Six Things Not to Like about Obama Motors

June 2, 2009 by  
Filed under Economics

obama_motorsPresident Obama didn’t ask my opinion about the government takeover of General Motors. Neither did you. Not to worry. I’ve decided to share my views anyway.

I’m going to start by now referring to General Motors as “Obama Motors.”  I have a good reason. Whatever your thoughts on the deal or on politics, the outcome of the GM takeover is going to play a prominent role in defining Obama’s political legacy.  The event is so unprecedented in U.S.  history, the textbooks and biographies cannot ignore what has happened and how it will turn out. I predict it will not turn out well.

In no particular order, this is what I dislike about the federal control of General Obama Motors.

1. Fundamental decisions that should be based on business will now be based on politics. It started with the firing of Rick Wagoner. Wagoner was considered unfriendly to Obama’s vision of what the car industry should look like. I’m not defending Wagoner but it’s a sign of what is to come.  Egged on by the UAW, members of Congress are already expressing opinions about which GM plants should be closed and whether dealers should be shed. These opinions are based on what is best for their own constituents, not on what is best for GM. Industry executives have been summoned to hearings beginning tomorrow to “explain” these decisions. This will become a non-stop pattern. Even if he wanted to, Obama is powerless to stop the Congressional meddling.

2. GM will be forced to make cars and trucks that Obama wants, not what consumers want. Obama has positioned the takeover of GM to become an instrument of his new energy policies. Eventually, GM will be told what cars to make. You can be sure they will be smaller, slower, lighter, and more expensive. (The planned Chevy Volt is expected to cost $40,000.) It won’t matter that we don’t want to buy those cars. Obama will make us buy them by taking steps to increase the retail price of gasoline. The upward creep in gas prices has returned. There’s no stopping it now. It’s all part of the grand plan. Look for the FrankMobile, Doddger, and PeloSUV as future GM models.

3. Federal control of GM creates unfair competition. Ford elected not to accept bailout money. It will be punished for this. The government can and will maneuver GM’s finances and federal law to favor sales of GM products. Tax credits, more federal money injected into GM, “cash for clunkers”, CAFE standards, you name it. All will be manipulated in a futile attempt to have GM “succeed” even at the expense of Ford, which will try to do what is best for its shareholders. It’s not just Ford that will be treated unfairly by Obama Motors. The government cut a deal with the UAW to restrict the import of fuel efficient cars from overseas.

4.  There is no realistic plan for a profitable GM. Some people seem to forget that GM hasn’t made a profit since 2004. It has been on a death spiral. The demand for new cars has fallen dramatically even since then. Many economists think the drop in demand is permanent. As baby boomers retire, they will purchase fewer cars. Younger generations hopefully have learned that having a car payment is not a sign of financial maturity. It could take many years for GM to find a place in our economy where it can successfully confront competition from Nissan, Toyota, Honda, and Hyundai. Do you think these companies will ease off while GM struggles to recover? Not a chance. They will be going for the kill and I don’t blame them.

5. The government is incapable of effectively running businesses. If the government had any skills in operating a successful business enterprise, it would be making its own tanks, warships, and fighter planes. Instead, it contracts those out and generally does a lousy job at that. What should make us believe that it will do a better job with GM? As you ponder this question, use this mantra: “Amtrak.”

6. There is no exit strategy for the taxpayers. The billions in taxpayer dollars dumped into GM will be converted to stock. This essentially was a new government welfare plan designed specifically for the UAW. We own stock in a dead company that the government “hopes” will return to profitability. When will that happen exactly? What is the time deadline? When will we “get out”, using a phrase applied to failed plans of prior administrations?  Meanwhile, our own money will be used to churn out cars that we don’t want to buy. This could turn out to be like agricultural subsidies that never seem to go away. Maybe the government will use our stimulus tax dollars to build enormous storage areas to keep the unsold GM vehicles, right next to the government butter stocks. (Say, can you make an engine that runs on butter?)

What are your thoughts about the future of Obama Motors?

Image credit: Ke


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14 Responses to “Six Things Not to Like about Obama Motors”
  1. cjbr549 says:

    The Ford-GM situation sounds a bit like the situation that the rest of us are in. Those of us that show some responsibility get to be bill payers (i.e., saps) and the rest get the golden deal. I think that the UAW will have to give Ford the same concessions that they give GM and Chrysler (the other side of ‘collective bargaining’), but that won’t stop the government meddling in GM. One can only hope that GM’s cars are so bad that it will help Ford out in the long run. Also, I think the name already coined by the financial media is Government Motors (GM) thus far, which is a bit catchier I think and matches the acronym.

  2. When I think of point 5, I think of the United States Postal Service. I’m sure there are plenty more that can fit that mantra. Good, sound points you have.

  3. lurker carl says:

    General Motors has bent over into the position that our government is trying to place health care into. Anyone who thinks our esteemed leaders will deliver anything better than private industry or your own sweat and blood can provide is sadly mistaken. Take a test drive in government housing, Medicaid or the military; thinking Big Brother has your best interests in mind with goods, services and labor will change once you’ve experienced it.

