Bailouts, Bankruptcies and Buffoons: The Story of GM

(June 1, 2009)

According to the laws of capitalism, it is survival of the fittest. If one business makes more than its competitor, so be it. If one business can’t stay afloat, oh well. Sour grapes.
Typically, the rule isn’t to replace the grapes with a strand of fresh strawberries.
Yet General Motors is a different case. It is the second largest auto-maker in the world and employs nearly a quarter of a million Americans. The bankruptcy of the company would not only put the families of the employees (easily in the millions) at risk, but likely the foreclosure of the entire American automobile industry.
Pres. Obama knows this. Congress knows this. And educated Americans know this. This is why billions of taxpayer dollars have been pumped into the company in a bailout effort. Obama has sworn that he will stay “hands off” on the majority of issues and leave those up to management. He has also wisely forced CEO Rick Wagner out of his position and plans to replace a majority of the GM board. He has also smashed all car manufactures with new fuel efficiency requirements. While on paper that seems to only benefit consumers, car dealerships will soon realize that Obama has just made their products better and more appealing to consumers. After all, the reason to go Japanese is not the price or the design – it’s the durability and gas mileage of the vehicle.
So far, Obama has done a good job. Yet, I see problems in the foreseeable future. Yet I may be the only one, since this regime has yet to announce any type of actual future strategy for this company. When does the government walk away from the company? After it repays its debt? Does it even have to repay its debt? Will the government even walk away at all?
Create a little anarchy...
Create a little anarchy…

Exit strategy anyone? It must be in the Washington D.C. water. Once again, the “shock and awe” of the initial barrage has left our government clueless as to how get taxpayers out of the situation that they have found themselves in. Many are still waiting to hear how (or when) the President will be able to confidentially hand this company back to management.
While I agree with the bailout in principal, I have extremely varied views on its philosophy and execution. I feel that this company has lost its privilege to become wealthy and regain its power. Instead of giving GM a loan that it will never be able to pay back, why not invest taxpayer money into this company and retain it? The company should be operated as a non-profit corporation. Workers get paid. Management gets paid. Assets and profits should be allocated to relieve every taxpayer of a portion of their federal taxes every year.
Want a reason to buy GM? How about because technically – you own it  – and every car you buy is actually lowering your taxes. Would that work for you? And when the loan is paid back, GM can have their company back. Until then, they are the property of the United States government.
Is this socialism? Is this what so many Americans wearing anti-Obama t-shirts will say? Not likely, since most do not understand the true nature of the business world. But in a sense, this company would be operated with a socialistic field. Absent will be the chance of capitalism for this company. Yet it is a privilege that they have already had and lost. Until their debt is repaid, I just can’t understand why the taxpayers should give CEOs another opportunity to make themselves fat in the pockets.
For every GM, there are thousands of business owners who have gone belly up. And there are no second chances in sight. GM should be thankful for any scrap they get. So put them back to work. Just this time, put a hammer and sickle in their hands.

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