Monday, April 27, 2009

GM is Doomed

And not just because the Obama Administration is determined to rip off the bondholders as a political payoff to the UAW.

It's doomed because the Government gets a 50% stake, and the UAW 39%. The bondholders, if they are stupid enough to go along with this scam, would only get around 10% for swallowing about $27 billion or so in debt. The United Auto Workers would get their 40% stake for only $20 billion or so.

The blatant politically driven theft aside, why is GM doomed?

Because neither the Government or the Auto Workers main interest or expertise is in running a profitable business. These two groups, the most complicit in the end of the US owned auto industry, are splitting a 90% stake.

The Obama Administration wants to force GM into producing cars that nobody wants, because they are small, dangerous, expensive, and impractical. But they are much favored by the Democrats, as long as they don't have to drive those “green” cars themselves.

Politicians hate cars; someone with a car can go where they want, when they want, and not have to wait on a politically approved schedule, going to politically approved places.

The Autoworkers, on the other hand, only care to keep the government money flowing.

In this arrangement, neither the government or the auto workers has any long term interest in what the consumer wants.

Indeed, the government is bent on making cars that the consumer doesn't want.