Posted on 06/02/2009 6:13:34 AM PDT by Mr. Mojo
(CNSNews.com) – Experts say the virtual takeover of General Motors by the U.S. government will negatively affect consumers and may ultimately drive buyers to boycott purchasing GM vehicles.
The Obama administration has decided to infuse an additional $30 billion to the $20 billion already invested in an effort to revamp the troubled automaker.
"I am absolutely confident that if (it is) well-managed, a new GM will emerge that can . . . out-compete automakers around the world and that can once again be an integral part of America's economic future," Obama said Monday.
GM filed for bankruptcy Monday, as the administration announced a Treasury-financed plan to push the 100-year-old American company into government possession. Under the plan, the U.S. will own 60 percent of the company; Canada will own 12 percent; unions 17.5 percent -- and bondholders will receive 10 percent of the pie.
Between 60 to 90 days after GM’s bankruptcy, the administration said it expects a rapid sale process that will permit a better and smaller company to surface.
However, economists and consumers are united in saying that a government-owned GM will mean bad news for consumers making them less likely to purchase a car made by the reorganized company.
“Public institutions or public enterprises tend to focus less on customer service, tend to focus less on innovation, and tend to focus less on continual improvements in their goods and services,” said Niels Veldhuis, senior economist at the Fraser Institute, a Canadian organization that promotes free markets.
“I would expect that, yes, you will see a drop off in terms of consumers buying the product, not for emotional reasons, but rather to reasons that are attributable to how public enterprises are ran and that is there is a lack of focus on the consumer,” he added.
Dan Ikenson, associate director of the Center for Trade Policy Studies at the libertarian Cato institute, said that, on the surface, given the fact that the U.S. government will have a stake in GM, consumers could have an incentive to buy from the company.
“There is going to be less availability of bigger cars, there is going to be much more emphasis on cars that Americans have traditionally not wanted to purchase,” Ikenson said.
The government, Ikenson said, is going to make it easier for consumers to purchase unwanted cars “by subsidizing them.”
But Ikenson also pointed out that, given the amount of money the government has invested; the new government-owned GM will hinder competition.
“My concern is that we are less likely to see robust competition in the auto sector because the government has such a stake in GM now,” Ikenson told CNSNews.com.
“It’s going to be more likely to invoke policies that sort of tilt the playing field in GM’s direction,” he added.
Ikenson predicts that competition will be affected because the government may impose policies that “hamstring” the competition by raising prices of non-GM automobiles.
However, Ikenson points out, “There will be fewer alternatives for consumers who just want to purchase GM products.”
James Gattuso, senior research fellow in regulatory policy at The Heritage Foundation’s Thomas A. Roe Institute for Economic Policy Studies, agreed that a federally owned GM is bad for consumers.
“It’s bad news for consumers in two senses, first as taxpayers by having $30 billion of risk as their money is invested in GM,” Gattuso told CNSNews.com.
“But more important directly as consumers, there is real concern that General Motors now will be run with a political agenda,” he added. “Consumers will lose if General Motors in effect becomes another Postal Service.”
Radio talk-show listeners, meanwhile, made it clear Monday that many of them will refuse to buy a car from Obama’s “New GM.”
“That’s like buying a Yugo,” wrote one listener of Baltimore-based WMAL-AM’s “Grandy and Andy Morning Show” on the program’s Web site.
Another listener said: “I think what will be coming out the door will not resemble, nor will it look like anything that anyone would want to actually have in their driveway.”
Clarence Ditlow, executive director of The Center for Auto Safety, a consumer advocacy organization, said the new GM will be “bad” for new owners -- and prospective ones.
“It’s a nightmare for present consumers and for future consumers it may just be a bad dream,” Ditlow told CNSNews.com. “But, in reality, for future consumers, there will be fewer dealers, service is going to be harder to get.”
Ditlow said the takeover is “one more reason for consumers to shift to foreign cars.”
“In both Chryslers and GM’s case, the government may very well make a viable corporation that can’t sell cars,” added Ditlow. “They are not going to perform anywhere near as well as what the government says they will.”
Just over a month ago, on April 30, Chrysler was also forced to file for bankruptcy, but a bankruptcy judge on Sunday approved the sale of the majority of Chrysler’s assets to a group led by Italy’s Fiat.
My wife is looking at Ford, Honda, and Lexus right now for her next vehicle.
There will always be people who will want to buy an American nameplated car, that is not a subsidized piece of junk. I think the heart of your question really goes to the UAW contracts. If Lord Zero is willing to print money to pay to union auto workers in both Chrysler and GM, then Ford will get stuck with higher labor costs at contract negotiation time.
Obummer's been able to face the fact that a goodly number of plants need to be closed, perhaps he may realize that he cannot continue to hand out huge paychecks to the UAW drones.
If anyone is interested here is a link to some charts showing total car sales in the US for 2008 and thru April of 2009. Car sales are in decline and may well be that way for a few more years.
http://online.wsj.com/mdc/public/page/2_3022-autosales.html
think ill be buying fords from now on
I personally, never knowingly purchase union made products.
The vehicles that people want,
and that people can buy (presently),
will be tariffed and taxed and fee’d
to the point that we won’t be able to buy them.
Didn’t trust obama enough to vote for him, I’m certainly not going to buy a car off of him.
We’ll never own any of their vehicles again.
BO and his band of merry Lefties are waking up to the fact that the 60 million who voted against him are the ones with money to buy cars and will seek other brands than GM and Chrysler. That’s why in his daily propaganda appearance yesterday, he tried to sell the idea that he was so reluctant to interfere in the auto industry and that his government would try to be “hands off.” It’s too late for that approach after firing GM’s CEO, installing his own lackey, and giving away the store to his major campaign donors, the UAW.
It’s insulting to see how stupid he thinks Americans are, but then why shouldn’t the Kenyan think that, as he occupies the Oval Office.
What is Tata Motors?
India. They now own Land Rover and Jaguar.
Did you ever think that buying Japanese would be the patriotic thing to do in America?
We have a Honda Pilot and are thinking of buying another one in the near future to replace another car. Everything is upside down these days.
hmmmm...thanks for the info. I guess we can safely assume now that India will not be signing any global cap and trade schemes. Who woulda thunk it...(eye roll). It’s designed to bring America down...not other countries.
Why does this whole mess remind me of that Johnny Cash song “One Piece at a Time”, but instead of stealing Cadillac parts, the government is stealing our industries...
Yeah, my wife’s grandfather wouldn’t ride in our toyota Rav4, because he was a Pacific Theater WWII vet.
He would, however, ride in the Lexus SUV, because he wasn’t aware of its pedigree, I guess.
Good point about those that voted against “the one” are those that have money to buy cars. Homeless types, illegals and overseas arabs usually don’t buy American cars from the dealer. The independant repair shops and retial outlets like Pep Boys ought to do very well for the next couple of years. I guess the kenyan goofball doesn’t realize that those that are smart and industrious enought to become “rich” are also smart enough to find ways around his commandments. Like the rich folks leaving high tax states. HEY MUGABE, most of the American population is not near as stupid as your voters.
Disclaimer: Opinions posted on Free Republic are those of the individual posters and do not necessarily represent the opinion of Free Republic or its management. All materials posted herein are protected by copyright law and the exemption for fair use of copyrighted works.