Sunday, May 31, 2009
GM Starts Over (and We Aren't Appropriately Sad)
We’d like to be more sympathetic to the fate of General Motors, which will likely declare bankruptcy tomorrow but we’ve already tipped our hand ; this is one more company that deserves to fall into the hole (we put AT & T, Northwest Airlines and Hilton in that batch as well).
Folks want to blame the current buying slump that is afflicting the auto industry for GM’s latest trouble, but that is rather simple-minded. GM has been losing market share for years. As of April it sat at a meager 19.2, falling from a mighty 60% at one time.
How foolish was the move to hand over billions to avoid what was plainly inevitable?
In November, the freshly minted President-to-be Obama – along with our Gov. Granholm - pushed for $50 billion for GM; “And if the companies don't get almost $50 billion, Obama will be dealing with the issue again by next summer,” a Bloomberg article stated,with little apparent insight.
Granholm said in a December statement that "the auto industry is the backbone of American manufacturing, and the ripple effects of bankruptcy would have touched communities and families all across our nation."
Recall Sen. Majority Leader Harry Reid (D-Nev.) announcing that “Congress is trying to save Detroit” also in December. We'd like to pass if that offer comes this way.
In the aforementioned Bloomberg piece, we also heard that "the auto industry is too big to fail," from Nariman Behravesh, chief economist at IHS Global Insight. We have looked for more insightful comments on the auto industry from Behravesh in the wake of the latest developments, but they are nowhere to be found.
So what is the fallout? We’ve seen so much hand-wringing and sky-is-falling utterance that it’s almost impossible to believe that the whole state will shut down upon the end of GM as we know it. Don’t feel badly for the employees; they have been handed plenty of ammo for the future in the way of money and benefits. Their going away package is something all of us would covet. Ditto the executives. And for any merchant who has based a life on the health of GM, well, GM's ebbing market share has been available for anyone to see for the past decade. Now we move forward and watch for the new big thing.
Hummer image by Flickr user GTM,CC 2.0
Toyota Camry image by Flickr user The Toad, CC 2.0