In an odd turn of events, former GM Vice Chairman Bob Lutz thinks that anyone that criticizes GM is not only "mis-informed" but insists that those "foaming ideologues" that criticize the car giant are "damaging the Republican Party."
It is interesting that an executive in the company derided as "Government Motors" is trying to direct attention away from his minders in the Obama administration and toward the opposing party, and just before a general election at that.
It is also interesting to see Lutz defending GM as the "future" of the car business. Lately GM has not been turning out the sort of products that puts the company at the head of much of anything.
For one thing, value seems to be an area where GM is in the back of the pack. James B. Stewart of the Wall Street Journal's SmartMoney.com found late in April that car shoppers don't find GM to have much value to its products.
"Indeed, value was a theme I heard over and over," Stewart wrote, "a reminder that high gas prices and malaise about the economy are having a profound effect on consumers, even the auto buffs who tend to populate car shows. This struck me as a marketing challenge for GM. Much as many shoppers seemed to like the GM offerings, nearly all of them cited models they deemed better values elsewhere at the show."
If GM is the future of the auto industry as Lutz claims, its products are going to have to give customers the value they are looking for. Thus far they aren’t.
Speaking of the high cost of fuel, GM did seem to lead the field in one area. As Reuters recently reported, it led in inaccurate fuel gages.
The National Highway Traffic Safety Administration said on its website it opened a preliminary investigation covering Chevrolet Trailblazers, GMC Envoys, Buick Rainiers and Saab 9-7s from model years 2005-2007 after receiving 668 complaints alleging inaccurate fuel gauge readings.
Those models ranked as some of the worst in value, safety, and/or reliability, and gas mileage. As David Freddoso quipped, "Thank goodness we put up $80 billion to bail out GM and Chrysler. They are now building such wonderful cars that they have achieved total dominance of the Forbes "Worst Cars on the Road" list…"
Still, Vice Chairman Lutz wants to label anyone that sleights GM as a "foaming ideologue" for doubting the company. One wonders if his spin is merely bluff or something else?
At the Detroit Economic Club today, Treasury Secretary Timothy Geithner tried to claim the auto bailout is a success.
It certainly doesn’t seem like a success for the taxpayers. GM stock is about $30 today, and unless it gets up to $54, the taxpayers lose money on the deal. Why would it go up? You want to fight high gas prices by buying a Volt? How does $41 grand a pop sound? And still GM loses money on every one it sells even at that price. Not only that but we are seeing that government subsides for electric cars is good tax money wasted in any case.
It doesn’t get any better. Worldwide, U.S. cars aren’t selling worth beans and domestically, GM is lagging because people who hate the bailouts won’t support it with their car-buying dollars any more than they did with their votes last year when they kicked out every incumbent they could find who’d been for it. And GM still has all its old problems, too, like those big fat union pension obligations. Sadly, nothing that caused GM’s financial trouble has been fixed.
But the spin continues. Last December, Geithner said the auto bailouts were “investments,” which “will show a positive return, not a negative return.”
As the 2010 midterms proved, the people know better. They know government can’t run an automobile company and they know the deal was mostly political payback to the UAW, the biggest culprit in why GM and Chrysler were in trouble in the first place -- not that company execs did themselves proud, either.
People didn’t believe Geithner when he said we’d make money on the deal, and they were right. Today’s speech was more of the same, and it still won’t fly.
Geithner, Obama and the rest of the gang that brought us this monstrosity may or may not actually still think they kept the economy from chaos by the bailout, but they’re just believing their own scare tactics if they do.
As George Mason University Professor Todd Zywicki pointed out in depth, a normal bankruptcy would have worked just as well. Sorry, Timmy. Your spinning wheel is getting us nowhere.
GM, Obama's favorite federally owned car company, was thrilled to report in March that sales figures for the Chevy Cruze helped put the company on the fast track to success but it wasn't the best news when the wheels began to literally fall off the Cruze causing a recall of GM's "success" story.
As we will remember, last November Obama proclaimed GM a great success story, one that justified his raging fever for bailouts. This March GM buttressed Obama's glowing account by reporting rosy sales figures in which the Chevy Cruze made a big appearance. Then GM reported that the Cruze and the Malibu accounted for "98,950 sales – roughly one of every four Chevrolets sold in the first quarter."
But let's not break out the champagne too soon because only weeks after GM celebrated sales of the Cruze, at least one steering wheel popped off in transit. It's a literal case of the wheels coming off GMs success story.
