GM to nationalize and become an American BL?

edkwon

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LA Times Columnist Dan Neil makes a 'modest proposal' to nationalize GM and the benefits such a change would create? Does anyone actually agree with his idea or think its just another recipie for disaster?

http://www.latimes.com/news/opinion/sunday/commentary/la-oe-neil2-2008dec02,0,6474451.story

At the moment, D.C. and Detroit are brooding on a Morton's Fork: Watch the American automakers auger in and take hundreds of thousands of jobs with them, or bail out these failed and incorrigible companies whose management so richly deserves whatever hell (flying coach?) awaits them.

Tops on the critics' list of grievances is Detroit's failure to anticipate the inevitable. Why didn't these companies sufficiently invest in next-generation technology -- fuel-efficient small cars, high-mileage hybrids, plug-ins and all-electric vehicles -- that could help wean the U.S. off foreign oil and take the automobile out of the climate-change equation? As the auto executives again bring their begging bowl to Congress, a consensus is forming: No bailout unless Detroit builds greener cars.

From my perch, as someone who drives all of the Big Three's North American product offerings, I think a lot of the anger is reflexive and misplaced. Detroit makes some amazing cars, and anyone who thinks otherwise should hold a Corvette ZR1 to his head and pull the trigger. The Ford F-150 pickup I drove last week flat-out humbles rivals from Toyota or Nissan. Considering that the domestic carmakers are shouldering titanic "legacy" costs -- it's estimated that $2,000 in healthcare, pension and employee post-retirement benefits are baked into the price of every UAW-built vehicle -- just being competitive in any segment is a signal achievement.

Nonetheless, the question remains: What to do about the domestic automakers? My modest proposal: Nationalize GM.

To be clear, I mean that the federal government should buy GM; forget rathole loans or nonvoting equity shares. The company's stockholder value has been essentially wiped out. The company's enterprise value -- the lock, stock and forklift price -- is about $32 billion; its total debt is $45 billion. Let's make GM an offer.


If you feel the gall of free-market ideology rising, consider that the measures being bruited about as preconditions for a bailout -- firing GM's top management; forcing a bankruptcy-like renegotiation of contracts with the UAW, suppliers and dealers (it has too many); and creating a czar of product development to force the building of green cars -- are nationalization in all but name. I say embrace it. GM-USA.

Here are the benefits of nationalization:

GM's fundamental problem is that it's too big -- and expecting it to fix itself in exchange for a $10-billion to $15-billion loan (its share of the vaunted $25-billion bailout) or magically right-size in Chapter 11 is foolhardy. It would take too long, cost too much and bankruptcy, should it come, would send customers running for the hills. Time is of the essence. Congress, writing a GM law and using federal power to abrogate contracts, could achieve at least some of these goals at a stroke.

GM is full of talent and potential. The company spent $8.1 billion on research and development last year, second only to Toyota. Of all the carmakers, GM is closest to commercializing a full-size, four-door, plug-in electric vehicle, the Volt, due in the fourth quarter of 2010. The Volt should travel about 40 miles in all-electric mode before requiring the services of its onboard, gas-powered generator. Many owners could go weeks before they used any gasoline. This is precisely the sort of car that environmental and energy security advocates have been clamoring for.

GM's business is growing in other parts of the world; it's only the North American operations that are killing the company. This is a corporation that had $181 billion in revenue and sold 9.4 million vehicles in 2007. To put it another way: GM, though distressed, looks like a good investment. Also, the federal government can sell the company -- at a profit -- once it's righted and sailing forward again.

GM is competing with companies that are quasi-national now. If you consider the advantages the government of Japan has bestowed on Toyota, Nissan and Honda -- in terms of healthcare and retirement benefits for its employees -- the unevenness of the field is clear. The same goes for most European companies, and the rising rivals in China will enjoy similar state-subsidized advantages.

The government can afford long-term planning. Many of GM's strategic missteps -- such as betting large on trucks and SUVs and not investing early in hybrid technology -- were the result of willful shortsightedness at the board level, responding to a financial market in which shareholders look for the quick return. Putting Uncle Sam in charge would fundamentally enlarge the return-on-investment horizon.

We need government-sized automotive help anyway. This country should be putting millions of plug-in hybrid and electric vehicles on the road. As far as I can tell, without big subsidies, there is no way in the near term to build these vehicles and make a reasonable profit, due to the stubbornly high cost of advanced batteries. Besides, if GM were owned by the government, it wouldn't spend time and money litigating and lobbying against clean-air and safety rules

Why not pick up Ford and Chrysler too? If Chrysler goes south, it's too small to drag down the rest of the domestic auto industry. Ford, which has been pursuing its "Way Forward" cost-cutting plan for more than two years, will probably survive the moment without government assistance, though it's going to be close.

