Deck Chairs Reshuffled

So who replaced the clapped out rustbelt-oriented General Motors on the Dow Jones Industrial Average? Silicon Valley’s own high-tech Cisco, National Business Review notes:

In a milestone marking the transformation of the US economy, Cisco was added to the Dow Jones Industrial Average today, and General Motors and Citibank deleted.

While Cisco has been affected by the slowdown, the tech giant still managed a $US1.5 billion profit in its most recent quarter.

The San Jose-based company remains the provider of most of the network hardware that controls the internet’s “pipes” and has been buoyed by aggressive diversification into areas such as business collaboration software and high def videoconferencing.

The full Dow adjustment saw Cisco and holding company Travellers Companies Inc added to the index, and GM and Citibank removed.

Cisco joins fellow blue-chip techs HP, IBM, Intel and Microsoft in the Dow (see the full list of components here).

General Motors’ well-document decline reached a nadir today as it filed for bankruptcy today (see Fiat and Magna pick up the pieces and Obama heralds ‘new GM’ as ‘old GM’ exits with $US180 billion).

Citibank has lost $US27.68 billion over its past four quarters.

Meanwhile, Larry Kudlow asks, “Isn’t it fascinating that stocks rallied over 200 points today, despite Obama’s command-and-control government takeover of General Motors?”

I think it’s because GM’s old-economy operation is yesterday’s story. The new economy doesn’t need GM. We’re only talking about 25,000 employees left in the car company’s domestic operation. Compare that to the millions of workers at new-economy companies like Intel, Microsoft, Cisco, Wal-Mart, Home Depot, Apple, and on and on.

Obama’s so-called GM rescue is a needless intrusion at huge taxpayer expense, and a political payoff to the union movement that helped elect him. And the central-planning mandate to produce little green cars at a domestic plant almost guarantees that taxpayers will never get their money back. Apparently GM cannot make these little green cars in China or Mexico and then have them shipped back to the U.S. for assembly and sale.

And we do not know the total compensation per hour for UAW workers — both salary and benefits — under the new agreement. That number hasn’t been published. So we can’t compare it to the compensation figures of the foreign transplants in order to measure competitiveness.

The U.S. now owns a whole portfolio of companies — AIG, Citi, Fan, Fred, and now GM. The long arm of the government has never reached deeper into the private sector.

Not to mention Amtrak and from FDR’s Great Depression, the TVA, which Wikipedia somewhat Orwellianly dubs, a “Government-owned independent corporation.”

Kudlow somewhat reassuringly concludes:

We are still a free-market economy. Even though Team Obama is moving the wrong way on a number of fronts, there still is room for American entrepreneurship and technological advances. This GM thing really is yesterday’s story.

I hope he’s right. In the meantime, it sounds to me at the moment, that corporatism: we’re soaking in it. (Or would be without those dams, I guess…)