The Crux Of GM's Problem

With General Motors filing for bankruptcy as I write this (the company is supposed to be filing electronically at 8 am), thoughts turn to fixing the now-wrecked company.

But here's the problem: The government is involved.

That alone spells doom for the world's once-greatest automaker.

Why?

The New York Times reveals the dagger that is poised to plunge into GM's heart:

Owning G.M.
editorial

The government is about to own a controlling stake in one of the largest car companies in the world, if, as is virtually certain, General Motors files for bankruptcy protection on Monday. If all goes according to plan, the American and Canadian governments will own nearly 75 percent of the company that emerges from the process — and could end up holding their stake for several years.

President Obama owes American taxpayers and voters a candid and detailed explanation of the government’s goals and the levers it intends to use to achieve them. He should make clear that the overarching objectives are to create a profitable company that makes cars that people want to buy, and that are more fuel-efficient. [link] [my emphasis]

Had these economics experts left it at "making cars that people want to buy" they would have blundered into the secret to GM's (and every other company's on earth) success. To make stuff that people might wish to purchase.

But that can't be enough now for GM, can it? The government (and the Times) have other priorities for the doomed manufacturer as well. The cars must be fuel-efficient.

So. If GM's cars and trucks are (a) well received and (b) fuel-efficient, then all is well. But what if (a) doesn't cohabit well with (b)? What if people like me still want that 260 horsepower Ford F150 pickup truck (the most popular vehicle in America) or a nice Chevy Silverado full-size truck (second most popular)*?

With the government calling the shots, does anyone doubt which of (a) and (b) will win out?

And with GM being ordered by its new political owners to make little cars and trucks (little trucks ...), does anyone actually think GM will survive?

If so, I've got some GM stock I'll sell ya.

* Hybrids and electric cars didn't make the list.
** Not mentioned is the government's only other priority for GM - keeping the UAW happy.