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Uh, No. I've posted this before but the banking failure and lack of credit for manufacturing is what got them into the mess. Ford mortgaged the company pretty heavily just before the banks went under, and managed to skate by (though they got DOE funding just like everyone else). But GM and Chrysler, by working on the standard fiscal year scale, got caught by the credit dry-up (like many other manufacturing companies that also got TARP funding).
Big manufacturing businesses (and quite a few smaller ones) live and die on credit for each year. Credit to buy the manufacturing materials and the like. Without it, they don't get to make anything to sell, and they go under. Letting GM and Chrysler go under would have a HUGE ripple effect on every business that supports them, from suppliers, to the stores and restaurants and service industries around the factories and HQ, and around the suppliers factories and HQs, and so on. Look what happened to textile manufacturing towns that are now ghost towns with high unemployment. You don't just let your major source of manufacturing turn into a huge source of unemployment if you can help it.
So we propped up the banks and forced them to lend to manufacturers like car companies and housing builders and other manufacturing industries. Using TARP funds.
wrong, the big three automakers go themselves into trouble due to poor management decisions, and poor quality control, as well as building cars that the people just didnt want. ford fires their previous CEO and installed alan mullally to turn the company around, and it was he that arraigned the loans that ford then used to make serious changes in their quality control and design efforts to build cars that the people wanted. mullally also changed the management style at ford to improve decision making, and include the workers on the line when they had good ideas to improve manufacturing.
what GM and chrysler should ahve done is go through the bankruptcy reorganization without government interference, that way they would have been forced to make the same changes that ford did, as well as having their debts held off while they reorganized. they would still have been in business, and they would still have been able to get the credit they needed to keep operating. the credit crunch affected small businesses and individuals far more than it did large businesses.
in the end mullally saw what was coming, and set ford up to weather the storm, and come out stronger in the end, and he succeeded nicely.
There's a distinction between acting as a lender of last resort, which the government has typically done albeit not to individual companies directly but rather to banks, and socialism. Socialism is when the state owns productive assets, such as when it purchased GM. That was after it had already acted as a lender of last resort and GM blew through the money at record pace.
To break even on its socialist investment in GM, GM stock would need to sell for about $76/share. Partly that's because the government mostly divested its interests in GM under political pressure (socialism is unpopular in the United States) and because it realized it wasn't going to break even quickly. That means the remaining shares, of course, need to be sold at a higher price to break even.
Of course, that's to break even. That ignores opportunity cost. Had the The Socialist Party of Washington instead invested in an S&P Index (a true investment in America) rather than GM... well, they'd have today made a 200% return, assuming they didn't prematurely sell their socialist holdings. America is a pragmatic country even more than it is a political one, although my belief in that is less than it was a few years ago. Had socialism played out well, I suspect it would not be unpopular. But the fact is it rarely does play out well. Socialist investments are usually highly political, such as the investment in GM, and not based on economic potential or sound judgment. It's very impressive that one could make a big equity investment in markets in early 2009 and come out losing money.
Your reasoning would be sound, except for the following reality:
In China, which is an extremely lucrative car market, Buick has a lot of appeal, and a lot of sales.
If one GM brand had to go, it was wise to retain Buick, and kill Pontiac.
Exactly
Almost every Pontiac model was simply a Chevy with a louder exhaust system, excessive lower-body cladding, and 8 tiny A/C vents, instead of 4 normal-sized vents.
It always amazed me how some simple detail changes managed to deceive people into thinking that a Mercury was different (or better) than a Ford, a Pontiac was different (or better) than a Chevy, and that a Dodge was different (or better) than a Plymouth.
The old GM business/sales model was one of steps:
Entry level was Chevy. As you aged and got a bit wealthier you upgraded to Olds, then Buick and, finally, Cadillac. Pontiac was thrown in as a 2nd "mid-life crisis" car for awhile, then they started to offer the land yachts.
I've had both Chevies and Pontiacs (bought new). I liked the Pontiacs better.
Funny thing is, it is still possible to take the same vehicle and sell it under various marques successfully. See Hyundai/Kia.
