Not surprisingly, the reaction to the twin requests by General Motors and Chrysler for billions more in taxpayer dollars money that we don’t have that will have to be repaid by future generations has not been all that positive.
Over at The Truth About Cars, for example, Ken Elias points out that the plans really don’t amount to much of anything:
The viability plans presented by Chrysler and GM to the US Treasury and the public yesterday signaled the end game. The plans amount to nothing more than begging for enough cash to stay afloat until the market turns upwards. Not only are the automakers’ arguments based on flawed assumptions about the US car market, but they singularly fail to address the fundamental problems that brought Chrysler and GM to their knees. The fact that anyone would take these pleas seriously indicates the simple triumph of fear and over common sense. You’d have to be willfully ignorant not to see these plans as the worst kind of cheap fiction. Well, maybe not so cheap . . . (…) Truth be told, we don’t know the total bailout funding required. Figure $40B-$50B dollars as a lowball estimate. And that’s just short term misery extrapolated over five years (Comrade). Let’s not forget the US pension contributions due in 2013/2014. Or shall we? This is bad craziness. Never mind the cost. Or the fact that the bailout is doomed to failure. Government money provided to private enterprise on this basis completely distorts the function of the marketplace. It rewards incompetence. It perpetuates incompetence. The bailout does nothing to address GM’s fundamental inability to sustain car brands with class-leading products. Nor can it. It is not the government’s responsibility to pick a winner in a free market. Nor is it the government’s responsibility to “save” a loser.
James Joyner, meanwhile, raises some worthwhile questions:
[L]et me get this straight. The only reason to bail out these failing companies is to save the jobs of its workers during dire economic times when it would be even more difficult than normal for them to find new work. Yet, they’re going to cut at least 50,000 jobs anyway. And their plan for saving the company is to announce ahead of time that cars they’re trying to sell now will soon go out of production, which means the companies won’t be making spare parts for them, which means no one who isn’t an idiot will buy one of them. Further, if the idea is to cut costs and they’ve figured out that the Aspen, Durango, and PT Cruiser are unprofitable why not stop making them now?
Or, why didn’t they stop making them when they first realized they were unprofitable. ?
The truth of the matter, of course, is that ending a model line, or an entire brand, isn’t always an easy thing to do. There are costs that Chrysler and G.M. have sunk into these lines that make it hard for them to just walk away and, as I noted yesterday, there are state laws on the books and in the works that make it financially burdensome for car manufacturers to simply walk away from a brand. For example, it cost General Motors nearly $ 1 billion to end the unprofitable Oldsmobile line, thanks largely to state franchise laws that “protect” dealers. The only way that G.M. and Chrysler to largely avoid these costs, would be to go through Chapter 11 Bankruptcy.
As if that weren’t bad enough, Dave Schuler notes that General Motors is worth more dead than alive:
As of this morning GM’s total stock valuation is $1.33 billion. The estimated value of GM’s assets is something like $30 billion. GM is literally worth more dead than alive.
Pouring billions down a rathole doesn’t really make sense when you think about that fact, does it ?
Finally, though, Jason Pye sums up what is probably the likely outcome of this notwithstanding how incredibly stupid it might seem:
I have no doubt that they’ll get what they’re asking for.
Sadly, I think he’s right.
