Does GM Stand For Government Motors Now?
Tuesday, March 31st, 2009“President Barack Obama asserted unprecedented government control over the auto industry Monday, bluntly rejecting turnaround plans by General Motors Corp. and Chrysler LLC, demanding fresh concessions for long-term federal aid and raising the possibility of quick bankruptcy for either ailing auto giant.
Obama took the extraordinary step of announcing the government will back new car warranties issued by both GM and Chrysler, an attempt to reassure consumers their U.S.-made purchases will be protected even if the companies don’t survive.”
Has anyone had the experience of buying a car for the first time and needed a down payment from your parents? I didn’t, that is another subject, but I could imagine my father maintaining some control over what kind of car that would have been. After all, if parents are helping with their money it makes sense for them to make sure a sensible car is chosen. That makes sense right?
Well, President Obama has put the US government in the role of parent to GM and Chrysler LLC. If these two automakers didn’t need money from the government they could do whatever they want, but since the government is giving them some cash, for now, “Uncle Sugar” is going to have a say in what goes on.
I’m really counting on someone (hint, Ryan) to come in and say why this is a bad idea – I see why this is more of the same in a bad way – but I’m going to briefly talk about why I think this happened in plain terms.
Both these companies have been relaxed, sitting in Detroit like some fat cats, and haven’t kept pace with the industry. Many Americans only buy American cars and that has pretty much kept these companies going until now. Value is such a huge aspect of buying with the current economic situation and I would say the majority of American cars just don’t offer good value:
Reliability – American cars are not as reliable as foreign competitors. The irony is many foreign cars are built in the United States. Basically, the technology is foreign and the cars are built here.
I have had experience with American (car) reliability myself. In March of 1996 I purchased a Dodge Avenger brand new. After going to the dealership for a few problems, the person who drives the cars around said, “You are here all the time.” Needless to say, that was the end of that. I traded that car in, purchased a 1996 Honda Accord and…it is sitting in the garage right now. That brings me to my next point.
Value – Cost of ownership should be an important factor when buying such a substantial purchase. The cheaper it is to own something over the long haul, the better. For me, I have driven the same car for almost 13 years. I would say it has been worth it and that means it is a great value. On the other hand, one of my former co-workers has a Chevy truck and he talked about how “loose” and “sloppy” it felt. The truck is a 2003 or 2004. With the right deal, he would sell the truck in a hearbeat.
Performance – American cars are simply lacking in performance, due largely to old technology in the vehicles. Things like 6-speed transmissions, direct fuel injection and vehicle weight mean gas mileage is comparable or worse than foreign cars with the latest technology. Keep in mind, old technology does not mean lower sticker prices.
Trucks/SUVs – People think they need large trucks and SUVs so that is what American companies built. Those vehicles aren’t so attractive to some people anymore because of gas prices. When the price of gas went up, some people tried to trade these large vehicles in and got a rude awakening. Guess what? The value isn’t there in those vehicles so people were faced with the decision to keep paying high gas bills or losing up to $8,000 trading them in. Not a good position to be in.
Besides all of this, my brother has been impacted by the US automotive industry. He was laid off and it really upset me. These companies could have been making better cars for a long time, but just didn’t. Why make the product better when you have a loyal customer base? That is what they are paying for now. If they would have made better cars, they would still be in a bad situation like the rest of us, but it wouldn’t be as bad as it is right now.
Now that I got all of that off my chest, I’m waiting to hear why government control is a bad thing. It is essentially the same reason, but something that needs to be said anyway.
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