GM Bailout of 2008-2009: A Provocative Query


#1

When account is taken of:



(1) General Motors had a 2009 Car Reliability GPA of 1.43, a D by letter grade and 15th among car manufacturers with significant sales in the U.S.,



(2) GM’s reliability standing had fallen from 9th of 12 in 1988 to 11th of 12 in 2009 while Ford’s had risen from 11th in 1988 to 7th in 2009,



(3)Car production capacity of 2009 far exceeded demand and Ford had been forced to downsize in the 2000s as its U.S. new car market share had declined 7 percentage points from 2002 to 2008, and



(4) GM’s U.S. new car market share had dwindled to a modest 22%,



did the bailout of GM accomplish much more than



(1) To deny re-employment of laid-off Ford workers,



(2) To punish Ford for nearly two decades of quality improvement, and



(3) To saddle unsuspecting U.S. consumers with low quality automobiles?


#2

Wasn’t Ford afforded (sorry!) the option of a bailout that it turned down for strategic reasons (namely, that the reputation of being “bailout-free” would give it an edge (oops!) over domestic competitors)?

If so, you can scratch “2” off the list.


#3

My 2009 Cobalt has been flawless so far at 20,000 miles. Our 08 GM car has had no recalls; operates perfectly at 35,000 miles.

Your questions reveal a bias that would preclude any possibility of objective answers from most who would reply to such rubbish.

Do you work for Ford and is this a troll post in an attempt to affect peoples’ thinking?


#4

Perhaps the OP should share where he got his “GPA” figures from. And maybe disclose what company he has stock in.


#5

I’m of the opinion the OP has an axe to grind.

The OP appears to be schooled in mathmatics and law and claims to be an automotive quality expert; apparently based on a small sampling of surveys in which any complaints may or may not reveal the entire story. This lack of a complete story is a very common trait in the bitching about your auto world.


#6

Why do you ignore Chrysler corp? They were in the same boat. Had GM and Chrysler been allowed to collapse into bankruptcy, a vast network of priceless, irreplaceable industrial infrastructure would have been lost forever. Hundreds of thousands of automotive sector jobs would have been permanently lost. Ford would have been handed a domestic monopoly. Foreign companies would have enjoyed a bonanza…

As it turns out, the new GM is building high-quality cars that are selling quite well and at a profit. Later this year, the Government will begin selling the stock it holds and the taxpayers will be repaid and perhaps even make a profit…Had the Tea Party Radicals been in charge, both companies would have been liquidated for scrap along with their employees, dealerships and all those who depended on them. Unemployment today would be pushing 20%.

Be careful what you wish for…


#7

OR the reason Ford didn’t want the bailout was because upper management would have to make concessions in wages and compensation…which GM was FORCED to when they accepted the money. but you’re right…Ford was offered and turned it down.


#8

Caddyman…I thought you were a capitalist???

It’s THEIR fault that got them in the mess they are…and now we the tax payers have to PAY for THEIR mistakes…Sorry but in a TRUE capitalistic system…companies MUST be allowed to fail…If not then it’s NOT capitalism…

Now on a good note…It’s predicted GM will buy back the company from the Government by the end of 2011 WITH INTEREST.


#9

I would actually say that in a true MARKET system, bad companies must be allowed to fail - in principle.

In a CORPORATE CAPITALIST system of the kind we have (which is only a quasi-market system) things often do get - well, maybe not literally too big to fail - but in general too big to fail since few people want to live with the reverberating consequences. That, I believe, is part of what Caddyman was talking about. One of those consequences, more or less implicit in Caddyman’s post, is that with a legal system that allows corporations of unlimited size, scope, and duration, corporations can kill a market just as well (or better) than a government can.


#10

I agree…That letting a company so large fail could be a problem…But MAYBE if we did let them fail it would send a message to other companies to NOT get so big…and maybe we can avoid this problem in the future. By bailing out GM/AIG/Citi-Corp (and many others)…sets a president that I think is going to do real damage in the future. We basically told them…“Don’t worry, keep mismanaging the company any way you want and if you screw up…the US government will be there to help.” Personally I have a problem with that.


