First, we should be accurate about how we use the term 'private.' I think the distinction people are trying to make is that it's not a federally owned company. However, GM is not a private company, it is a public company. I only point this out as a pet peeve, and I'm not arguing that that makes them a federal company. I'm simply saying that a publicly traded company is not private. That being said, here's a few thoughts on questions raised over the last few days:
- Over 15 years ago, GM had the opportunity to place itself on the cutting edge of automobiles with the production of the EV-1. This car consumed zero gallons of gas per mile and had zero emissions. For detailed information about what I'll briefly outline here, watch the great documentary, "Who Killed the Electric Car?". The short story is, a culmination of forces including the oil lobby saw to it that the production of affordable electric cars cease and desist and even ensured that EV-1s already on the road would be reclaimed and promptly destroyed. In place of the Electric Car, GM began production on the Hummer. All this to say that GM dug itself into a deep hole by confining itself to the production of vehicles that were so inefficient and consumed so much fuel, they couldn't even be sold in most foreign markets; nor, as we're seeing now, the U.S. market.
- As a result of such business practices, GM could no longer keep itself afloat. The leadership turned to the federal government. I am not well-versed enough to know whether the stockholders of the public company were unwilling to support it, or if the company was bent on receiving taxpayer dollars. At any rate, the federal government approved billions of dollars (your dollars) to go towards this failed company. Then, as we all know, the company asked for more money, and got it.
- For this reason, as much as the federal government deserves to be critiqued on their use of taxpayer money, GM should be critiqued just as sharply, for their willingness to even think about taking tax dollars from the American people directly for themselves completely isolated form any type of service offered, goods sold, etc. If you want to talk about rewarding failure, here's a perfect example.
- Finally, having received an outlandish amount of funding from the federal government, GM effectively sold their soul. If the federal government and its money are the only thing keeping your company afloat, then Barack Obama can put whoever he wants in charge.
- As a sort of aside, I would also be interested in hearing whether the company, whose demise or even the thought thereof warrants the absolutely insane type of bailout we've seen (the defense of which rests on the fact that if the company collapses, our entire economy will collapse), is in fact already nationalized.
Being as short sited and trigger happy with our money as our government is, does not necessarily entitle them to take over a corporation. The government has already handed over our hard earned money and asked for nothing in return. Barak cannot turn around after the money is given and start placing demands on GM. What the government should have done (although this is fairly simple, thus of course politicians might not be able to grasp it) was give the company money under a set conditions. Give GM money BUT ONLY if the president steps down. Give AIG money BUT ONLY if they don't give a million of it to each of their executives as a bonus for their incredibly poor investment decisions. As for GM already being a nationalized company, the fact that we have gotten to a point where the demise of one company could lead to the demise of our entire economy, and the fact that this company is dependent upon non-renewable resources frightens me. If GM is a nationalized company, and is what our economy hinges upon, we as a country have chosen a poor poor champion of business.
ReplyDeleteRob Young
I find this whole debate somewhat strange. If a company is being supported by federal dollars, how does the leader of the federal government NOT have a say in how it's run? It seems perfectly reasonable to suggest GM forfeited a good portion of its direct control by coming to government for capital.
ReplyDeleteTo our friend Rob, Obama did give the automakers sets of directives; specifically that they submit a specific business plan outlining how they would become profitable and how they would turn their businesses around. They've all had months to create such a plan and even then it still wasn't suitable.
The options then were that GM would do a major shake up of their leadership and Chrysler would either find a partner or go under.
I do agree with Rob in that our industries should be diversified enough that if one industry goes under an entire state won't go under with it. I'd love to see our automakers make green cars, but also invest in high-speed rail and public transportation. High speed rail would quickly reinvigorate Michigan's economy by creating access to markets in Chicago, Indiana and Ohio as well as reducing our dependance on fossil fuels (by providing easy and cheap transportation for those who couldn't afford green energy cars immediately).
All that to say, I don't think Obama's a bad guy for dictating some things to GM. Beggers can't be choosers.
josh- i share your sense of confusion over the strangeness of the debate. that's exactly what i was getting at in the fourth bullet point. if the federal government is essentially the chief stockholder, then we shouldn't act like they're doing something outrageous when they make decisions in that function.
ReplyDeletei do think the whole situation is absolutely absurd. when a mom and pop grocery store is on the verge of being run out of business by wal-mart, will the federal government supply them with funding in order to retool and stay afloat?
the problem is that the federal government has become so huge and abstract that it requires an equally huge, abstract market to sustain itself, and is interested very little in local, capital E economy.
Well, I don't agree that the government was, in fact, a chief stockholder, and that's the issue for me. The company is incorporated, but a corporation, under the law, is an individual and has the rights of an individual.
ReplyDeleteSo to put this in perspective, let's say you had a next door neighbor named GM. GM has a large home filled with foster kids that he can't afford, and is living in a house that is falling apart and he cannot afford to repair. He turns to Uncle Sam and receives a federal loan (this is all speculation, mind you). Still unable to feed his family and patch his roof, GM turns to the feds again and receives more money, to no effect.
What the feds SHOULD do is tell GM that he cannot afford what he has, so he needs to declare bankruptcy so that his foster kids can go to good homes and he can move into a home more suitable to his income.
INSTEAD, the government rams down his door, tells GM that the government will from now on raise his children and tear down his home and rebuild it from the ground up. And oh yeah, GM got fired from being the dad.
All speculative, of course, but the point is that the government here can't use the fact that OUR money (not Obama's) was keeping this company afloat, and I'd rather see it die now than have more of my money spent to keep it afloat for another decade, after which it WILL die anyway.
"If the federal government and its money are the only thing keeping your company afloat, then Barack Obama can put whoever he wants in charge." Agreed.
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