What's Good for GM?

Turns out, it’s not so good for the country

By Doug Thompson

What’s good for GM isn’t so good for the country, as it turns out.

The latest $30 billion installment of public money into the automaker is a tiny fraction of what we’ve done for General Motors.

Our emission and mileage standards have been a bad joke for decades. We have no worthwhile energy policy. Our energy policy is to do whatever is necessary to bring in cheap gas. When we were finally forced to do something, we poured money into corn-based ethanol. Why? Because it presented the illusion of a boundless stream of cheap gas. The illusion proved false. Don’t worry, though. Cellulosic ethanol is coming. Really, it is. All we have to do is suffer through another decade or two — or three, or whatever — of utter oil dependence. Cheap gas now costs more than $40 a tank for a medium-sized car.

What’s good for GM has been terrible for us, looking back. I don’t know of any tallying up of the total we gave in tax breaks and other incentives — mainly by state governments, not the feds — for competitors to GM either. All in all, our love affair with the car — which made the country the dominant international carmaker for most of the 20th century — has taken back a big chunk of the benefits it once bestowed.

Looking forward, people who voted for “Change” in the last election must realize that the administration and Congress have cashed in a great deal of their political capital to save jobs at GM and Chrysler. The GM and Chrysler deals are not popular. Letting the companies crash would have been less popular, but it was a choice between evils. 

There’s not a whole lot of power left to push for health care, for instance. Reforming health care is vital to the U.S. economy and the U.S. people — more vital than saving GM. However, we’ll see what can be done with the political energy that’s left. 

On the positive side of the ledger, 58 percent of those responding to a Ipsos/McClatchy Poll way back in early May said that “guaranteeing universal health insurance for every American by the end of 2009” was one of the top three national priorities. Of those, 20 percent said it was the top national priority. 

Back on cars, we’ll see how much market share for cars goes to Toyota. We’ll see if “Buy American” means as much when you’re buying from the American government. If “Buy American” has any meaning left, a likely beneficiary will be Ford. The “managed” GM bankruptcy won’t help just GM.

An estimated 2,100 GM dealerships will close. This has particular relevance for Arkansas. Local car dealers and their related repair and maintenance shops are important to local economies of many small towns. Soon many of those businesses won’t exist.

Steve Pearlstein, the Pulitzer Prize-winning business columnist at www.washingtonpost.com, made another pithy point in his Friday column: “If this were happening in France or Venezuela, we wouldn’t hesitate to call it nationalization.”

Yet we’d be wrong, Pearlstein goes on to argue. “Like Bush v. Gore, the auto bailout represents a distasteful policy decision that even its authors hope will set no precedent,” he writes. He goes on: “As I suggested last year, a pre-cooked, accelerated bankruptcy process was the only realistic way to restructure companies that had been so badly mismanaged for so many years. As is appropriate in a capitalist system, shareholders have been wiped out and lenders forced to suffer for their bad judgment.”

So why aren’t bankers being forced to pay more for their bad judgment? Because people still want loans. Relatively few of the folks still buying cars are buying GM versions. Hummer, which became the very symbol of addicted-to-gasoline thirst, will be sold or eliminated along with Pontiac and Saturn. As this is being written, Hummer is the only one of those three reported to have a buyer: A sad but telling commentary on the American automotive market, perhaps.

The biggest question to me is: What will Ford do?

Ford was in as bad a shape as GM not so long ago. Ford made some tough calls. Ford actually negotiated a cost-cutting deal with the United Auto Workers before the GM bankruptcy. Still, the company that didn’t go for a buyout and struggled — so far successfully — to stay off the bailout bandwagon now has to compete with a leaner, relatively debt-free GM.

Maybe government management will even things out.