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Better Companies with Better Technology Will Rise from the Ashes GM and Chrysler are back at our doorstep, hats in hand, asking for a bailout that could
exceed $130 billion. We should say, "No, and shame on you for asking!" GM is failing because of horrible mismanagement, a complete lack of long term planning, outdated technology and the fact that they make, by and large, high maintenance, gas guzzling cars that few people want to buy. One need look no further than Consumer Reports to see the rampant quality issues of many (most?) of their models and the fact they simply don't hold up as well over time as their Japanese counterparts. Are they the victims of an environment within which no automaker can survive? They are not. Despite the recession, Toyota sold over 620,000 more cars than GM last year and invested heavily in R&D. They sell more hybrid cars than all US automakers
combined. This year Toyota will release third generation hybrids, including new budget and luxury models. They have a
100 year business plan. Does GM have a 10 year plan? During tough times people want fuel efficient cars that don't incur high maintenance costs. That is why they are buying Toyotas and Hondas. End of story.
priusAm I being unpatriotic by inviting this comparison and touting Toyota's success? Keep in mind that Toyota has been a model employer in this country since 1957. Today they operate five major assembly plants in the US and employ tens of thousands of employees in six states. From Jan 2006 to July 2008 GM laid off 5,500 workers. During this same period Toyota laid off zero. Not one American worker. I realize poor management, outdated technology and quality control issues area not the only factors contributing to GM's woes, although I would argue they are the most significant. There are external factors, such as UAW's stranglehold and public companies in the US having difficulty building cash reserves. Japanese companies are encouraged to build cash reserves to weather difficult economic times, while companies in the US are pressured to pay dividends if they have substantial money saved. Its obviously not a friendly economy for anyone, but bubbles and recessions are well known features of capitalist systems. The ability to plan for them and weather the storms is a proper test of the worthiness of a company to survive. That is the way our system is supposed to work, and it
is the way it works for those of us without droves of lobbyists. Its time for us to step up to the plate. I would love to see GM replaced by five or ten hungry, agile automotive start-ups that have the ability to lead in the areas of fuel efficiency and alternative energy vehicles. Does anyone really think GM, under the direction of a new federal car czar, can accomplish this? There is no evidence of any such collaboration bearing fruit. GM's time has come and gone. Will this cause a short term jump in unemployment and a nasty cascade effect on suppliers? Yes, but making the right decision is often painful in the short term. We need to swallow this bitter pill, let GM fail, and give a new generation of smarter companies a chance to build better cars.

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Comment by Bruce M. Bird on March 22, 2009 at 10:28am
The genius of our capitalist system is that it both rewards success and tolerates failure. It's the notion of a company being "too big to fail" that carries with it all sorts of awful, unintended consequences. When a company fails, it should file for bankruptcy.
Comment by Cameron Souza on March 14, 2009 at 10:47am
US is funneling its citizens money to giant failed businesses:

Comment by Cameron Souza on March 10, 2009 at 2:06pm
I agree GM should go, but UAW is a big problem as well. They pervert the cost of labor to a very damaging degree. As Laurence indicated, we effectively pay a tax to subsidize overpaid labor and better retirement plans than most college educated workers enjoy.
Comment by Light Maleski on March 3, 2009 at 4:14pm
I couldn't agree more Daniel.
Comment by Daniel Leuck on March 3, 2009 at 2:31pm
Well put Laurence. AIG and GM have their hands firmly planted in our pockets. We, the tax payers, are being asked to prop up failed business models. This is never a good idea. Sometimes you need a forest fire to make way for new growth.
Comment by Laurence A. Lee on March 3, 2009 at 7:32am
F me on all this "Bailout Money". Doesn't it raise an eyebrow that these companies seeking Bailout Funds are ONLY NOW declaring multi-billion-dollar losses?

Seems to me, they've been cooking the books in a positive light for years (decades), to elevate stock values and inflate forecasts; and now that the Bailout Option is available ("OMG! Free Money!") they're cooking the books in a negative light to "demonstrate" their need for all this Bailout Money.

When I hear AIG took a 60B loss, I can't help but think they've been deferring and hiding a decade's worth of losses, and are only now "unwinding" those losses on the books -- in a single quarter to make their situation seem more dire than it really is.

Crooks. All of 'em. >:-(
Comment by Light Maleski on March 3, 2009 at 1:26am
I think the politician are the only ones who will really miss the big three if they fold. The workers will be able to find employment again at new plants. They may have to learn a few new skills or move, but who hasn't been forced to do that to make money at some point or another. I mean, Detroit can't be THAT great a place to live. Lucky we live Hawaii.
Comment by Cameron Souza on February 28, 2009 at 9:15am
That bailout money is better spent on subsidies for research in renewable energy and alternative fuel source infrastructure.
Comment by J. David Beutel on February 22, 2009 at 7:25pm
Comment by Daniel Leuck on February 21, 2009 at 7:15pm
Kostya, Laurence & Dave - You are all spot on. Kostya - I'm 100% with you on your electric car club idea.
I remember reading last year that Paris is planning a program along these lines. I haven't heard anything about it recently.

I agree that owning a car is far more expensive and inconvenient than it needs to be. Hawaii is a great place to implement something like an electric car club or state program with computerized tracking of start and end points.

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