No reason for public involvement in GM
Now that GM has declared bankruptcy, the question is how much the government should invest in what may be a failing enterprise. Billions have already been spent. Commentator Robert Reich asks the question: Why?
Robert Reich (Robert Reich)
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TEXT OF COMMENTARY
Kai Ryssdal: In his remarks at the White House today, President Obama reminded us exactly how much skin we've got in General Motors right now. Taxpayers own 60 percent of the company in return for $50 billion in government aid. Commentator Robert Reich asks what we're getting for our money?
ROBERT REICH: You and I and other taxpayers now own what was once the largest company on earth. But it's difficult to find a public purpose behind this biggest industrial bailout in history.
The goal can't be to preserve jobs because the Treasury has been telling GM to slim down; and the company plans to shut 11 factories and lay off 21,000 workers.
If the goal is a much smaller and leaner GM that might be profitable one day, that's something the private sector is better able to do than government -- through workouts or bankruptcies -- and there's no reason for public involvement.
If the goal is to create a prototype for a fuel-efficient car of the future, Congress has already appropriated money for that, and the Treasury says it doesn't want to tell the new GM what to produce anyway.
If the goal is to repay the public, there's no point in putting up the public's money to begin with.
So why exactly are we doing this? Maybe because the sudden dissolution of an American icon like GM would be a blow to the American psyche, further eroding confidence during this deep recession. Yet under normal bankruptcy the GM brand would likely live on, and GM's other valuable pieces would be bought up.
Over the next decade or so, GM as we've known it will likely disappear in any event. The government's huge stake in it merely slows down this process. Which, I think, is the point. The government is investing some $60 billion in GM in order to slow its demise, and thereby give its workers, suppliers, dealers, and the communities that depend on it more time to adjust.
But if the purpose is to help the Midwest adapt to industrial decline, investing that much money in GM seems an inefficient way to accomplish it. Wouldn't it be better to use the money to convert GM and other declining manufacturing companies into producing what America needs -- such as light rail systems and new energy-efficient materials. And training laid-off autoworkers for the technician jobs of the future?
Comments
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From CA, 09/05/2009
Mr. Reich, in the auto industry leaner is better but that is not true for smaller. Whether it happens or not, you can best believe Obama administration and GM are planing for growth. The scale back of operations is nothing more than shedding expense which would not be possible in normal operations or bankruptcy. Unloading antiquated plants and machines tools without the associated undertaking cost, frees capital for future investment in modern streamlined production floors and machine tools. You may recall American steel producers' automation lead to downstream inefficiency and bottlenecks because 50 year old buildings did have streamline layout required for modern steel making: American government leadership failed miserable in not providing incentives for modern manufacturing infrastructure.
However, even if the bailout money is lost and GM eventfully fails; it will cost American stakeholders much less than a GM that collapses overnight. The whole auto manufacturing industry is suffer from over-capacity, it will not rush to fill the void left by GM. Nearly every American will feel the effects for next twenty years by paying $1500-5000 higher prices for cars and trucks (The dollar figure represent a description of the probability rather than actual number.)
Regards, John Debba
06/03/2009
A light-rail-based economy! YES! Now that's innovation! Will the auto-industrial complex ever wake up?
06/03/2009
OK, let's admit to cynical reality. America used to be a manufacturing powerhouse, and where did they invest their profits in? Campaign donations to Washington, D.C. That helped to kill trolleys and build highways like Germany had to move tanks back and forth, in case the Russians somehow attacked.
Since the Cold War, the financial industry has bribed, excuse me, invested more in Washington D.C.'s campaign financing, while industry went abroad to build and hide their headquarters for tax reasons. So, you see a bailout with no questions asked of the finance system, but industry has to beg for attention--until its noticed that GM's biggest source of profit wasn't building cars, it was in the financing of them.
Still, there's a fly in the ointment--GM does well in Europe. So, why did it import big gas guzzlers from Australia and re-badge them as Pontiacs, rather than bring in fuel efficient Opels?
Why was GM's imports typically low cost, low quality, stuff like Geo Metros and the like? Americans buy what they are advertised--trucks were never really that popular, until Detriot realized it was the one thing the Japanese couldn't build, and thus beat them in the American marketplace with.
From AL, 06/02/2009
Boy, it feels a little awkward being in agreement with Professor Reich but he's right. What we have is a super sized, no company left behind program to support our national self esteem. It's a sham that will cost us much and help no one except beauracrats.
From Cambridge, MA, 06/02/2009
So glad Mr. Reich knows what the jobs of the future are going to be. I guess he's talking to us from the future. I'm interested in buying a ticket to that destination too.
We have the manufacturing capability for light rail. The trouble is on the demand side. What entities are going to purchase annually the hundreds of billions of dollars of equipment and infrastructure to make light rail happen? Just a bit more than than the Federal loan/equity in General Motors.
There is no equivalent support for light rail as there is for highways as the Federal Highway Administration's 40 billion dollar budget for 2009.
See: http://www.dot.gov/bib2009/htm/FHA.html
Only when there is support for light rail operations and capital projects via tax support federally, locally at at state levels does it make sense to argue for light rail industrial manufacturing. That time has not arrived.
Looking to buy that ticket to the future.
From Pittsburgh, PA, 06/01/2009
If Robert Reich thinks the answer to what General Motors or the American economy needs is Light Rail Systems, he is a lot less smart than I thought. Light Rail is slow, un-adaptable, and very dear - when what we need is fast, flexible, and cheap!
Here in Pittsburgh, the cost of Light Rail is bleeding to death what was once the most extensive per capita bus/street car system in the country. We cut the cheap service so we can have these lumbering 88 Ton, 6 million dollar beasties stuffed twice a day with commuting suburbanites and lightly used otherwise ... deadly on streets and at grade crossings, and unable to deal with at the majority of stops the handicapped patrons that our low-floor street cars of a hundred years ago handled as a matter of course.
I guess it's nice to have underground boarding Downtown and to empty out a crowd after an event, but as a whole Light Rail has been vastly expensive and inefficient.... and isn't that what's killing General Motors?
From Dubois, PA, 06/01/2009
All you seem interested in reporting is about GM cars. GM manufactures a multitude of produces vital to the national economy and defense. We are lost without Delco-Reme electronics, Allison transmissions,Budd wheels,Detroit Diesels, Harrison radiators, and many consumer products that have commercial and militery applications. That's why we need gov'mt involvement in their mismanagement.
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