GM Death Watch 223: I Know Why the Caged Bird Sings

The Truth About Cars ^ | December 14, 2008 | Robert Farago

[canucksvt]

When I was growing up in Rhode Island, the state was run by the mafia. Politicians, police, priests, judges, juries, firemen, trash collectors, teachers, unions– anyone who had power owed that power to Raymond L.S. Patriarca. Period. In the last forty years, the mob’s stranglehold on the Ocean State has dissipated– even if the stench of corruption remains. But it’s too late. The mob-controlled unions and their corrupt enablers destroyed Little Rhody’s industrial base. The state will never be a locus of, well, anything. And yet people call talk radio and wax lyrical about “the good old days.” Justice was for sale. Racism endemic. Violence systemic. Priests buggered little boys with impunity. “But at least you could walk the streets without fear.” This, Detroit, is your future. And you can thank your godfather, GM.

[jalisco555]

Farago was all over GM’s self-destruction years before the MSM picked up on it.

[caver]

Russians also talk about the good ole days when the Soviets were still in power and Stalin was killing millions. Go figure.

[GadareneDemoniac]

And so was Lorenzo, and Perot, and others.

The comments on this article at the link are interesting. Nobody talks about the huge legacy costs associated with large number of retirees.

[carumba]

Lets bring back the models with the big tail fins.

[Mad Dawg]

I'm not defending the execs, but when labor, with the support of politicians, is making life impossible from one side, and Washington is attacking from the other, I can see how people end up smoking cigars while they can. They know their days are numbered and there is nothing they can do about it.

Just as the banks were pressured and sued to make bad loans, and vilified if they didn't, so GM et al. were more and more obliged to engage in doomed business practices. Where else on earth would one have to pay 90% of full pay to someone who was laid off or furloughed? Who expects a business to survive when Congress requires it to build cars people don't want?

Among the many things contributing to what may be the demise of the Big Three is creeping socialism.

[SW6906]

Good column. Everyone should follow the link and read the whole thing!!!

[RoadTest]

Good article until the four-letter-word. That’s where I parted company with the author.

[libstripper]

FTA: Mark my words: if GM uses taxpayer money to stave off bankruptcy, and then comes back for more, executive haircuts and public equity stakes won’t do squat to mollify an enraged public. There will be a consumer backlash that will make bankruptcy seem like a J.D. Power Award.

GM, by its collaboration with the DemonRats and Watermelons, is disgracefully doing to the auto industry and potential car buyers exactly what Smith & Wesson tried to do to the firearms industry and gun owners by its horrible settlement with the Clintonoids. If this horrible bailout/voluntary nationalization of GM goes through, GM should be boycotted as completely as S&W was, with the same consequences. We must all remember that the ultimate purpose of the bailout/nationalization is to make it impossible for Detroit to make the kind of cars consumers want and to enable nationalization of the rest of the auto industry.

[thirst4truth]

Who expects a business to survive when Congress requires it to build cars people don't want?

What cars are these? The congress inplemented a tax code that gave the consumer a 100% credit on taxes if you bought a vehicle with a GVW of 6000 pounds and used it in business. The SUV and Truck craze took off in the last couple of years. There is still a 100% tax credit this year for that. Almost everyone I worked with bought a truck or SUV these last few years. I work in the real estate industry do alot of business with builders. If the truck or SUV cost $50,000 brand new, remember it had to be brand new, you could deduct $50,000 from your $100,000 or $200,000 gross schedule C wages.

Did congress with their tax code help to seal the fate of the detroit auto makers, "making the cars people didn't want"?

[Josh Painter]

Interesting that Farago doesn’t seem to share his outrage over GM management with the UAW for its part in the mess.

Just sayin’...

- JP

[Mad Dawg]

Tax credit or deduction? There's an important difference.

Am I mistaken that Congress mandated that carmakers make a certain proportion of their production have a certain mileage -- or that their entire production average a certain mileage? If I am not, then for all those pickups and other truck framed vehicles they would have to make a proportionate number of low mileage vehicles, whether or not they thought they would sell.

So I understood it anyway.

[thirst4truth]

This is what my CPA said verbatim,

"Buying a new heavy SUV by Dec. 31 can generate a slew of tax breaks. Look at the Write-offs if your business buys a new $50,000 SUV with a loaded weight of more than 6,000 pounds and places it into service before the end of this year: the firm can expense $25,000, the maximum for vehicles. And it can claim $15,000 half the remaining $25,000 cost as bonus depreciation. Plus regular depreciation is 20% of the 12,500 balance of the cost. The total first year write off is $40,000 assuming 100% business use. Used heavy SUV or trucks don't receive bonus depreciation."

Its a deduction, a very significant one. Encouraging GM to make lots and lots of 6,000 GVW vehicles.

[Mad Dawg]

Okay, a deduction from income before computing tax. That's different from a credit.

Its a deduction, a very significant one. Encouraging GM to make lots and lots of 6,000 GVW vehicles.

But that doesn't address the consequent requirement to make lots of low mileage vehicles to bring their averaged fleet mileage down. I THINK my point still stands.