4 Reasons Why Uncle Sam Shouldn't Save GM
Foreman says these jobs are going, boys, and they ain't coming back... —Barack Obama-supporter Bruce Springsteen, My Hometown.
Troubled automakers get no sympathy from my pal John Tamny over at Real Clear Markets. (The site is the first thing I check out every morning.) He argues against a 1980s-style bailout of General Motors. Tamny makes several important points:
1) GM is not that important anymore to the overall economy. "With a market cap of $5.7 billion, GM's market value is now less than that of Bed, Bath and Beyond."
2) Automakers often push a harmful protectionist trade agenda. "Tariffs and various restraints on trade have been eagerly sought by U.S. carmakers over the years."
3) Automakers often push for a weak dollar to boost exports. "The Big Three have routinely agitated for a weaker dollar against the yen, and as recently as 2005 in a Wall Street Journal op-ed, GM CEO Rick Wagoner cast some of the blame for the company's poor performance on 'unfair trading practices,' in particular 'Japan's long-term initiatives to artificially weaken the yen.' "
4) GM has no one to blame but itself. "Some say that GM's problems are rooted in bad deals made with unions over pay and defined benefit/health plans, but judging by the mistaken policies that GM executives lobby for, it could realistically be said that GM suffers most from a lack of executive talent."
While all of the above may be true, where I think Tamny really scores is his evaluation of the political and policy impact of a GM bankruptcy:
A collapsed GM would predictably lead to all manner of protectionist and currency-related punishment for those automakers who've apparently committed the grave offense of producing that which U.S. consumers want while being foreign.
Of this, I have no doubt. And wait until China tries to buy GM or Ford. Oh, the wailing we will hear from the America Last-ers and the declinists.
Tags: General Motors | economy | government intervention
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That '80s bailout
Chrysler, about to go bankrupt, was bailed out by the government.
Chrysler sold itself (merger, right.) to Daimler, which wasn't in the plan when the bailout was set.
Daimler, not being able to make a go of Chrysler, sold it to Cerberus.
Cerberus isn't having any better luck so today we have Chrysler, about to go bankrupt...
And so it goes.
...and one reason why it should...The Economy
Think about what a bankrupt GM would do to the US economy:
1) Tens of thousands white- and blue-collar workers on unemployment
2) Dealerships closed and all staff placed on unemployment
3) Advertising agency offices closed...staff all placed on unemployment
4) IT companies providing dealer management systems downsized, staff let go
5) Tier-1, -2, and -3 suppliers either closed up are severely downsized...more to the unemployment lines
6) Charities and Foundations supported dissolve...impacting the beneficiaries negatively...and the staff now on unemployment
...and the list goes on
It was once said, "When GM sneezes, the United States gets the flu!" That is as true today as it was then. GM may have a market cap right now that is lower than Bed, Bath and Beyond, but it is STILL a Fortune 5 company in terms of annual revenue and that revenue is what helps keep the economies of both the states and the US moving forward. Remember "Keep America Rolling" after 9/11...GM LEAD the way to keeping America's economy vital. Where were all the Japanese manufacturers? They were enjoying the fruits of their sales back in Japan. None of their revenue stays here in the United States.
So before you write off GM as the big, bad, under-performing company that deserves all that they are getting right now, think about what the United States would be like without GM.
GM
The Federal govenerment should never bail out a private business., Except if lots of rich Republicans work there like Bear Searns. God forbid the real estate market in the Hamptons goes down. 28 Billion dollars to bail out a bunch of Harvard MBA's who are largely responsible for this recession, give me a f-ing break.
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