GM – To Bailout or Not To Bailout? – The take from West MI

Michigan is an automotive state.  Our economy statewide is married to the industry, as much as I wish it were not.  And now it seems that a long time of trouble for the US automakers has become so critical that the “Small Three” have been begging like paupers for the past two weeks trying to get a government funded bailout for the industry.

The auto companies have been saying that their failure would be a catastrophe for the economy, and that they were on track to a recovery before the overall economic crisis hit, so they should not be allowed to fail.   They have been lobbying the government like crazy, stirring up the public with youtube videos (see video below… if they are bleeding cash, what is with all the publicity??!), and generally whining about how they NEEEED $25 billion in loans to survive!  

I however am not quite convinced.  Here are some factual snippets that I have heard on the news as of late that make me feel that perhaps GM is not deserving of a bailout.  Sources noted where available.

 

  • Average healthcare cost per car:  GM: $1,635 — Toyota: $215  (NOTE:  while I certainly agree that healthcare is an important part of quality of life, the current model of “Insurance will pay for whatever I want” has lead to rising healthcare costs in this country.  Reform is the answer, not rubber-stamping a “everybody gets everything they want” policy, since that clearly will not work out in the long run.  I have seen more recent numbers than the ones provided, GM $1300 Toyota: $300, which are better, I can not locate that source.  Either way, the gap is huge.)
  • Shrinking Market Share (Source – NPR Discussion last night) – GM used to hold a 50% market-share in US auto sales.  This number has now dropped to 20% yet GM is still acting like it has not.  From my memory of the NPR segment last night, GM has something like 2-3x the number of dealers as Toyota, and over 2x the number of brands.  While this may have been warranted in the past with their dominant position in the market, it seems like GM has been living in denial about their fall from the top.  I can not see any major distinctions between most of the brands they own, which means that they all cannibalize each other.
  • If one falls, will they all? – Nearly all news reports keep talking about what will happen if “the big three fall”.  Well, why are they all going to fail?  Yes, none of them are in a GREAT position at the moment, however that does not mean that if one hits bankruptcy or failure that the entire industry will fall apart.  C’mon!  Perhaps what one of them needs to pull out of this is a less competitive marketplace?

 

Some may call me a bad Michigander for not blindly saying that we need to save the big three at all costs, but I have spent most of my life seeing these companies, and Michigan, ailing because of their mis-management.  The decline has been happening for at least the past ten years.



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