In one case, a Chevy Cruze owner was driving 65 MPH on a highway when her steering wheel broke right off. With her in the car were her young son and her own elderly mother. None were hurt fortunately.
Now GM is recalling 2,100 cars in hopes of preventing another such unfortunate accident.
GM reported that it had traced the defect to a relatively small number of cars that had initially had the wrong steering wheel installed. When the error was discovered, at least in the case of the one car noted above, the replacement wheel was not installed properly. Regardless a recall was initiated.
None of this is good news for GM as the company's market share has been experiencing a steady decline over the last few years.
A few days ago I wrote about how the Obama administration has stuffed the upper echelons of management at General Motors with government lackeys who have no experience in the auto industry and how Obama's government will lead GM to ultimate failure. Today we see yet one more step toward GMs ruin with government plans for subsidies that the taxpayers will end up paying for.
The Washington Times' Kerry Picket reports that some Democrats and the geniuses Obama put at the top of GM, much derided as "Government Motors," are proposing that taxpayers be tapped to foot the bill for tax credits and rebates for customers that buy the failed Chevy Volt.
Michigan Senator Debbie Stabenow has proposed legislation known as the Charging America Forward Act (S.298) that will give federal cash rebates of $7,500 to anyone that buys the Chevy Volt.
The Department of Energy claims that this rebate program idea is somehow just like the Cash For Clunkers program. But this couldn't be more different.
First of all, this program is only for one car model, the Volt, not just any car model. It isn't likely that the program will stimulate the greater economy. Secondly, the Chevy Volt is a failing model. thus far in 2011 GM only sold 602 Chevy Volts. The Volt's month-to-month sales were down between January and February, too. Sales went from 321 in January to 281 in February.
The fact is that these thousands of dollars of rebates will not do much good and will cost far more in administrative costs than it is worth doing. Not to mention that it will keep GM manufacturing a car that no one seems to want. The latter is the worst part of this as GM will continue putting resources to a failed model to sustain Obama's green initiatives despite poor sales.
This is further evidence that GM is now a political body and not a car manufacturer. It is also further evidence of the seeds of failure being deeply planted in one of the nation's largest corporations.
The President, of course, sees this differently. He sees a future for the labor movement essentially maintaining the current status quo on into the 21st century economy. Notwithstanding the increasing burden of pay, benefits and pensions, and the irrestistible pressure of global competition, we will "win the future" by making large infrastructure investments which will yield a high enough return to pay for our obligations.
Smith and Obama seem an odd pair at first. But think this through. Both took over as CEO when their organizations were facing financial duress and existential threats to the enterprise. Both were, however, "company men" (Is there a "company" more insular than the Chicago Democratic machine?). Both spent prodigious sums on big ticket infrastructure projects. But neither was willing to do two absolutely essential things: a) restructure the enterprise to be smaller and more responsive and b) address the long term labor cost obligations of the firm.
Smith instituted several initiatives that included forming strategic joint ventures with Japanese and Korean automakers, launching the Saturn division, investing heavily in technological automation and robotics, and attempting to rid the company of its risk-averse bureaucracy. However, Smith's far-reaching goals proved too overambitious and overwhelming to actually be implemented effectively, in the face of the company's resilient corporate culture and bureaucracy. Despite Smith's vision, he was unable to successfully integrate GM's major acquisitions, several of which also failed to tackle the root causes of GM's fundamental problems.
Smith's tenure is commonly viewed as a failure, as GM's share of the US market fell from 46% to 35%, and as it took on considerable debt causing it to lapse close to bankruptcy in the early 1990s. As a result, CNBC has called Smith one of the "Worst American CEOs of All Time"
Smith's efforts were basically an effort to throw cash at GM's problems and hope the sheer weight of remedies would right the ship. But the technology fixes that buying EDS and Hughes were supposed to augur in fizzled. Saturn never achieved self-sufficiency and drained resources from the core brands. And new models arrived late and over budget.
The anti-Smith was Ross Perot, who came from a non-union background in Texas. Perot was a major GM shareholder after the EDS deal and chafed at the waste and delay that exemplified GM, but was bought out and sent on his way before he could annoy the establishment further and cause the firm to mend its ways.
Perhaps Smith's greatest failure was his unwillingness to address GM's unsustainable labor and retirees costs. Of course, Robert Stempel and John Smith, Roger Smith's successors, had no stomach for going toe- to toe with UAW. Instead, the same old UAW contracts were signed and the same jobs banks and retirement packages left in place as the firm slowly lost market share (propped up by low financing and fleet sales )
GM was left 15 years later hoping their retirees would expire fast enough to enable it to compete. It lost that race and filed bankruptcy under the auspices of the Obama administration.
Samuelson is right. The public sector is going to go down the same road as unionized manufacturers like GM. The states are about where GM was in the 1980's---the bump in the road has been hit and the time was come to think long and hard about where to go next. And maintaining a cost structure that accelerates faster than the economy that pays for it is a ticket to doom.
They are going to restructure their long term labor and benefit cost structure in a fashion that over the next couple of decades their states can afford. Remember, both NJ and WI are old industrial states with slow growth. They need policies that will recharge the private sector, but have to come to grips that even the best-case scenario now won't pay for what prior adminstrations have promised.
If there is to be pain, better it be dealt with now while the public instrumentalities across the nation are still going concerns, rather than later when actual insolvency turns our state governments into little Irelands and Greece.
The Democratic Governors claim their approach is "more pragmatic" In the short term it will be more popular to keep labor peace and give bond money away. The GM management would have been excoriated in the short term by Wall Street had they pressed hard enough to cause a strike by the UAW. But in the long run, one or two bad quarters would not have caused the firm to fail. Kicking the can down the road did.
And even in the not so long run it can look pretty bad.
After all, when GM couldn't sell its cars and was stuck with lots of big plants and high priced employees, what was Roger Smith left to do? Oh, yeah....he shuttered the plants in Flint and laid off the workers.
Will some annoying filmmaker in 2015 or 2018 be chasing President Obama or a Governor like Dan Malloy around asking why the public sector was forced into massive layoffs? Or is that just not done to Democrats?
Broadly speaking, the U.S. welfare system divides into two parts -- the private, run by firms; and the public, provided by government. Both are besieged: private companies by competitive pressures; government by rising debt and taxes. GM exemplified the large corporation as private welfare state. In contracts with the United Auto Workers, GM promised high wages, lifetime employment, generous pensions and comprehensive health insurance. All this is ancient history: New workers get skimpier benefits. .......
Pressures on private and public welfare won't abate. The economic conditions that encouraged corporate welfare have long since vanished. In 1955, GM, Ford and Chrysler accounted for 95 percent of U.S. light vehicle sales, reports economist Thomas Klier of the Chicago Federal Reserve. With market dominance and technological leadership, the Big Three assumed they could pass along to customers the costs of job guarantees, high wages and fringe benefits........
In theory, expanding public welfare could offset eroding private welfare. President Obama's health-care proposal reflects that logic. The trouble is that the public sector also faces enormous cost pressures, driven by an aging population and rising health costs. The Congressional Budget Office projects the federal debt will double as a share of the economy (gross domestic product) to 82 percent of GDP by 2019.
Any sober examination of figures like these suggests that the system has promised more than it can realistically deliver. We are borrowing not to finance investment in the future but to pay for today's welfare -- present consumption. Sooner or later, the huge debt will weaken the economy. Nor would paying for all promised benefits with higher taxes be desirable. Big increases in either debt or taxes risk depressing economic growth, making it harder yet to pay promised benefits.
The bottom line is that if the Fortune 500 couldn't provide free health care to all their workers and dependents, it's hard to see how governments are going to do it--that is--without tradeoffs which politicians aren't going to disclose up front.
I also find it interesting that the most vocal Congresional proponents of "public option" health care are those politicians who came of age at the tail end of the Great Society---Ted Kennedy, Chris Dodd, Henry Waxman, et al.---all of whom would like to pretend that big government never really failed--it just got bad press. And we all know Barack Obama "missed the 1980's"
Roger Smith may seem to be a light year away from our suave , metrosexual President. But maybe not. When Smith took the reins at GM, the firm was challenged, but huge. Smith thought by sheer force of revenue he could buy GM's way out of trouble. He spent profligate sums on his vision--buying Hughes Electronics, buying Ross Perot's EDS, building huge new assembly plants like Poletown and Buick City even when GM had plenty of old plants, starting the new Saturn brand to compete with Toyota.
Ironically, when American business was in the process of reinventing itself by becoming nimble, flexible and customer-oriented, Smith remade GM into even more of a command and control organization than he inherited--removing divisional autonomy.