To be sure, the yard marks of democratic capitalism have moved under us in recent months. Last week, the feds announced that the government would take a $20-billion stake in Citigroup and guarantee hundreds of billions in risky assets, a move that would have seemed pure socialism had we not lived through the last few months. Have we not in effect nationalized the mortgage-loan industry?

I say, let's avoid the euphemisms and have the courage of our supercharged Keynesian convictions. By nationalizing GM, we can aim the company's astonishing resources at one of the biggest public-policy problems we have: oil. Restructured and refocused, GM could build green vehicles by the millions in a few years and still have the capacity to build gasoline- and diesel-powered pickups (which we'll still need) ... and maybe even some Corvettes on the side.
 
Obviously this moron doesn't remember or is willingly forgetting British Leyland.

As someone who has a car descended from BL, I have to say that this man should be taken out back, stuffed in an Austin Princess, and shoved off the Golden Gate bridge.
 
Obviously this moron doesn't remember or is willingly forgetting British Leyland.

As someone who has a car descended from BL, I have to say that this man should be taken out back, stuffed in an Austin Princess, and shoved off the Golden Gate bridge.

I agree with all his points about downsizing and restructuring...except for the govt ownership part.
 
To put it another way: GM, though distressed, looks like a good investment. Also, the federal government can sell the company -- at a profit -- once it's righted and sailing forward again.

GM is competing with companies that are quasi-national now. If you consider the advantages the government of Japan has bestowed on Toyota, Nissan and Honda -- in terms of healthcare and retirement benefits for its employees -- the unevenness of the field is clear. The same goes for most European companies, and the rising rivals in China will enjoy similar state-subsidized advantages.

The government can afford long-term planning. Many of GM's strategic missteps -- such as betting large on trucks and SUVs and not investing early in hybrid technology -- were the result of willful shortsightedness at the board level, responding to a financial market in which shareholders look for the quick return. Putting Uncle Sam in charge would fundamentally enlarge the return-on-investment horizon.
I can't really see the idea behind some of this guy's ideas. First of all, i really wouldn't call a company that's knee-deep in debt, burdened by the UAW and it's demands and on the edge of bankruptcy, a good investment, even if it's European operations are profitable. In fact, i don't think GM's been a good investment in a really long time, the SUV craze and it's high profits have just saved it from the inevitable for a good ten to fifteen years. It's just such a ruined structure, thanks to all the union burdens, the general badness of it's R&D departments and their ideas, bad quality products (partly thanks to both of the issues i mentioned earlier) and many other small things.

And what is this guy talking about with health care and retirement benefits? It might be state-subsidised in the corporation's home countries, but unless i'm really out of this (which i might well be), Toyota, Nissan or any other car company doesn't get any help in the health care and retirement benefits, except for not following the UAW regulations and saving money that way. And for the European part, well, GM (and any other US company) workers here get exactly the same benefits as any other company's workers, so GM has the same state-subsidised (should they exist, in most European countries they do) health care and retirement benefits here too, just like their colleagues working for other car companies.

As for the government being able to afford long term planning for GM, well, they might be, but i'm not entirely sure the government is really willing to do that. After all, i don't think the government will want to pump billions after billions into a company that needs complete restructuring of operations, and unless some kind of deal can be worked with the UAW and lots of unnecessary workforce booted, neither of which will probably be a very popular option among the existing workforce or pretty much anyone else, won't still be that competitive. I just don't think that people will buy the cars unless they are better than what the competition can offer and on par with the pricing. Hard one if you're carrying excess money pits with you, money pits that won't even do their work properly, as we've seen with GM cars for a long time now.

And as the return-on-investment horizon goes, well, that's really a fundamental problem with the American stock market and its investors. They want quick returns on their investments, something which probably won't change just because the government would buy GM. And as he mentioned, if the federal government might sell it for a profit in the future, it'll probably be back listed in the stock market. Where people will still want quick returns on their investments. Which means that "boom/craze products" will be built once again to satisfy the hunger for short term profits. The problem isn't necessarily there, but more in the fact that quick responding markets need quick responding executives, able to call the trends and produce what the customer wants. If the customer's interest in SUV's stops in 2005, you can't be building so many anymore in 2008, but you must move to something else. Something the GM execs that led the company into this disaster apparently didn't get.
 
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Or, it could be
https://pic.armedcats.net/a/an/anonymous/2008/08/31/satire.gif

Dan Neil is too smart to mean it, I hope.
 