#11

I’m completely with you there. The problem is as old as the railroads (the first seriously huge corporate things). I’d love to be a card carrying Libertarian, but I can’t do it while the legal system allows the monster corporation. They are not just “people” running around out the trying to make an honest living and giving everyone the good life.

The thing about hugeness is that its frequently been a good way to turn a profit - largely thought market control & scale rather than great quality or something like that. So as long as huge is possible, “huger” will be a good strategy for profitability and will be followed. (Myths about network forms of business notwithstanding). There is no mechanism inside of corporate governance that will keep people worrying about the long term when “progress” is measured in quarterly reports and investors can move money around at just about any time with a speed-of-light keystroke. So I don’t actually think that any lessons will be learned by letting things fail. There have been some huge failures - like Enron. What we find out is that most of the people who suffer from it are completely innocent(e.g. employees, small stock-holders). Short term orientation and things like golden parachutes tend to get in the way of any kind of deterrence strategy for people who will come out smelling like roses either way.


#12

Are these national statistics or worldwide statistics? What is the source of these statistics?

GM sells more vehicles outside the US than it does inside the US, so if they are domestic statistics, they aren’t very meaningful.

Regarding the accomplishments of the bailout, it is too soon to tell.

Nobody punished Ford, and I seriously doubt they feel punished. If they wanted the money, they could have had it. They didn’t need it and they didn’t want it.

Nobody has been “saddled” with a low quality automobile. Nobody is being forced to buy a GM vehicle. As consumers, we still have freedom of choice. In fact, Toyota and Ford appear to be doing quite well. Who do you know who was somehow compelled to buy a low quality vehicle against her/his wishes?


#13

Apparently Mr. Bleeker Is Affiliated With A Couple Of Auto Web Sites. I Found Them By Clicking His Red Name (Posted by: James B. Bleeker) At The End Of His Submitted Question, Above.

I see that none of the fine GM and Chrysler cars I own / have owned come anywhere near representing the “Toyota Age” equivalent information that I found there. They were much better than implied and I have had no reliability issues. Could it be that every great American car I buy is exceptional ?

I’ll give Mr. Bleeker a 1.42 .

CSA


#14

They were much better than implied and I have had no reliability issues. Could it be that every great American car I buy is exceptional ?

In ONE word…YES…


#15

We Agree Mike! These Cars Are Exceptional, Reliable, Safe, Quiet, Comfortable, Practical And Economical !

CSA


#16

Ford didn’t need a bailout because they had arranged a substantial line of credit a couple of years previously in case of such an emergency. Since the bailout resulted in Chrysler being owned by Fiat and GM being owned 80% by the government, I think Ford’s reason for refusing a bailout was due to a lot more than marketing savvy.


#17

If all that manufacturing infrastructure was priceless, someone would have bought it and kept some kind of car business going, but maybe without crippling union contracts.


#18

Unfortunately your experience is the exception NOT the rule…I wish GM and Chryco DID make great reliable cars…Maybe for the first 150k miles they do…but after that…sorry…but they still fall behind Toyota, Honda and Nissan


#19

The main purpose of the bailout was to rescue the autoworkers’ union. The union got a substantial share of “new GM” and got their pensions and health plans guaranteed, without having to make any wage or work rules concessions (other than giving up the Monday after Easter as a paid day off.) Meanwhile, the bondholders who bailed out GM a few years earlier and who supposedly had “secured” debt, and were supposed to be first in line for any payments made this time, got the shaft.

The bailout indirectly hurt Ford since the UAW likes to use the same contract model for all the automakers, and they were able to keep a pretty generous contract instead of having it be nullified by a legitimate bankruptcy.


#20

The problem is, if GM had failed many other companies would have too. Many of it’s suppliers ALSO supply parts to Ford, Chrysler and other auto manufacturers. Many of them if they would have lost GM as a customer and gotten stuck with GM parts inventory with no place to sell it, would have gone under as well. That would have put a strain on Ford, Chrysler, et al…well you can imagine the domino effect it would have had.