General Motors was Horatio Alger, and the model of adaptability over the first-half of the American century. GM consolidated, acquired, competed and expanded at a
rapid rate; it contributed to the World War I effort, survived the 1929 stock crash, mobilized for the Great War and adjusted to postwar labor unrest.
William Durant’s colorized versions of the Model-T followed by Alfred Sloan’s business acumen propelled GM to become the world’s largest corporation and America’s biggest employer.
Times have changed.
GM is not the juggernaut it once was or the symbol of American auto supremacy. The global economy borne out of America’s industrial might havecreated real and under-perceived threats to GM’s invincibility.
An international economy also meant sustained structural and national challenges as we policed our competitors’ borders. Neither party can control $4.00 gallon gas, unfair trade practices or the subsidized invasion of German, Japanese and Korean compacts.
GM’s girth and self-inflicted blunders added to the Company’s vulnerability. Poor planning, bad and big cars, pension liabilities, abundant dealerships, unrealistic compensation packages and forays outside of core skill sets shrunk the General’s market share and increased collateral damages.
I am not a big fan of subsidizing failure, but I am also aware that the problems that beset GM are not isolated or entirely organic.
General Motors is an American economic anchor and a vital security asset. It is necessary to park GM’s government loan package in reverse and look at federal intervention over the last 40 years. When it comes to national security and economic stability, taxpayer aid is not inherently bad or good, or the sole prerogative of automobiles and democrats:
• 1971: Nixon and Lockheed during the Vietnam War. ($1.4 billion)
• 1975: Ford’s rescue of New York City. ($9.4 billion)
• 1980: Carter and the comeback of Chrysler. ($4 billion)
• 1984: Reagan administration’s bailout of the Continental Illinois National Bank & Trust Company. ($9.5 billion)
• 1989: Bush 1’s rescue of the savings and loan industry. ($293.3 billion)
• 2001: Bush 2 and airlines after 9/11. ($18.6 billion)
Allowing GM to fail was not an epidemic that could be contained and isolated to democratic and pro-labor Detroit. Watching Adam Smith drive GM off the cliff for political gain or playing a game with millions of American livelihoods is irresponsible. Sooner or later, the big bad government would have to address unemployment, social services, foreclosures, and less tax revenue.
In 2008, one out of ten American jobs was connected to the auto industry. This manufacturing base spent $156 billion on parts, materials and services, and were the biggest customers for steel, plastics, electronics and computer chips.
This is the trickle-down theory in action.
Assisting GM was the right course of action. Mr. Bush and Treasury Secretary Paulson deserve credit for bold and timely federal intervention that saved the stalled motor of the American economy.
Extending a lifeline to GM was not the popular thing to do, but it was the right decision. Only 25% of voters supported Obama’s package; roughly the same approval rating for Truman when he left office.
Governing is about making hard decisions, and not staging reality shows. Federal loans to GM were an investment that will yield positive dividends for the 60% of the Company’s shareholders: the American tax payer.
GM offered a record IPO on November 18 that valued the Company at $63 billion, and raised $20.1 billion as 220 million shares changed hands.
GM has turned the corner in large part because the federal government assisted the Company and refused to surrender to demagoguery.
Rock The Capital covers the entire political spectrum.
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