An important reminder from NRO:
Admirers of the GM bailout should bear in mind that it was the Bush administration that first decided to intervene at the firm, offering a bridge loan on the condition that it draw up a deeply revised business plan. President Obama’s unique contribution was effectively to nationalize the company, seeing to it that the federal government violated normal bankruptcy processes and legal precedent to protect the defective element at the heart of GM’s troubles: the financial interests of the UAW. It did this by strong-arming GM’s bondholders into taking haircuts in order to sweeten the pot for the UAW. The Obama administration also creatively construed tax law to relieve GM of tens of billions of dollars in obligations — at the same time that Barack Obama & Co. were caterwauling about the supposed lack of patriotism of firms that used legal means rather than political favoritism to reduce their tax bills.
Cadillac is doing OK, thanks to a multi-billion dollar revitalization program begun a decade ago. But much will depend on the success of the new XTS full-size sedan, which GM was just forced to halt sales of due to a software glitch. It’s a quick fix, but does nothing to help the sullied reputation of the brand once known as “the standard of the world.”
Chevy’s record is mixed, but losing $49,000 per Volt has got to make the company grateful that they don’t sell many of them.
There’s no way an honest bankruptcy would have allowed the GMC marque to survive. It’s a vestigial of GM’s Bad Old Days of badge-engineered crap — GMC doesn’t produce a single model of its own, merely rebadged Chevy trucks. That hurts GM’s economies of scale, and also requires duplications in its expensive marketing efforts. Instead of making one truck, you have to pretend to make two. And instead of selling customers on one truck, you have to sell them on two. That also puts one of GM’s divisions in direction competition with another of GM’s divisions. This is a big part of how GM got into this mess, starting 30 years ago.
Speaking of duplicated efforts: GM has not one, but two luxury brands. We can’t forget Buick, which is big in China but less well-respected here. GM seems to have positioned Buick up against Lexus, and Cadillac against BMW. If sales are anything to go by, consumers aren’t buying it (ha!) about either brand. Again, an honest bankruptcy would have forced GM to jettison Buick (keeping it alive in China, of course) so they could focus on making just one damn decent luxury line. GM’s engineers are among the best in the world — but there are only so many of them. Diluted efforts lead to diluted results.
Just about every other carmaker in the world has one retail brand, one luxury brand, and maybe — maybe — a truck/SUV division. GM has two not-very-luxurious luxury brands, one retail brand which also makes trucks and SUVs, and a truck brand which only pretends to make trucks.
What a confused (and confusing) mess.
And that’s before we even get to their union troubles, which kangaroo bankruptcy court allowed to fester. Allowed? Hell, Obama’s kangaroo court mandated that GM and the UAW stay chained together in heavy seas.
Someday, GM will be back for another bailout, but it didn’t have to be this way. An honest bankruptcy would have focused on the economics of saving the company. Kangaroo court focused on protecting a politically connected union. Now the whole company is wired into Washington, and can’t be allowed to drown no matter how many times it goes under.
ALMOST FORGOT: Apologies to TTAC for stealing their name.