Dr. Frankenstein, aka Vice President Joe Biden reminded us at the Democratic Convention that GM is alive, and bin Laden is dead. Both true, to a certain extent. Bin Laden is dead, period. GM is alive, but on life support, artificially buoyed-up by government subsidies and government favoritism. The people who now control the corporation are the unions which were the source of GM's failure in the first place, and government bureaucrats deciding on which products should be on the market regardless of what the public wants. The bondholders who actually put their money into the company were cut out of the reorganization, and the outrageous union pensions were preserved.
So, how about them Volts, folks? They cost +/- $41,000 to build. They sell for +/- $41,000. So it's an even deal, right? Well, not quite. Using money borrowed from the taxpayers (only half of which has been returned), GM is spending millions of dollars to promote the Volt. So it's losing money—big time. Why does this remind me of the old joke about the TV used car pitchman? “We lose money on every car we sell!” Well, then how do you stay in business? “Volume!”
OK, then how about that “volume?” There isn't any. Purchasers are exiting Volt showrooms in droves. Beside the miserable sales, there is the small problem of Volts occasionally going up in flames because of a poorly-designed battery compartment. Never daunted, GM has spent more borrowed taxpayer money ($10.4 million more, to be exact) to build a Volt plant and put more union employees with outrageous pension benefits to work. No matter how much the gummint and the green weenies may try to convince the public otherwise, there's not much of a market for a car that gets only thirty-five miles to a twelve-hour charge. That won't get me halfway to civilization, and there aren't any charging stations on our mountain roads.
Well, maybe we should just count the Volt as a “loss leader” which props up an otherwise healthy corporation. Yeah, sure. Even liberal economists admit that the $82 billion auto stimulus will lose the taxpayers somewhere between $40 billion and $50 billion. About half of that loss can be attributed to re-funding GM's United Auto Workers union employee pensions and benefits. That is attributable largely to the Obama administration's insistence that the unions had to be protected to the detriment of the bondholders (that is an essentially unlawful act, comparable in effect on the taxpayers to the deal struck in the Solyndra bankruptcy). The inmates are truly in charge of the asylum.
Meanwhile, the administration insisted that GM had to get “leaner and meaner.” One of those efforts involved closing dealerships. Coincidentally, the vast majority of the dealerships closed were owned and operated by Republicans, employing as many as 100,000 workers and sales staff. As part of the reorganization, pensions were completely or partially cut off. But not for the union employees. The disappearing pensions occurred only at GM subsidiary Delphi (GM's major parts supplier), and Delphi was largely non-union (another 20,000 workers).
As bad as all that is, we can live with a revitalized General Motors which will now start adding large numbers of new American workers entering the work force. Or will it? The current GM business plan includes building new plants and hiring thousands of new employees—in China, Russia and Indonesia. That would be fine if the major emphasis were still on domestic production and hiring. But there are no new plants or major hiring in the American part of the formula. Just preservation of the status quo.
So the next time a Democrat crows to you about Obama “saving” GM, let him explain exactly what it is that Obama actually saved. In the long run, what we have is a union-owned government-controlled and subsidized GM and a Chrysler Corporation owned by the Italians. Other than overpaid and over-pensioned union employees, nothing worthwhile has been saved.
Mitt Romney, not Barack Obama, was right. Both corporations should have gone into genuine bankruptcy, and let the market and demand decide their respective fates. Far too many people who should know better think that bankruptcy=corporate death. Far from it. The main purpose of most large bankruptcies is to do what is necessary to make the corporations viable again. It includes belt-tightening, streamlining of the modes of production and marketing of the product, producing a better product than the competitors at a price that consumers can afford, and most of all, relief from the hideous union pensions and benefits packages foolishly granted during boom times. All without federal taxpayer subsidies. Had that been done, GM would have survived to fight another day. And if it didn't do what needed to be done during the reorganization, it would ultimately fail, as all inefficient businesses finally do.
If you're looking for a good comparison, consider this. Obama took a failed corporation and temporarily revived it with huge infusions of taxpayer money, totally disregarding all the flaws which caused GM to fail, and adding insane government-imposed “green” requirements on top. When the subsidies stop, and the bailout money dries up, GM is on a course for ultimate collapse. On the other hand, there is Mitt Romney, Bain Capital, and Steel Dynamics, Inc. Romney took a bankrupt company, did what needed to be done to restore it to profitability, and today, without government subsidies or government interference, Steel Dynamics is one of the largest, and clearly the most efficient of America's steel companies.
But you won't hear that from Obama or the mainstream media. They're too busy blaming Romney for the felonious death of the wife of an Obama-favored corporate “victim of vampire capitalism” resulting from the closure of GST Steel. GST simply couldn't be made either profitable or survivable. At the same time, they're too busy touting the administration's big lies about the wild success of General Motors.