Pulling Plug On GM Would Help Both Auto Industry And Michigan

IBD Editorials ^ | November 11, 2008 | John Tamny

[Kaslin]

Ludwig Von Mises once wrote that the entrepreneur who fails to use his capital to the "best possible satisfaction of consumers" is "relegated to a place in which his ineptitude no longer hurts people's well-being."

The latest losses at General Motors reveal yet again that it is the living embodiment of managerial ineptitude, and to ensure that it no longer fails its customers while harming the well-being of Americans more broadly, it's essential to let the firm die.

Many will of course blanch at the presumed loss of jobs that would result from GM's death, but judging by the high level of unemployment in Michigan, it would be more realistic to say that GM's continued existence under weak management has served as a capital repellant such that capital and jobs will continue to flee the state if GM is saved with the money of others.

Worse, business history, from ships to farming to mining, shows that sectors reliant on government help are invariably weakened as opposed to strengthened.

The above is the case because businesses rarely fail due to a lack of money. Instead, poorly run businesses find it hard to raise money in the capital markets. Government money allows the architects of bad decisions to continue making mistakes that cause a company to be capital-deficient to begin with.

[Harry Wurzbach]

Arrrgh. When you don’t let crappy companies fail, all you will end up with are crappy companies, sucking on the government teat.

[spacejunkie01]

What’s the real, honest to God chance, that we will NOT bail out the auto industry and 2) that the unions will die??

[SmokingJoe]

“Cut wages and hours...and ultimately cost of cars. Get rid of the Union...Yeh, like that will happen.
Get rid of all the Teacher Unions, too."

You are not comparing the teachers unions to the auto unions are you?
Thew big difference being, that teachers’s unions are payed by tax payers and have no competition. The auto unions are in a business where they face relentless competition from lots of very efficient car companies from all over the world. Big difference.

[FrankR]

"General Motors cannot be saved. Pumping taxpayer money into it will only prolong the inevitable. "

General Motors has had their day in the sun. Companies come and go...ask Studebaker, Rambler, and the Stutz Bearcat. All once great companies who went away for various reasons,and were swiftly replaced by competition.

General Motors was once a great ship, but they were taken over by clinging barnacles (unions). Those barnacles have taken such a solid hold that it is too late to clean them off and float again...so she's goin' under.

Along comes "Tugboat Nancy" with a plan to buy the grand old lady some time by adding outriggers, but it's a bit too late.

It's time to let go, GM. Even if you get a few billion to bail you out, the union weight is just going to sink you again in the future. They're your ankle bracelet and you can't go anywhere without them attached.

The unions will continue to bleed you dry, because everytime you make a little profit, they're going to negotiate even higher wages, and you're right back where you started. They're doing you like obama is going to do America. Redistribute the wealth...and make everyone equally poor.

But the democrat law of unintended consequences always arises (it's akin to Murphy's Law). You can't produce a competitive vehicle that's worth a toot because paying protection money to the unions/democrats will inhibit your research and quality. You won't be able to compete with non-union shops who put their extra money into quality.

But, you go ahead, GM...take the money. Blow it all appeasing your masters, and wind up broke anyway.

Meanwhile, I for one will no longer buy any vehicle from a unionized company. I will get a better car, and I won't be (indirectly) supporting democrats.

GM is like the 30-something year old still living with their parents...when the parents croak, Jr. is left out in the cold. You can't serve two masters, it's either the market, or the unions...you decide GM.

[Travis T. OJustice]

The unions and their liberal counterparts in the media will craft a way to blame the management for the demise of the particular industry affected. After the busines is gone, it’s even easier to blame the management for the demise of the company than blaming the exorbitant cost of union labor. Unions will never take any blame or criticism. Are unions blamed for the steel industry going overseas? Nah. How about the textile industry? Nah, it’s the greedy business owners “screwing the working people”, not the fact it’s 10x more expensive laborwise (at least) to manufacture a shirt here.

[Travis T. OJustice]

Both unions still suck!

[FrankR]

It was meant to be half-sarcasm, half-rhetorical. Sorry to confuse you.

