Rescuing GM

Thomas Friedman has a great article up about the foolishness of the likely bail-out of GM:

They were interviewing Bob Nardelli, the C.E.O. of Chrysler, and he was explaining why the auto industry, at that time, needed $25 billion in loan guarantees. It wasn’t a bailout, he said. It was a way to enable the car companies to retool for innovation. I could not help but shout back at the TV screen: “We have to subsidize Detroit so that it will innovate? What business were you people in other than innovation?” If we give you another $25 billion, will you also do accounting?

One of the puzzling things is that most of GM’s non-US operations are profitable, and most of those are prospering with the sort of cars that consumers in the US now want. Development costs are minimal – all the cars have great safety features, ‘clean’ emissions, etc. so there’s little tweaking to do – the cars are fuel efficient, and they’re even pretty well styled. The only stumbling block is cost, though production costs in Europe can’t be significantly higher than in the US (otherwise GM wouldn’t need the bailout. I guess hiring a container ship to start importing Vauxhall Astras is too innovative without a fat pot of government cash to pay for it.

One comment on “Rescuing GM

  1. It’s clear that American workers can make the best car the world in terms of quality: my Toyota Tacoma was built in Tennessee by American workers. It was voted the best quality car you could buy in the US for three years in a row. I say let the company go bankrupt, even let it fail. Let the American workers have a chance at being managed well by a different company. Not one that keeps the management that allowed it to lose 95% of its value (GM), etc, while making cars people clearly aren’t buying. I think the bailout is completely idiotic. It’s corporate sloth on top of greed.

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