Tops on the critics' list of grievances is Detroit's failure to anticipate the inevitable. Why didn't these companies sufficiently invest in next-generation technology -- fuel-efficient small cars, high-mileage hybrids, plug-ins and all-electric vehicles -- that could help wean the U.S. off foreign oil and take the automobile out of the climate-change equation?

Are these Al Gore clones really convinced that that's the problem? Afaik the two most profitable automakers currently are BMW and Porsche, and neither of them have any electric powered cars. OK, there's one hydrogen burning 7 series that drives around Munich, but that's just kinda cool.
 
Are these Al Gore clones really convinced that that's the problem? Afaik the two most profitable automakers currently are BMW and Porsche, and neither of them have any electric powered cars. OK, there's one hydrogen burning 7 series that drives around Munich, but that's just kinda cool.

Yes they are, but there are enough of them around to cash in on their stupidity don't you think?
 
Yes they are, but there are enough of them around to cash in on their stupidity don't you think?
Yes, but the big three make much more cash on cars like the Mustang, trucks and SUVs. Something no one else can do.
 
Or, it could be
https://pic.armedcats.net/a/an/anonymous/2008/08/31/satire.gif

Dan Neil is too smart to mean it, I hope.

I see you caught onto 'a modest proposal' by Jonathan swift. Like his satirical treatise about feeding the rich w the children of the poor. This guy is using a crazy sounding proposal to make some legit points.
 
Yes, but the big three make much more cash on cars like the Mustang, trucks and SUVs. Something no one else can do.

You mean other than Toyota and Nissan? (Whose trucks and SUVs are also hugely profitable.)
 
Are these Al Gore clones really convinced that that's the problem? Afaik the two most profitable automakers currently are BMW and Porsche, and neither of them have any electric powered cars. OK, there's one hydrogen burning 7 series that drives around Munich, but that's just kinda cool.
They've got the problem right, but the solution wrong.

Take BMW, they invested in the X-series' when the SUV boom was big, and it was a smart move. But they ALSO invested in the smaller 1-series and Mini lines, which put it in a good position just in case fuel prices shot up. Smart move there too.

The Big 3, by contrast, invested heavily in SUVs and neglected their car lines. So when the truck bubble burst, the smaller, cheaper models are underdeveloped and uncompetitive, so everyone goes elsewhere.

That's not the full scope of the Big 3's problems, obviously, but it's a certainly a part of them. No, this wouldn't be solved by hybrids and electrics - those are expensive to produce, and a niche market at best - but it would have been mitigated somewhat by something a bit more competitive than a Cobalt.
 
Exactly. They should have had a diversified product line, and they didn't. Toyota, Nissan, and BMW all do. So does Mercedes. Ford's getting one from their European division. GM... not so much...
 
Question I have is can Ford do the change over in time to smaller engine sizes, and a more diverse but better offering. ...
 
I don't think Ford *needs* to "change over", as they're simply going to import the Euro product directly or just produce the Euro product in Mexico. Also, most of the *basic* engine designs from the Euro lineup have been creeping into the US lineup since Nasser got fired. Pretty much everything in the 2L-up class is already here, and the Fiesta is coming with its (I think Mazda-based) 1.6L engine next year.

Common wisdom is that Ford is actually and surprisingly very well set to ride this one out - and that Mulally got this plan in motion right after he got to Ford.
 
...and the Fiesta is coming with its (I think Mazda-based) 1.6L engine next year.

Common wisdom is that Ford is actually and surprisingly very well set to ride this one out - and that Mulally got this plan in motion right after he got to Ford.
Correct, but isn't it a 1.5L? I thought it was coming with it's runty Mazda2 sibling.

Also, it's common wisdom that Mullaly is a genius; the only mark against him that I can think of is him sitting with those retards in Congress, instead of just going "look at us, we aren't going bankrupt, buy cars from us!"
 
Yeah, there's that... on the other hand, if someone is stupid enough to say, "Hey, look, we feel sorry for you, have some free money," you'd have to be a moron not to belly up to the bar and see what's being offered.

Also, if he hadn't gone, the shareholders might have crucified him, so....


The engine may be the 1.5, I thought it was going to be the 1.6. Not like there's a whole lot of difference, really. What's 100cc between friends? :p
 
Hasn't anyone ever told you that size matters? :p
 
Yeah, but when we're talking about econobox commuter modules, it hardly makes a difference. It's not like there's going to be a huge power boost from 100cc NA difference. :p
 
Ford's getting one from their European division. GM... not so much...
I guess GM is very much late with their imports from Europe. I mean, they did bring the Opel/Vauxhall/Holden Astra over as the Saturn Astra and i think the Insignia is also coming there (i'm not sure though, verification anyone?). So they're really starting something they should have started years ago and possibly won't finish before going bust and having all the good ruined.
 
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