[RegulatorCountry]

How long has the auto industry been unionized? Since the Depresson, at least. Cheering the demise of yet another domestic manufacturing sector is the height of stupidity. There will come a time when it is not just the loss of employment that is mourned. GM has been putting out some really good product for going on five years, now. They’ve been turning the corner. All for naught, never to be forgiven for bureaucratic bumbling in the seventies and eighties, it seems.

Every single automotive manufacturer in the world is going to be in big trouble, if they’re not already, including Toyota, due to this economic crisis. Toyota has had de facto subsidy all along. Is it “right?” Not for us to say, apparently, since we have no say in the matter. Do we really want to be like England?

[Travis T. OJustice]

I'd put the number right around

[Travis T. OJustice]

I was only half confused. :)

[Beagle8U]

“That is so because, paradoxical as it sounds, GM’s bankruptcy would be a boost for Michigan's economy and the U.S. auto sector generally.

Far from vanishing, many of GM’s assets would be quickly purchased by competent foreign automakers eager to expand their capacity in what is the world's largest auto market. Happily, the list of well-run car companies, from Toyota to Nissan to Porsche, is long.”

Sorry, never happen. No foreign car-makers will ever operate in Michigan because of the unions. Unless MI is willing to declare itself a RTW state it is doomed to highest in the nation unemployment forever.

[SmokingJoe]

“What’s the real, honest to God chance, that we will NOT bail out the auto industry “

This is the deal.
The RATS may have the votes to do it, come January. The idea is for Republicans to oppose them every step of the way, and use it as a clarion call to energize the base. If past record, and what happened after the $700 billion bailout is any indication, no amount of bailout money will save GM or Ford or Chrysler, so let the fallout fall on the Dims. Dailmer Benz pumped in billions of dollars into Chrysler, and got exactly nowhere. They were finally forced to walk out. If Daimler Benz couldn't do it, no amount of Government bailout is going to save these moribund US car firms.

[steelwheels]

Hey Mr. GM, remember that 1986 Olds Delta 88 you sold me for $18,000? You remember, the one with all the problems that you wouldn’t fix. Well, I’m sure you have, but I haven’t and never will. Uh....I believe “yo chickens have come home to roost”!

[Condor51]

Let all three fail and declare bankruptcy. They aren't auto makers anymore anyway.

They're Insurance and Retirement Plan brokers for all the UAW dullards who've ever worked there (They make cars as a side job, as an after thought).

After they reorganize GM can make Chevy's and Cadillacs, Ford - Fords and Lincolns, Chrysler - Chryslers and Dodge. And they can build them in Tennessee, Georgia, etc. screw Michigan and the UAW.

[spacejunkie01]

thanks joe....have we heard much yet about how the R’s in congress are commenting so far?? I know that’s not the best metric as there were a good number of R’s against the idiotic bailout (that’s NOT working) and then, suddenly, they come around and vote for it.

But, are we seeing resistance on this and what are the odds the R’s stand firm and let them go down?

[Scythian]

I agree, let the big dinosaur die and somebody folks will create new car companies that work.

[Scythian]

Oops, it’s still early ...

I agree, let the big dinosaurs die and folks will create new car companies that work.

[olezip]

Worse, business history, from ships to farming to mining, shows that sectors reliant on government help are invariably weakened as opposed to strengthened.

Our current crop of Marxists (Pelosi and Obama to name two) believe that this time it will be different because they are in charge, and they know better. Of course a 100% record of failure of such policies means little to the disordered mind.

It is a great opportunity to nationalize another failing enterprise and further destroy what is left of our economy. Total destruction of free enterprise will happen when they nationalize health care for all of us, especially the children.

[SmokingJoe]

They can blame all they want. In real life, its not gonna make a whit of difference. GM, Ford Chrysler will sooner or later go out of business as constituted now, bailout or no bailout.
So let them blame away, there will be no GM to blame. It will be like blowing in the wind.

[hunter112]

The Rats will bail it out, guaranteed. Where else in America are there as many African-Americans making sizable wages? OK, big government. But they're not being put out of business by the Japanese and Koreans.

The UAW will get the first slice of "pie".