GM Deal Builds, Then Destroys Driving Excitement Like a 1985 Pontiac Fiero
Jacob Sullum runs through many of the reasons why the feds running GM is an awful idea, but like the oilpan in my old 1970 Chevy Impala, you can never fully catch all the leaks with a single fix.
Indeed, Alan Vanneman points to more reasons to be skeptical of the GM takeover that isn't really a takeover because President Obama has told us he doesn't want to be running GM but if you don't move those donuts to the other side of the dealership, I'm going to kick your ass all the way across the showroom…
Anyhoo, here's Phil Levy writing in Foreign Policy about the international dimension to the whole debacle:
GM had recently informed Congress that it planned to produce roughly 50,000 subcompacts per year in China to sell in the U.S market in the near future. However, on Thursday, UAW President Ron Gettelfinger said that GM had agreed not to import the cars from China and to produce them in the United States instead as part of its deal with the UAW.
This change opens up an enormous set of problems for the United States that will stretch well beyond the automotive sector. The United States has commitments under the World Trade Organization for its tariffs on cars; it's supposed to avoid quantitative restrictions altogether. This latest policy switch looks very much like a government-mandated reduction in auto imports from China. A particularly sophistic trade lawyer might try to argue that this is just part of a labor deal, not an explicit U.S. government policy. But the UAW is currently receiving only what the Treasury Department decides it should get. Further, under current plans, the U.S. government will soon be a majority owner of GM. That will make it difficult for the government to dissociate itself from GM policies.
And then, of course, there's this economic hairball clogging the carburetor:
The likelihood of recouping the enormous infusion of funds into GM…was going to be a problem in any case. In 2004, GM earned a net $2.7 billion. That was the only year of the last five in which they made profits. Even if the new GM were entirely devoted to repaying U.S. taxpayers, if every year is as good as 2004, and if the government charged GM a concessional interest rate, it would still take the new GM more than 25 years to repay.
But that all happened when GM was trying to make a profit. Now, GM will be trying to satisfy political demands for domestic employment, alongside demands for meeting environmental goals. It's more difficult to make money when you're not even allowed to try.
Pontiac builds excitement, delivers some less than that here: