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August 08, 2005

GM Begs

The best part of the unshockingly bold crony-captialism Matt ferrets out is that it won't work. GM is suffering from a cash flow problem in the same way I'm suffering from old age arthritis: it isn't. The company is still paying a stock dividend, their CEO still got a $2.5 million bonus this year, and they've got $20 billion in on-hand cash. The company's got money, the problem is nobody buys their cars. And that's not because of retiree health care costs or unions, it's because they make poor-quality automobiles that are totally unsuited for today's gas prices.

So GM, I'm sure, can get Congess to bail them out. But it won't do them any good. GM's problem isn't in their bank account, it's in their product line. Pumping up the former won't do them a damn bit of good; it's the latter that needs an overhaul. And they're going to have a hard time doing that with a furious workforce and congressional oversight. Reacting with cries for help, as they are, is so wholly pathetic, so obviously unsuited to the situation, that it's left me ashamed of my wimpy domestic ubercorporations. That's why I, for one, welcome our new Toyota overlords. Maybe they'll give us back some of that can-do American spirit.

August 8, 2005 in Big Business | Permalink


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We must move forward, not backward, etc.

Posted by: TJ | Aug 8, 2005 12:14:11 PM

One wonders why the Dems don't start thinking about and proposing very serious lobbying reform in DC, and making this a major promise to the country.

The scandals are legion, and the points so easily understood, that this seems like a very hot and important topic to pursue.

Somehow the control of the legislative process by corporations has to be reigned in. Even if the Dems won (thru some electoral miracles in 06 and 08) control of Congress, the existing lobbbying setup won't go away and the Dems would find it hard to get anything meaningful in the way of reform passed - in health care, for instance.

Some obvious reforms: (I'm sure there must be other and perhaps better ones)

- Prohibit by law (not just rules) lobbyists from being in legislative mark-up sessions with congresspersons, their staff, or committee staff.
- Require lobbyists to completely disclose any or all contacts with congresspersons or their staff - on a weekly basis on a publicly maintained website.
- Forbid funding, directly or indirectly through non-profits, of travel junkets.
- Enact a hard barrier of 2 to 4 years to prevent former congresspersons or executive branch officials from becoming lobbyists.

Posted by: JimPortlandOR | Aug 8, 2005 12:47:28 PM

My money is that the lobbying would work. It would flip Michigan, seal up Indiana even if Bayh runs for President, and make it tougher to compete in Ohio. And it's not like Michigans two Democratic Senators are going to say "no".

Posted by: Nick Beaudrot | Aug 8, 2005 2:04:11 PM


The reason is simple. Dems are just as much at fault for, and the beneficiary of lobbying as the Republicans are.

The simple fact though is that interested people will have a disproportionate impact on legislation, and there is probably not going to be any way to prevent that. To an extent, this would be a problem of its own.

For example, we know that Doctors are going to have a say in any legislation that effects medicine. Naturally this will probably mean that Doctors are going to be favored, at least to an extent, by legislation. But forbidding any Doctor from being a part of any medical related legislation would be a cure even worse than the disease. The effect applies with any other profession or industry.

Posted by: Dave Justus | Aug 8, 2005 2:04:19 PM

GM's quality ratings actually aren't that bad -- they did decently in the latest JD Power ratings, though as usual Toyota did better.

GM's problem is that they lost all interest in building interesting cars because they were making money hand over fist upselling their car customers into trucks -- big SUVs like Trailblazer, Tahoe, Escalade and Hummer as well as full-sized pickups that increasingly come with two rows of seats and four full-sized doors.

Dirty little secret: I sold cars 30 years ago for one summer. Profit margins at the dealer level were between 12 and 18 percent for cars but 25 percent for trucks. That's factory invoice vs. MSRP as shown on the window sticker. Trucks are more profitable for dealers; they're also more profitable for the manufacturers because it takes lots of engineering brainpower to make smaller cars stand up to crash-integrity standards as well as ever-increasing emissions standards. The larger size of trucks means the engineers spend almost no time, comparatively, dealing with these issues on bigger vehicles. The fact that emission standards are less stringent on trucks than cars plays a role too.

As Japan Inc. began eating Detroit's lunch in the car sector, Detroit retreated into trucks -- more profitable and no competition from Japan.

Until recently. Toyota and Nissan now build full-sized trucks and SUVs. Even Honda has a pickup now. Toyota is taking the shrinkwrap off a new pickup truck plant in FREAKING TEXAS, for God's sake, where even the Green Party drives pickup trucks. Once word gets out that you can get Camry-style quality in a pickup truck, Detroit's got nowhere to go unless they start building cars people want to buy. As far as showroom successes go, Ford's got the Mustang and Chrysler's got the 300, but these are the exceptions that prove the rule.

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