- How 10 classic toys were invented… I had no idea that Lincoln Logs were invented by Frank Lloyd Wright’s son.
- Cheap gas from coal… Wired calls this “bad news”.
- Can venture capital come in from the cold?
- 15 tools for gmail addicts.
- Bad news week for newspapers.
- The ultimate guide for everything Twitter.
- Wikia giving up on search, focusing on answers.
- Sony drops PS2 price to $99, increasing competitive pressure on PS3.
- 15 ways Google Voice revolutionizes communications.
As you might suspect, my confidence that the government is going to go into GM and fix everything that needs fixing is pretty low. The problems that GM (and Chrysler and Ford) have been long in the making and represent intractable conflicts of the kind that government is a poor arbitrator of, between labor and management and investors.
At it’s core, the government sees the problem as the Big Three not making the vehicles they should be making and losing share as a result, which suggests that the government’s plan is to get us to buy the vehicles that they think we should be buying.
It’s more complex than this simple assessment would suggest and no doubt a big factor that the government will have to come to grips with is that the U.S. new vehicle market has simply collapsed as a result of the credit crisis and eroding consumer confidence, and as a result there is a lot of excess capacity in the manufacturing base that will need to be consolidated. Government is a poor manager for consolidation because the direct result is that a lot of UAW jobs are going away forever.
As it stands right now, the total U.S. market sales for new cars and lights trucks is on a 9 million unit run rate for 2009, which is down from about 13 million in 2007. For the Big Three this would not be as devastating as it has been were it not for the global slowdown of record book proportions, which affects GM more than Ford or Chrysler because GM has been very successful in China and moderately successful in Europe.
The Federal government’s assessment is simplistic at best and their willingness to force significant concessions from labor, bondholders, management and shareholders is untested. They are effectively putting themselves in the place of being a bankruptcy judge and trustee when the bankruptcy process is perfectly adequate to handle the task at hand. Having gone from rescuing banks and insurance companies, the Feds are now guaranteeing car warranties.
All of this reminds me that truth in animation often more appropriately aligns to reality, as when the IRS took over Krusty Burger (must watch) and on South Park when the boys went into the gnomes cave and learned about corporate takeovers in the underpants business… the problem with plans that begin with “phase 1” is that they often never get around to “phase 2”.