auto industry — VOICES for REASON

In a series of ads for “The New GM,” General Motors, recently taken over by the government, is doing everything it can to present itself as a newly nimble private company.  GM, the ads imply, is single-mindedly focused on returning to profitability by offering truly desirable cars to customers. How are they going to do this? By producing the kind of cars the Obama administration has been pushing: small cars with high fuel economy, hybrid technology, “alternative fuel” capability, etc.

If GM’s new approach sounds like an exciting turnaround, it isn’t. GM has already gone down a less extreme version of this road — and it proved to be the road to bankruptcy. Induced by irrational government fuel economy laws and union laws to make myriad small, fuel-efficient cars with overpaid union workers, GM lost enormous amounts of money. By contrast, GM and other American automakers made money on larger, safer, more luxurious cars (which could more easily absorb the higher labor costs) including SUVs and Muscle Cars — cars the administration decries. (See my previous blog post “The elephant — and the donkey — in the room.”)

And we can see this trend continuing today with the one new GM car that is generating genuine excitement among consumers, a car developed pre-Obama-era. Is it a hybrid or other car that gets 30+ MPG? No — the new hit car is a Muscle Car, the revamped Chevy Camaro, which gets a whopping 22 miles per gallon. And it’s only that high if you buy the lower-powered V-6 model.

Is there any chance that the new “Government Motors” would have developed this Camaro? I don’t think so, because it doesn’t fit into the government’s priorities, which are the real factor driving GM. While the old GM was hardly a model of customer focus, The New GM is necessarily government-focused. It is not privately owned or controlled; it is majority-owned by the government, and therefore controlled by Barack Obama and his appointees. It exists to pursue their agenda. Remember, Obama fired the former CEO of GM. He set the terms of GM’s phony bankruptcy. He holds all GM’s sticks and carrots — and GM acts accordingly.

There is nothing “New” about this GM. It is a government-controlled auto company pursuing the government’s agenda — an agenda that has nothing to do with making superior, profitable cars. Don’t let the ads deceive you otherwise.

flickr/myobb

The “great source of consistently outstanding reporting and commentary on the auto industry” I mentioned in my blog post yesterday is: Holman Jenkins of the Wall Street Journal (and author of the excellent antitrust column featured in my last blog).

Where others assume that all of Detroit’s problems can be blamed on bad managers, Jenkins points out the real sources of their decisions.

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As taxpayers are forced to pay $50 billion to bail out the massive corporate failure that is GM, it is crucial that America’s reporters and analysts accurately break down the series of events that brought us here. Unfortunately, the recent GM retrospectives in top newspapers evade the elephant in the room — which in this case is joined by a donkey. The biggest player in the GM breakdown (and in the broader failure of the US auto industry) is the United States government, following both Republican and Democrat policies. The stories all focus on the failed policies of GM’s management — but conveniently omit how the government was instrumental in forcing these policies on them.

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Take a look at this opening to a recent editorial in the most prestigious American newspaper. It epitomizes how far this country has strayed from its founding principles. From a recent New York Times article about the government’s commandeering of Chrysler entitled “So Far So Good”:

Less than three weeks after Chrysler filed for bankruptcy protection, it looks as if the Obama administration will pull off its goal of completing the carmaker’s restructuring by June, allowing it to emerge as a smaller, more viable contender in the global auto market. [Emphasis Mine.]

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On April Fool’s Day, Car and Driver published a phony news story claiming that the Obama Administration had ordered GM and Chrysler, recipients of bailout money, to cease NASCAR activities:

In a move sure to spark outrage, the White House announced today that GM and Chrysler must cease participation in NASCAR at the end of the 2009 season if they hope to receive any additional financial aid from the government…A complete withdrawal from America’s premier racing series is expected to save more than $250 million between GM and Chrysler…

Many in the industry, including those close to NASCAR, were not amused, and rallied to have the article taken down. (It takes some digging to find a cached copy; the one I found is no longer available.) Car and Driver apologized for “going too far.”

No pun intended, but are you kidding me? The government is in reality dictating which CEOs must be fired, which companies must merge, what kind of cars they must make, what labor policies they must follow–and people are up in arms over a fictional policy that is almost mild compared to what the government is actually doing?

In case it takes the idea of government controlling NASCAR to wake anyone up, let’s be clear: the principle that the government has the right and the wisdom to dictate every aspect of industry, NASCAR included, has already been conceded by us, the American people. The only thing saving GM and Chrysler’s NASCAR programs is the votes politicians want from fans. Unfortunately, when it comes to the government’s broader takeover of industry, Americans’ votes are squarely with the administration.

There is an alternative. Liberate auto companies from stifling labor laws and fleet requirements, and let the chips fall where they may. Stop calling for the government to invest in the auto industry. As we are seeing, once the government buys the auto industry, it owns it.