Friday, July 10, 2009

Engine Charlie Rolls Over in His Grave

During the closed confirmation hearings for his confirmation as President-elect Eisenhower's Secretary of Defense, "Engine Charlie" Wilson, who'd been President of General Motors since just before World War 2, was asked whether, given his investments in GM and its position as a major defense supplier, he could make a decision that would hurt the company.

"I cannot conceive of one, because for years I thought what was good for our country was good for General Motors and vice versa. The difference did not exist. Our company is too big. It goes with the welfare of the country."

The more popular version of that answer, the one I learned in school, was "What's good for General Motors is good for the country."

And a quick web search reveals that I'm far from the only person for whom either of the quotes immediately came to mind as GM, which trustbusters talked about splitting apart when I was a boy (at one point GM held close to 60% of the US automobile market), was after a long, market-driven decline (which was already in motion as those trustbusters were talking) finally being driven into bankruptcy, unable to survive the Panic of 2008, in order to re-emerge today as a nationalized firm.

That government ownership is costing you and me $50 billion. So far. Money that, not so incidentally, has been created out of thin air. Technically this bail out is largely in the form of loans, $6.7 billion of which the new GM promises to pay back by a 2015 "deadline."

I'm thinking of the British motor car industry which, except for the parts owned by GM (Vauxhall), Ford, and Chrysler (the Rootes group, including Sunbeam and Hillman), was largely nationalized in 1975 under British Leyland. BL would go on to make a few very nice cars, but only Jaguar and Land Rover would remain successful in the US, eventually to be bought by Ford. Who lost a ton of money and finally sold them to Tata Motors of India. The rest of BL -- Austin, Rover, Triumph, MG, Morris, and a host of other names familiar to British car fans -- is essentially gone. Except for the Mini, which came out of BMW's brief ownership of the company.

Can General Motors do what British Leyland couldn't? Or will it, like BL, bleed the taxpayers for 30 years -- with an occasional nice, but money-losing car -- before finally collapsing once again? Today's article, "New GM's New Cars" features seven new GM models. Ominously, Number 2 is the Pontiac Solstice Coupe. Yes, Pontiac, which will be shut down next year.

Good luck, Mr. President.

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