Exactly!
I doubt if more than 10% of the Hyundai and Kia owners realize that they could have bought the other marque, and wound up with essentially the same vehicle.
That being said, I think that Kia's version of the styling on each model is preferable to Hyundai's styling of the same vehicle type. Consumer Reports recently commented that the new-ish Kia Cadenza (a variation on the Hyundai Azera) handles better than the comparable Hyundai and--overall--it rated the Kia version somewhat higher. So, it is possible to incorporate some valuable differences (much more significant than Pontiac's 8 tiny A/C vents ) into these variations, in addition to slightly different body styling.
Uh, No. I've posted this before but the banking failure and lack of credit for manufacturing is what got them into the mess. Ford mortgaged the company pretty heavily just before the banks went under, and managed to skate by (though they got DOE funding just like everyone else). But GM and Chrysler, by working on the standard fiscal year scale, got caught by the credit dry-up (like many other manufacturing companies that also got TARP funding).
Big manufacturing businesses (and quite a few smaller ones) live and die on credit for each year. Credit to buy the manufacturing materials and the like. Without it, they don't get to make anything to sell, and they go under. Letting GM and Chrysler go under would have a HUGE ripple effect on every business that supports them, from suppliers, to the stores and restaurants and service industries around the factories and HQ, and around the suppliers factories and HQs, and so on. Look what happened to textile manufacturing towns that are now ghost towns with high unemployment. You don't just let your major source of manufacturing turn into a huge source of unemployment if you can help it.
So we propped up the banks and forced them to lend to manufacturers like car companies and housing builders and other manufacturing industries. Using TARP funds.
Actually, the problem with GM was decades of horrible management & arrogance. They had cranked out a LOT of REALLY crappy vehicles in the 70s & 80s - and were so cocky that the expected people to buy them just because they were GM products.
Suffer through owning one 1978 Cadillac Seville DIESEL, and you'll drive Toyota for the rest of your life. And let's not forget the Citation, the Vega, and a long list of similar gems.
GM used the American car-buying public as their testing facilities, rather than doing proper R&D. And it backfired on them.
Then you add to that the bloated Union pay and pensions, and straight-up immoral CEO pay and benefits, and you've got a company that DESERVED to fail.
Instead, the taxpayers of America were forced to bail out a company that we had already turned our backs on, due to their crappy vehicles.
Ironically Socialized Motors/Government Motors/New General Motors produces much better cars than they did when it was a capitalist company in the free market.
For most people, Pontiac was to Chevy, what Plymouth was to Dodge, and Mercury was to Ford. Basically duplicitous. Name me a dozen vehicles(total) that were produced by Pontiac/Plymouth/Mercury in the past 35 YEARS(1978) that were substantially different/unique from a Chevy/Dodge/Ford.
That said, i still don't understand the logic on keeping GMC. It would have been better to kill GMC, and revive Olds as the near luxury feeder to Caddy.
Through the 1950s, a Dodge was simply a Plymouth rebadged with maybe a slightly larger engine and a couple of interior comfort features and a better radio. By the 70s, many of them were identical (Omni = Horizon, and Caravan = Voyager) with a different badge, and sold through a different network of dealers. One buyer even reported that he bought a car made at a switch point in the assembly line, and there was an Omni logo on one quarter panel and Horizon on the other. I think Ford Taurus and Mercury Sable were identical, too, with different grille design and tail light lenses amd gearshift knob..
Pontiac and Oldsmobile were step children of GM. Rebadged versions of other GM cars in most cases. It was time to thin the lines, nothing to do with government.
Pontiac was building muscle cars in the late 60s/early 70's then it plateaued with the Smokey and the Bandit Trans Am. In the 80's they build economy cars (Sunbird/rebadged Chevy Cavalier), minivans (Pontiac TranSport/rebadged Chevy Lumina/Olds Silhouette.........terrible slope front minivans aka "dustbuster" design) and unmemorable sedans.
Remember the Pontiac Aztek?
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) into these variations, in addition to slightly different body styling.
