Andy McKay

Nov 19, 2008

GM going under

What I've seen about the current discussion focuses on giving the auto manufacturers lots of money because that's cheaper than them going under. Some comments on that:

  • If they are looking for $25bn in a bailout, that won't last very long - GM alone, lost $39bn in 2007. So how long will that $25bn last?
  • If they are looking for that much, you know they will want more. They will become dependent. Does the government get to take it over? Does the management change?
  • This is a problem that's been in the making for a long time. From slow sales to pensions and healthcare GM is a troubled company:
    In fact, per car, GM is now spending more on healthcare than it does on steel.
    Rising benefits burden (2006)

I see these as businesses that are inherently bad and going to fail. The real question is do you spend money now and keep them alive or wait for them to fail in a few years. I haven't been able to find figures on actual volumes of sales, but here's GM share prices, notice a decline since their peak in 1999:

Yes it is precipitous in the last few months, but this is more than just a shock, it's a crap business. You might help them ride out the storm for a month or two, but they will be going under until they can get their union under control, focus on cars people want instead of crap, cheating or just plain disgusting cars.

Note: yes the PT Cruiser is by Chrysler and I mostly talk about GM. These three companies are generally not good corporate citizens and I lump them together.