And a time when GM should have been trying to right-size itself with future demand, establish a realistic labor-management relationship and build its own organic resources, Smith brought his version of "Hope and Change"
How exactly is Barack Obama's economic vision different than Roger Smith's. He is trying to buy off the old labor establishment and spend his way past the problems we face--instead of forcing the painful but necessary reforms we will need to be competitive in a cutthroat global economy. And he is trying to impose centralized management upon a dynamic economy.
Let me make one other point. If we adopt "cap and trade" much of the heavy industry left in the Midwest will give up the ghost and move to Asia. Then the workers will be retrained for health care. But "health care reform" is supposed to cut costs. In practice, that means closing hospitals and firing employees. Out of the frying pan, into the fire. Jobless recovery, anyone...or "Player Piano"
It's sorta common knowledge that our President, a native of urban Chicago, is not a fan of the SUV.
One prominent auto magazine had this take on his mandate to massively increase the fuel economy of the American motor fleet.
Obama's CAFE Fuel Economy Standards to Create Fleet of Tiny, Expensive Vehicles - Car News
But we "know" "everyone loves the environment" and "everyone hates SUVs". So the car buying public is reacting positively to how the auto industry is being changed?
It might be gone. Even with the auto industry mired in depression – sales are down nationally 36.5 percent – big vehicles such as the Ford Expedition and Chevy Tahoe are in tight supply because of drastic production cuts that automakers imposed last year as sales began to plummet.
Now, a year after $4-a-gallon gas nearly killed SUVs, some dealers in this market are selling them for window-sticker prices. Moreover, most late-model used pickups and SUVs have regained all of the thousands of dollars in trade-in value they lost last summer, dealers say.
O.K. , this is Texas, the biggest , reddest and right now most prosperous part of the country. But don't think this is likely to be an aberration. And it is going to be a big problem in trying to recover much of our $100 Billion or so investment in Detroit.
The competitors to GM and Chrysler have to follow CAFE too, but are under less intense pressure to be "green". Look for Ford and Toyota to maximise production of Explorers and Highlanders if GM and Chrysler are pressured to hold down production. And look for SUV prices and profits to rise further due to regulatory scarcity.
The Obama brain trust will force the two government owned car manufacturers to develop a product line that appeals to young urban sophisticates. ---not the traditional market of "apple pie and Chevrolet". Few of these folks are going to be pried loose from buying foreign brand automobiles. They've just become too accustomed to doing this. Sounds like Ford is going to gain lots of market share as the last "real American car company" if it can avoid running out of cash.
I'm certainly not arguing that the previous management of Detroit were a bunch of wise men. But Detroit made SUV's because they were profitable. The Chevy Volt will not be. So the new crew running the car business might lose even more money than the old crew did.
And make the SUV back into a huge status symbol due to its scarcity.
If Chrysler and GM had been permitted/forced to declare bankruptcy months ago then there would not have been massive amounts of government money owed by those two companies. As it was the debt owed allows the government to claim a majority ownership of both companies.If the single entity owning a majority of GM and Chrysler were not the US government would they be subject to a anti trust ruling from the federal government?How much collusion will there be between Chrysler and GM in the future with a common majority shareholder?
Totalitarianism is once again on the march. It's coming at us so fast and from so many directions it is difficult to see as a whole, though the pieces are quite familiar.
Let's start with President Obama's most recent encroachment on the private sector, the putative firing of GM's CEO. Nothing in the Constitution tells us that Presidents should maniuplate the leadership of private enterprise, or usurp the responsibilities of shareholders and boards. While I shed no tears for GM or its failed CEO, I wonder about Obama's vision of the Presidency when he behaves more like Hugo Chavez than Teddy Roosevelt, our most activist President when it came to clipping the excesses of big business.
When in modern times has a President taken such invasive action in the private sector, apart from Richard Nixon's imposition of wage and price controls?
"He has the massive will of the American people behind him -- and he has been granted permission by us to do what he sees fit. If you liked this week's all-net 3-pointer, stay tuned."
To do what he sees fit. We're a long, long way now from the American political heritage of Rousseau, Locke, Burke, and Jefferson when we think like this.
Tough economic times are opportune moments for totalitarianism, and sometimes it comes with charismatic leaders who buff it up with charm and soaring rhetoric. Finally, though, all they offer are their own beliefs about what is fair, just and right. And when the timing is right, a lot of people will agree with them.
What is fair, just and right is usually defined against a fearful backdrop of scoundrels, represented by dehumanized stereotypes: The rich, bankers, lawyers, hedge fund managers, and usually Jews (don't worry -- that's coming).
