I want to commend Louis Woodhill’s fine analysis at Forbes of the fix that GM is in to your attention:
President Obama is proud of his bailout of General Motors. That’s good, because, if he wins a second term, he is probably going to have to bail GM out again. The company is once again losing market share, and it seems unable to develop products that are truly competitive in the U.S. market.
He continues by analyzing the new Malibu, GM’s latest entry in the D-Segment of the auto market, noting that GM’s cost basis is such that the company needs to sell a lot more cars than its competitors to make a profit, and contrasting GM’s top management with VW’s.
Essentially, there is no place in today’s market for a company that makes mediocre products and needs to sell a lot of them to maintain its operations. Further, unlike VW GM does not appear to be preparing to make and sell the best cars in the world but to progressively reduce its operations until, presumably, there is nothing left but the smile.
When the federal government bailed out GM there were essentially two viable alternatives. The company could be allowed to resolve its problems in ordinary bankruptcy with the government’s attentions focused on bailing out GM’s employees or GM’s cost basis, most of which is labor costs for employees present and past, could be reduced and the company forced to modify its fundamental way of designing, manufacturing, and selling cars to do much, much more with much, much less, an enormously tall order.
The Obama Administration elected to do neither, choosing to remove top management (as Woodhill puts it “rearranging the deck chairs on the Titanic”), preserve GM’s labor cost problems, and double down on GM’s losing investment on EVs, assuming that the tremendous sales of an enormously popular vehicle which has proved itself anything but would right all wrongs. These were catastrophically bad assumptions. If there were vast demand for street legal golf carts in the United States, I suspect we’d already know about it.
GM now seems to be heading inexorably towards bankruptcy again. Will the federal government leap in at the nick of time to preserve it again? Stay tuned.