General Motors makes some of the best cars in the world. That said, they are in a horrible position because of some major mistakes made. First off, they put all of their eggs into one basket, the SUV/Truck. I think SUVs are fine and it’s a great thing that America was leading the world in making those vehicles, but when the cost of gas rose to over $4 a gallon, it was a reminder to people of how stupid it is for most people to buy one.
On top of that, there was a bubble in commodities, so after the shock of people seeing how stupid they were, they had no money to buy any cars. Any cyclical industry is especially hit by recessions, because they sell things than people don’t need to buy. Still, the harsh bubble/bust world is not the end for Detroit. The Unions put the American car companies in an extra harsh position because the increase the labor cost and thus increase the labor cost. Add on top of that the legacy cost, and you got one huge mess. Lastly, I want to downplay this thing that Detroit is not making green cars, which is crap. The problem is not that Detroit was not making green cars, but simply that they were making cars that people did not want to buy.
What do we do now? As the Republicans said months ago, we need these companies to go through bankruptcy. We can not keep throwing money down this pit. Still, the Democrats noted that we could not do this because people are not going to buy a car if they don’t know if that car company is going to be around. Well, Obama struck the perfect chord today, as he favors bankruptcy, but he favors it while at the same time the government protecting the car warranty. He is taking the system designed for this system and fixing it up to work in this case. Here they can shed the legacy cost and lower the labors cost and streamline the product. We can’t lose General Motors.
While I love what Obama did with bankruptcy, I am pissed over what the administration did to Rick Wagoner. They used him as an offering to the American people. I find it sick that the US Government is firing the CEO of a great American company. Wagoner made his mistakes, but that give the Gov’t no right to ax him. Where do they get this power?
So, good plan with the bankruptcy, but bad getting rid of Wagoner, he was a good man doing his best during a hard time.