Consider Glenn Beck's questioning of Connecticut's Attorney General, who could not offer any legal grounds for harrassing the bonus babies of AIG. Finally, he fell back on his perception of popular sentiment -- that AIG employees got "money they don't deserve."
Who's to be the judge of that, if not your boss? Apparently, more and more people feel comfortable making Obama the final judge of more and more things: What should taxpayers subsidize, who should be taxed more, what people ought to earn, what constitutes social justice.
To do what he sees fit. It is really no different than what Germans, Argentinian Peronistas, Spanish Francists, Italian fascists, and Nicaraguan Sandinistas granted to their leaders.
Come now, you say -- Obama's no Hitler! He is not. But National Socialism and every other fascist movement took root with government control of private industry and institutions (especially universities, and press). Private ownership, government control. Take away the funny mustaches and silly uniforms, and that's what totalitarianism is. Sometimes it is accompanied by imperialism and mass slaughter, but sometimes it is quieter than that (Tito, Castro, Peron, Chavez). Only the scapegoats change to suit the Leader's needs.
You won't catch President Obama wearing a funny uniform, but his minions in Congress just passed a bill that triples funding for Americorps, and organizes them into "local cadres," with uniforms, military-style discipline, and a committee to consider compulsory service for Americans of all ages. Even the San Francisco Examiner, hardly a conservative oracle, called it "creepy authoritarianism." And those same minions are considering passing his reduction of tax deductions for charitable contributions -- a move no doubt designed make the non-profit private sector more dependent on government, and less on private donors.
All of these policies, and more, show us a President who is a classid statist, with a profound distrust of the individual, and a will to curb individual freedoms in the interest of groups -- favored political classes of people. Most people won't be among those favored groups when it's all said and done.
The rising totalitarian sentiment is not confined to the left. It's worth remembering that our modern left and right, Communist and fascist movements, both originated from the dialectic philosophy of Hegel. Increasingly, we see fascist and Communist flags in public demonstrations in the streets of London and Paris, not to mention long-forgotten fascist flags and insignia increasing displayed at professional football matches in Europe.
Unconnected things, perhaps. I think not. I think we're seeing social phenomena -- Obama is one example -- that reflect people's reactions to widespread economic insecurity and fear for the future, a call for someone to just fix it, to make things right again. To do what he sees fit.
I've allowed the dust to clear after last week's late night auto bailout debacle. In the passage of time, Senator Dodd's performance looks sorta like this
Indeed, one wonders why Dodd bothered at all, since he seemed to not care what sort of dreck the federal government generated on an issue of rather pressing concern...saying of Bob Corker
"If perfection was supposed to be his goal, he was sent on a mission he could never complete,"
An effective chairman would have rounded up his votes and forced some form of temporary compromise between the GOP and the UAW to pass a bill that offerred some meaningful relief. But after the TARP disaster, http://www.thenextright.com/ironman/chris-dodd-on-the-bank-bailout-yep-i-pulled-a-plaxico Chris Dodd's delivery skills might be better employed at Domino's
It's not just that Dodd is a liberal, or as my CT compadre Artful Doddger points out, his act back home is wearing very thin http://theartfuldoddger.blogspot.com/2008/12/this-was-not-good-weekend-for-publicity.html. It's that he just isn;t very effective at what he does anymore. And after almost 30 years in the Senate, there's little reason to expect improvement.
I would also suggest to the "save the planet" people out there that the market is indicating that in the immediate term, a massive retooling to electric cars is going to be an exercise in fiscal insanity. If Toyota doesn;t see that much of a market for the Prius until maybe 2011, http://www.courant.com/business/nationworld/wire/sns-ap-toyota-plant,0,7578590.story, perhaps a more prudent short to mid term strategy for Detroit might be to maximise revenue selling conventional vehicles?
Sure it's unplesant and dull, but I've yet to see anyone explain how this works even for the purposes of postponing a bankruptcy until better economic times unless the Detroit 3 cut costs and sell profitable cars http://thenextright.com/ironman/can-hope-change-a-spark-plug
(as an aside, I figured out why the image is a) Detroit only sells big SUV's and b) no one buys their cars. I was in lower Fairfield County this morning. That's the deal down there--the only GM products I saw were Escalades and Tahoes--yuppies assume that's how it works for the whole country)
I might also suggest much as the auto industry is a big picture, it isn't the biggest picture. Since the election of Obama, we have seen the Dow plummet and recover, but as the zeroes on the proposed stimulus package get larger, the value of American currency gets smaller.
