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.
Toyota builds a great truck right here in San Antonio, at a non-union shop.
Was a GM person myself..Never again. We should all support Ford with our purchasing dollars. I know I will.
I’m sure the product will resemble the Tata but the price will resemble the BMW.
I was berated by an older gentleman for my Hyundai Elantra Wagon. He saw my military stickers on the windshield and asked me how I could do such a thing given WWII.
I asked him to tell me when we had been at war with South Korea and then I would think about getting rid of it.
He walked away muttering about "buying American."
Supporting unions which support the Marxizing of America is not “buying American”.
Boycott Hussein motors? Why, that will be against the law. Or at least, anyone silly enough to buy a vehicle they actually WANT will face a very stiff fine—er, tax, er tribute...well, fill in the blank yourself—for displaying audacity enough to ignore what Hussein determines best for the PEOPLE!! See, Hussein knows it’ll be impossible to lose money when you not only make the product, determine it’s price and “value”, create a monopoly, force people to use it....the POST OFFICE?? Oh, yeah. Never mind.
And in Princeton, Indiana too.
“Toyota builds a great truck right here in San Antonio, at a non-union shop.”
Nissan is doing the same thing in Mississippi. Non union so far..but I am sure Zero and his band of chicago thugs will ‘remedy’ that as soon as they can (eye roll).
No way am I buying Obama Motors. Even used.
“...Its a non-manufacturing investment company...”
My bet is still on a Middle Eastern ‘holding company’ of some sort. Mark my word. They love those trucks and are not stupid enough to buy into the whole global warming scheme.
First I doubt the new Government Motors will produce any vehicles with popular appeal. Gone will be the Corvette, pick-ups will be replaced by wimpy mini-trucks that can’t do the jobs pick-up buyers need done and the sedan that can seriously accommodate four passengers will be replaced with some subcompact with barely seating for two. In Obama’s mandate to meet the new CAFE standards engines will be leaned down as to be almost undrivable and reliability will be a joke. Billions will be poured into the Chevy Volt which will gather dust on what few dealer’s showrooms are left.
Technically, as The Chosen One has pointed out, the USA is already bankrupt and has been for a while.
You are right, it matters little whether it’s a write-off or a subsidy- same money, different column on the spreadsheet.
Could Algor be behind this, eliminate internal combustion engines and force everyone into Green transportation?
I've never been big on Ford, so I'll have to look at the F-150, or that 65 Mustang I've been wanting to fix up.
Unfortunately, the next shoe to drop is the scarcity of replacement parts. Obutthead will soon decide that providing replacement parts for cars built prior to his new era is counter-productive to new car sales. Then there will be a vague, unexplained difficulty in manufacturing and shipping repair parts for older models. The media will attribute this to the economy and the policies of the Bush administration.
Those of us left holding the bag with current GM vehicles will be stuck scrounging junkyards or paying premium prices for leftover stock. If this happens too much, watch for a new government effort targeted to 'reclaim' late model junkers for recycling. It might be time to buy a good parts vehicle to save for a rainy day.
Like nearly everyone else on this forum, I am done buying GM or Mopar. Obutthead can shove his fascist car industry takeover wherever it does him the most good.
I'll take one if they give them away, but only if they throw in free maintenance and a life time warranty.
lol, what makes you think that? Election after election they keep electing politicians that waste many times that amount on far stupider projects than GM.
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