Category Archives: $700,000,000,000 Bailout

Should we bail-out General Motors?  NO!

How about, at most, we bail-down General Motors. 

Let’s face reality.  General Motors has had cancer for over 35 years that just reached all the major organs.  Back in the early 1970s they first encountered a surprising spike in high-priced gas during a time when they sold fabulously large and gas-guzzling vehicles (deja vu?).  At that time Toyota was not even a viable competitor but because they made smaller  cars they had a more fuel efficient fleet (and, believe it or not, lower quality) and they were able to grab an increasing share of the market.  Dumb luck played into their hands but they seized the opportunity.

At the same time of Toyota’s ascendancy GM, however, took an entirely different tack (I know I worked there from 1988-1992 and yes worked on the Saturn EV-1 doing all the initial market research).   They continued to lose market share by ignoring the market or, even when they got it right, building poor quality product, or even when they got that right doing a poor job of pricing or marketing them.  They even had the world’s first alternative fuel vehicle (Saturn EV-1) and gave up on it when California  law no longer required it.  Toyota, on the other hand, stood by the Prius for 11 years and now look at it.

The sad truth is that the weakness of the GM business model means that, at best, GM can survive (no matter how much help they receive) as a much smaller entity.  It is fruitless to provide a “bail-out” and any assistance should be in the form of a bail-down.  It should be designed to allow a smooth downward transition of GM, maybe not to oblivion but to a much smaller company with AT MOST 3 domestic divisions (I vote for Cadillac, Chevy and Saab) as opposed to the 8 they have today (more than they had when they had 50% market share then as opposed to 25% now).  No matter what is done jobs will be lost as GM cannot continue to survive in its present form or present size (and there is 30 years of trend data to back that up). 

Looking at any help for GM as a bail-down as opposed to a bail-out also helps to make better decisions that have a longer term positive impact.  A bail-out pours money into an archaic “blue” AND “white” collar management structure that cannot operate efficiently and will only continue to decline  (throwing good money after bad).   A bail-down shifts those funds to the innocent victims, namely the individual employees (in the form of unemployment benefits, retraining, relocation) currently trapped in that archaic structure and provides a transition out and the ability to reorganize for more efficient use of their labor in growing companies.  It seems to be an overlooked fact that there is actually an American automotive company that is hiring and even building a new plant.  Its called Tesla and its here in Silicon Valley.  Lets get some of those employees some plane tickets (to save on additional fees at the gate leave the union baggage behind).    Not to mention they could buy some of those foreclosed houses in Gilroy and Vallejo we need to get rid of thereby solving two problems at once.

A lesson to learn from the AIG is that those initial bailouts never work and only get larger as time goes on so that is why a much more metered and purposeful response is in order that benefits the individuals and not the companies.

Oh and President-Elect Obama I have good news for you.  You have a vision of one day being able to buy a hybrid or alternative-fuel vehicle made right here in the United States.  I applaud that vision and am happy to tell you that two years ago today I traded-in my old gas-guzzling Pontiac for a beautiful mid-sized HYBRID family car made right in Lexington Kentucky that gets 35 MPG OVERALL and has more domestic automobile content than the Ford Mustang.  Its called a Toyota Camry.

Long live Lieutenant Motors!!!