Monday, September 10, 2012

GM Is Alive. ALIVE!

And its premier product is the Chevy Volt. It's not only the car of tomorrow (or the day after tomorrow), but it comes with accessories (pictured) not present in any but the most expensive luxury imports. Now that President Obama has ordered that within ten years all American passenger cars must get 50 mpg (or 150 mpg, or 250 mpg, I don't remember the exact figure), the product from the company he saved will lead the way. The Chevy Volt is one hot automobile, sometimes literally.

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.

The car sells for about twice what a comparable-size gasoline powered car sells for. But that's OK, because it's so eco-friendly. Or not. It still has to be charged, and those batteries are made from highly-toxic materials. There may be zero emissions from the car itself, but what about the emissions from the plants that produce the electrical energy needed to charge the car for its thirty-five mile trips? There have been five reported and verified fires caused by the defective battery array (the administration only admits to one). But fires are just part of it. The hookup to the chargers produce multiple problems, and even when properly connected, the car frequently doesn't accept the charge. Actual estimated total costs to the taxpayers for each Volt produced run as high as $250,000 per vehicle.

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.


Individualist said...

I look at this Fiasco another way.

Now more than any time in the past we have tools to assist in engineering design which allow one to make a virtual replica of the car and test it before ever pouring an ounce of steel or plastic. Wtih autocad and other tools engineers can probably design in weeks what too months before and days what took weeks.

Yet it still takes years to get new designs tested and approved by the government for on road use.

Shows like Overhaulin and American Chopper show a small group of mechanics designning, fabricated and assembling new product for consumers in weeks. With the advent of new tooling and robotics it is probably possible to make cars one at a time in the higher quality markets and still be profitable.

Yet if GM goes under the industry can't be replaced. Why? Gvoernment regulations and Union rules.

We need to rethink business. It is a global market and technology is making the guildsman of old (the craftsman that learned all the intricacies of his trade and designed unique works of art as well as practical tools) able to be profitable and compete with the assembly line. At least in high dollar goods. If we don't do it in this country then someone in an emerging world country without regulation will.

AndrewPrice said...

The Volt is exactly what happens when the government decides to make private sector decisions. You end up spending millions to make a product no one wants when everyone else in the market is making better products that consumers do want. I read this weekend that the Volt's sales are 3% of what Obama promised at this point.

K said...

Maybe so, Andrew. But there are lots and lots of electric vehicle recharging stations at many of the upper class swanky malls in California that looked lost and forlorn for years. This was embarrassing to progressives as it underlined the fact that the California state government is functionally insane.

Just the other day I finally saw a Volt parked at one recharging. Mission accomplished!

tryanmax said...

One more question to ask: GM may be alive, but what is the quality of that life? In other words, would GM still be alive if it were subject to fully-implemented ObamaCare? Or would it be told to take a pill and go into hospice? LOL!

Patriot said...

This is the nub of the Repubs problem: "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."

Wrong message. I think most people still believe bankruptcy is one of those negatively charged phrases, and cover their ears when they hear it. So the Repubs are not getting the right message across. should be what you referenced earlier in your post..."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)." THIS is what the Repubs should be hammering on DAILY.

Most Americans will assess these types of decisions based on a "fairness" factor. This action can no way be explained away as "fair" by the Dims, and the Repubs should be hammering this point home. Let the Dims try to justify that approach to the American people...that the union workers pensions were saved but not the non-union workers.

LL said...

GM is heading for another bankruptcy per Forbes. And relative to the Dow Industrial Average, the stock lost 49% of its value since the Obama Administration bailed it out. (cited above)

T-Rav said...

National Review just had a pretty extensive article on this. I haven't read all of it, but they basically make the point that, if what was "saved" is now on life-support and kept that way only by massive government subsidies, is that really something to crow about? (The answer is no.)

However, I have to agree with Patriot that people aren't going to want to hear a lot of this. Voters, being people, are often very stupid, and in cases like these think that because GM is a household word, and because it employs "the little guy," has to be protected at all costs. See, this is why I periodically get pessimistic, as I alluded to on this morning's thread: The average person wants government not to be involved in something, until it's a something they're emotionally invested in, in which case it's "Why doesn't the government do something?!?!?!?!" (sigh) I have such a poor opinion of mankind. And unfortunately, I don't see much reason to change it.

rlaWTX said...

I finally got my Chevy (2000) in 2007. I guess I am going to have to learn to like another truck... unless I keep buying them used, then I have more years to avoid buying from Gummit Motors directly.
Then maybe I'll like Fords F150s. maybe. [aesthetic issues]

rlaWTX said...

"'Why doesn't the government do something?!?!?!?!'"
And "conservatives" do this too - a lot!

(sigh) squared.

BevfromNYC said...

The former Delphi employees are rallying today in Detroit to protest how they got the shaft...

You know, with the rate the Volt catches on fire, maybe this was supposed save fire departments, not the auto industry.

Tennessee Jed said...

whether it's healthcare or car manufacturing, this administration has ham handed it's way through the private sector like a simitar.

T-Rav said...

Bev, if you hear those black helicopters nearby in a little while, that means you've probably discovered their racket.

AndrewPrice said...

Folks, Blogger got Larry again. His comments have vanished. Sorry for any inconvenience.

Post a Comment