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Friday, December 02, 2005

Can We Save GM?

David Ignatius at the Washington Post writes in his column today of GM's demise being a wake up call to America to work on the economy, specifically in the auto sector.

He makes a very good point that in the global economy, we are becoming a consumer nation, buying from elsewhere and manufacturing less and less here. He's also right that the GM issue probably isn't receiving as much press as it would in other times, due to other events. I remember when Chrysler declared bankruptcy, and it was a near daily news story.

Where the column goes off course is when he starts talking about the government helping to revitalize our manufacturing base.

Commentators have blamed GM management for being too shortsighted and its workers for being too greedy. But few people seem to appreciate that the nation as a whole has a stake in maintaining a dynamic industrial base, or that government policies could help reverse our industrial decline.
We all do have a stake in it rebuilding our industrial base, but the commentators are right, too. GM's management has been short sighted, and slow to build cars people want. The wages of the workers, and the refusal of the UAW to ever budge on things like health care (GM is the second largest provider, behind the government), makes those two parties, not the consumers who don't like the unattractive, over priced products to blame.

His plan, based on a paper from last year, is to give GM incentives to build light weight vehicles that would be more fuel efficient, and would reduce our oil consumption by 29% in the next 20 years. The incentive to the consumer would be a big fee on "heavy cars" and a rebate (paid for by the fee) on the light weight ones.

It's an interesting theory, and it might help get the lighter weight, more fuel efficient vehicles on the road. The problem with the theory is that it fails to address GM's actual problems, making cars people want, and having a production cost to make them affordable.

While the Prius and Civic hybrids are selling quickly, it's because they are offering two things, gas savings, and a reasonable cost. GM could probably hit the first one, but under it's current UAW contracts, wouldn't be able to make the second.

One of the other points on these lightweight vehicles is the use of biofuels, instead of gasoline. It's a nice idea, but biodiesel and ethanol are both more expensive than gas, by a large amount. The only reason they are semi-affordable is because of government subsidies. Since those subsidies come from tax dollars, keeping them cheap enough to make a 15-20% cut in oil use means someone (you the tax payer) will be footing the bill.

I'd like to see GM survive, but not if it's going to be done on my tax dime through tax breaks, fuel subsidies, and other smoke and mirrors. First I want to see them get their costs under control, then talk to me about giving them incentives to build eco-friendly econoboxes.

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Blogger shoprat said...

If you want a good AMERICAN MADE car, you can always buy Toyota. They have a policy of what they sell in America they make in America with American labor. Their cars are actually the most completely American made. (And one of my shop's most profitable programs is Toyota parts). The only reason they don't count in some minds is because there is no UAW in their plants.

I believe GM will survive but it will be a shadow of what it once was. As far as changing, we will have to see what happens.

6:11 AM  
Blogger Crazy Politico said...

My next car will probably be another Hyundai, built at the Alabama plant.

I agree, that a lot of folks are misled by the UAW about them. While not all of the company profits stay here, the wages of thousands of workers do.

3:17 PM  
Blogger Mark said...

I bought a Toyota Tundra, and hear no end of shit about buying a "foreign" truck. Idiots.

10:00 PM  
Blogger Crazy Politico said...

My last truck was a GMC 2500 HD and I loved it. Except the gas mileage. With 30 mile commute to work (no public transport) it was getting a little expensive.

The Hyundai is getting about 33mpg average per week, which is nice. Even if it is Korean

10:18 PM  
Blogger Phantom_Driver, USNR, Ret. said...

Closing the plants and laying off 25,000 is a good move for GM who will getinto smaller vehicles, brand new robotic assembly plants, far less UNION employees, and a much better bottom line.

Now is the time to buy GM stock and hang onto it.

Look for those plants to be in right to work states. The union membership, once 25 percent of the work force, is now unde 9 percent.

And that's a good thing. The unions terminated themselves.


10:19 AM  

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