    These bankruptcies puts Ford into an interesting sales position. FoMoCo management shook off the cobwebs several years ago, as it has done sucessfully many times in the past, while GM and Mopar blindly followed their failed business plans. This reorganization gave Ford the edge that the other domestic manufacturers are grappling for now. As buyers shun Government Motors and Fiat-Chrysler, Ford’s market share will increase. Until, that is, when Uncle Sam and UAW clamp down on Ford’s captive import designs and products that comprise much of the current and future Ford automobile lineup.

    So we will be stuck with a lineup of government mandated GM designs (think Vega and Chevette) and a bunch of Fiats with a Chrysler badge (think Yugo) that will finally destroy the last heavy industry left in the US.

  4. Michael says:

    I give Obama Motors less than 10 years to become an equivalent to another American power house of industry: Steel.

    Come to think of it: is there ANY industry that is controlled by a union producttive? Steel? Textiles? Education?

    Higly rewareded laziness is simply outrageous.

  5. MasterPo says:

    Well said.

    I’d add two things:

    Regarding your point #2, while I agree, that still won’t help Government Motors (may as well keep the achronym) either. Not when there is also Toyota, Hyundi, Honda, Nissian, etc etc. IOW, even Obama makes us all sell our cars and by tin cans on wheels I would *still* rather buy a Toyota than a GM. And I’m not alone in that thinking. So Obama will also have to lump on HUGE taxes and tarriffs onto imported cars to get people to buy GM.

    And secondly, even if there was an “exit strategy” *IF* GM ever did start pulling into the black, even just a fraction, do you think Congress would let the gov sell? Hell no! They’s claim being an investor with a profit is good for the country!

    Face it: The American auto industry is now nationalized for good. Never thought I’d see this day in America. :-(

  6. Love this quote:

    “Look for the FrankMobile, Doddger, and PeloSUV as future GM models”

    I’ve bought GM vehicles in the past, and have always had good luck with them. I can now say I’ll probably never buy another GM or Chrysler, as long as they’re under government control or taking bailout money. (of course i wouldn’t be buying a new car anyway.. used only!)

    This whole plan is just another huge boondoggle, and as you mention there is nor real plan for taxpayers to get out of this – as well as no real prospects for a profitable GM. How long will we have to subsidize them? What industry is next for government takeover?

  7. Ian says:

    The Empire is crumbling…China’s Red Star will rise and dominate the planet for our forseeable future…would it be better to learn Cantonese or Mandarin?

  8. MasterPo says:

    Ian:

    But the books and newspapers will record him in history as the greatest President ever!!

    Remeber that “history” is what goes down on paper.

  9. Ian says:

    MasterPo,

    Books & newspapers being a reflection of “pop culture” and easily manipulated by whatever faction happens to hold power are the least reliable recorders of history. Besides history is merely a collection of stories of events that may or may not have happened as depicted and are primarily written by people who in most cases were not present at the time to witness the alleged events when and how they actually occurred. “Greatest” is a very nebulous term. There are many “greatest” leaders in history that are erroneously revered by school children in their repsective cultures due to the State’s organized version of brain washing otherwise known as public education. The children of Cuba believe Fidel Castro is the “greatest”. Al Queda operatives including children believe Osama Bin Laden is the “greatest”. Members of the Third and Fourth Reich believe Adolf Hitler was the “greatest”. Christians believe Jesus Christ was the “greatest, Muslims believe Allah was the greatest, and so on and so on. Every interest group and faction has its hero (or villan depending if you belong to an opposing group). For all the centuries of so called “civilization” humanity continues to operate at a tribal level only slightly elevated from that of the proverbial “band of apes”. Good luck with your “greatest” whatever.

  10. perries says:

    Just think of the legions of entirely forgotten Great Leaders, lost even to history.

    And Mr. TML – agree with all you wrote above. I love to read your blog.

  11. I have always tried to purchase as economical, highest gas mileage vehicle as I can, however since I need pickups to drive great distance for my products, I look for V6, 2WD, etc., yet I need room for passengers as well. Unfortunately Detroit has gotten away from what many need (I know other business persons with similar opinion); most green vehicles to not address this as well.

    Now with the nationalization of two auto makers by a clueless/socialist president, this hope is gone completely and I am boycotting GM/Chrysler.
    I just purchased a new truck for my business (a Toyota) and although I did look at GM, I will not buy from this company again as long as it is government owned.

  12. MasterPo says:

    Ian – Big difference.

    In 50 years (probably much much less) when grade schoolers go to the library to do research for their class papers on early 201st century events they will find tons of articles in what are general thought of (true or not) as reputable newspapers like the NY Times and USA Today about how great Obama is, how amazing his policies are, how everyone just loves the man, how he created soooooo many awesome new jobs and brought hope and change to the world blah, blah, blah.

    Meanwhile there will be just as many articles talking about how Bush was the worst American Preident ever, how he is a war criminal, how he is an awful hater and liar, how the war on terror was unjust, etc etc.

    So what are school kids 50 years from now supposed to think?

  13. You’ve hit it right on the head with #2 – I can still remember the days of the Chevy Citation and the Reliant K. My friend’s father had a Citation – he nicknamed it the “Hesitation”. I think the GM takeover will do wonders for foreign car sales.

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