Does GM Stand For Government Motors Now?
Written by: Tom Sawyer
“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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Tags: Does GM stand for Government Motors now, The governement is now in the car business, The President drops the hammer on automakers
March 31st, 2009 at 1:01 pm
I’ll jump in on this one. For me it’s really quite simple. If we allow the government to take over car companies, what stops them from coming after other businesses as well? Where do we draw the line? When Uncle Sam takes over banks, car companies and other businesses, as well as healthcare you can bid free enterprise a fond farewell.. If that doesn’t bother you then you will be happy and content living in a socialist country. If that does bother you then you just might want to start questioning what’s going on in Washington right now. For instance, where is the government going to get the money to cover all those warranties? And how long will it take to get your warranty work done when Uncle Sam is footing the bill and managing the companies? And what reason do we have to believe the government is going to do any better job running these car companies then the present CEO’s have? Have you seen our countries checkbook lately? We’re printing money in the white house basement and we’re still spending like there’s no tomorrow. This isn’t party politics, this is sheer insanity. I feel badly for all those people who’s jobs have been affected by this but my husband has suffered job losses due to poor management of companies he’s worked for. We’ve had to relocate and start over and we got through it. My father was a smart man and I can tell you he never loaned money to anyone who was a poor credit risk. Our government is throwing money at people who will never pay it back and don’t seem to understand how stupid that is. God help us all.
March 31st, 2009 at 4:25 pm
Actually, your comments are valid and what I was looking for. Yes, it is the car companies’ fault they are in the situation they are in, but the government taking over isn’t necessarily the option either.
Would it be better if we let them go up in smoke?
April 2nd, 2009 at 5:29 pm
Tom, BTW, your comments are displaying perfectly. Now to the subject at hand. For me it is also easy. I agree with you. If the government has to bail out a company, any company, then they absolutely should take some level of control over the operations, upper management, and the future of the company. If an organization does not want the government to come in, then don’t accept their money. The equation is really black & white. To use your example, if I loaned my kid money to buy a car, then I would have some say in what he buys. If he does not need my money, then I have to say in what he buys. I don’t see an argument here.
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April 3rd, 2009 at 7:21 am
I think that may be exactly what needs to happen. My husband took an early retirement from the retail clerks union and over the years we have seen our income and benefits decline. We have accepted this because we understand that the economy can no longer support the promises that were made. Why is it that the auto unions are carrying on as usual with no regard for economic decline? We have always felt it’s better to get something rather than nothing. Maybe if the auto unions and employees were willing to make some concessions they wouldn’t be in this position. And let’s not forget, our government has proven to be irresponsible with our money so who really believes they are going to save GM. And lets also not forget that it was democrats and republicans together creating this fiasco, particularly Barney Frank and Chris Dodd.
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