GM Should Run to Bankruptcy Court

By avoiding bankruptcy, GM only risks trading union demands for federal tyranny

Shikha Dalmia | April 6, 2009

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Indeed, Obama has already declared that he wants to make GM the world's leader in "building the next generation of clean cars." Never mind that GM can neither build these cars well nor sell them. Out of GM's top 20 "profit-contributors" last year, only nine were cars—the rest were all politically incorrect SUVs and trucks. GM sold less than 15,000 hybrids last year, and this year is going to be worse because industry-wide hybrid sales have dropped by two-thirds from their peak last year. Indeed, last year there was a waiting line for a Toyota Prius—today there is an 80-day supply sitting on dealer lots. Meanwhile, the Obama task force was forced to conclude that the crown jewel of GM's green lineup, the $40,000 electric Chevy Volt it developed expressly to impress D.C. Democrats, is "too expensive to be commercially successful."

Yet nothing that Obama has said gives any hope that he will accept such market realities. To the contrary, he has given every indication that he will use GM as a pawn to launch the biggest auto industrial policy ever. By avoiding bankruptcy, GM only risks trading union demands for federal tyranny. It is not a smart trade.

Shikha Dalmia is a senior analyst at Reason Foundation. This article originally appeared at Forbes.com.

Comments

JP|4.6.09 @ 6:14PM|#

I haven't RTFA, but why haven't GM's creditors initiated an involuntary bankruptcy case?

Dr Duck|4.6.09 @ 6:18PM|#

Indeed, with the exception of Saturn, Wagoner has not been able to bring himself to jettison any one of GM's eight brands

Oh, how quickly we forget Oldsmobile.

|4.6.09 @ 6:22PM|#

why haven't GM's creditors initiated an involuntary bankruptcy case?

Probably because they're hoping for the bailout to pay them more than they'd get if they liquidated GM right now.

-jcr

|4.6.09 @ 6:37PM|#

You're totally right. If the government gets it's hands on GM, they are going to kill all the politically incorrect (but profitable) lines of cars, and force GM to produce politically correct (but unprofitable) "green" cars. If they ever want to turn a profit again, they should flee now.

JP|4.6.09 @ 6:40PM|#

But if JCR is right, then don't the ones with skin in the game think (at least for the time being) that GM will be better off* with a government deal?

*Better off in the sense of less likely to default on its obligations.

|4.6.09 @ 6:43PM|#

No disagreements from this quarter.

A minor(?) addition. GM should have filed in 2007. Water under the bridge and all that, but still ...

|4.6.09 @ 6:49PM|#

Well, now that the government has sacked most of the board, I don't think the shareholders have much say in the matter.

I think the hope is that they'll finagle something that will enable them to keep getting subsidies, so it'll be marginally profitable for the shareholders, but that is by no means a guarenteed outcome. As we saw with the AIG bonuses, the Obama has a habit of reneging on it's promises to private business.

Paul|4.6.09 @ 7:34PM|#

I haven't RTFA, but why haven't GM's creditors initiated an involuntary bankruptcy case?

Why on earth would they do that when Obama is on the phone promising $???? more billion dollars, free of charge, 0% interest?

Paul|4.6.09 @ 7:35PM|#

Oh, how quickly we forget Oldsmobile.

Oh, how hard it is to forget Oldsmobile, despite my repeated attempts to wipe it from my memory.

|4.6.09 @ 8:32PM|#

I do like the angle that it is up to GM to leap, if it can, out of the jaws of government.

OTOH it does provide a case study for the magic power of government. See them direct GM to where? I suspect the politics discussed in the article are closest to reality; Green Motive Power is here, now that we have mandated it.... lol.

Of course it is sad that all the tax money is being pissed away, but it is anyway, you might as well get a talisman against those that point at 'deregulation' and sneer that the laissez-faire needed to start on thier crow.

LarryA|4.7.09 @ 12:11AM|#

"I'm from the government and I'm here to help you."

(Shudder.)

AndreainNY|4.7.09 @ 9:53AM|#

Obama needs GM to produce the electric car because he wants to keep up with the Green-ses.

|4.7.09 @ 11:50AM|#

Of course it is sad that all the tax money is being pissed away, but it is anyway, you might as well get a talisman against those that point at 'deregulation' and sneer that the laissez-faire needed to start on thier crow.

Someone's translation bot needs a tune-up.