and plans for the next 25 years, GM was content to stick with high-cost union towns and plan for the next 25 minutes. Rather than develop a wide range of cars, they chose to put most of their eggs in the truck/SUV basket. Now they can’t sell those cars to save their lives and they have nothing else to offer.
Toyota, in the meantime, cut its losses when its Tacoma truck failed and opted to build more small cars instead. GM wants us to give them money so they can rebuild their line, which they’ve previously failed to do.
There’s also the problem of reputation. Again, I look to Toyota, which focused on building high-quality cars and developed a reputation for durability. GM cut corners and built crappy cars no one wanted. They apparently make better cars now, but they can’t shake the impression that their cars are unreliable.
At this point, GM is so deep in the hole that their only hope is to get bailed out so they can merge with Chrysler.
Why Is This a Bad Idea?
Robert Reich said it best in his Marketplace piece this morning, but I’ll sum up his arguments, which I totally agree with.
1. We already have a system in place to deal with this and it’s called bankruptcy. Companies with bad business models go bankrupt. Their creditors get in line, debts are negotiated, and the company reorganizes into a leaner, better-managed company. It doesn’t typically shut down, and I don’t expect that GM would vanish if it went into bankruptcy. Several major airlines have emerged from bankruptcy and continue to fly years later. Yes, jobs would be lost, but they’re going to be lost anyway.
2. Bailout proponents argue that bailout out GM will save jobs. However, GM wants the money so it can merge with Chrysler. What happens when two companies merge? Streamlining, which is code for lay-offs. Car lines will have to be cut, duplicate admin functions will be cut, etc. Why does anyone think this is a good idea?
Furthermore, the argument that we have to save the “Big 3″ doesn’t hold water if the bailout will ensure that two of them merge, resulting in the “Big 2.”
3. If we keep bailout out these companies, what motivation do they have to become more nimble in responding to shifts in the economy? Again, I look to Toyota. How is that they, along with Honda and other Japanese auto manufacturers, saw demand shifting, but the Big 3 didn’t? Why should we reward an inability to plan for the future and respond to market realities?
Out of all the bailout plans, this one might have me the maddest. If GM didn’t want to fail, they should have made better cars. It’s not our responsibility to bail them out because they chose not to. It was their responsibility to earn my money. They didn’t, so they didn’t get it, and I don’t want them to have it now, either.
What do you think of the GM bailout plan? What’s making you stabby this week?