What to do with GM?

What a strange situation we face! GM is pressuring the government for a bail (hand) out. They want a minimum of $25 million on top of money they have already received to help them make it--for how long few know.

I cannot imagine GM surviving. This is a company that has been so poorly managed over the years that it likely should not survive. It is a dinosaur--a large one. The larger the dinosaur, the slower and more agonizing the death. But, dinosaurs die. The market, like life itself, ebbs and flows. Look back at the Dow Jones in 1970 or 1980. Many of those companies are no longer around. We all survived well.

GM has a scare tactic. The economic exponential of their failure would mean 2.5 million jobs. I don't doubt that number is right. GM failing would bring down most of their suppliers, the dealers, workers and others. They have a huge supply chain. It would all collapse.

But, people will still buy cars. It's not like there is nothing to replace GM. They are failing, in part, because people don't like what they make and also what they make cannot be made at a cost that can reasonably be passed on to the consumer.
If they fail, people will buy cars with names like Honda, Toyota, etc. Come to think of it, they already are. In just the past 10 years, the majority of cars sold in the Philadelphia area went from American made to foreign made. The percentage of non-Detroit cars bought keeps growing. Why? Because few people like what Detroit is making. The market has spoken.

Could GM have done better? Yes, it could have not given away the store to the unions. The average GM worker with wages, benefits and pension costs GM about $78. The average for the same worker at Toyota is about $45.

So what are we going to bail out? The company will fail eventually. It is too big to change quickly enough to save itself. The dye has been cast. The GM brand has become "untouchable".

Will we bail them out? We likely will. The bulk of the union workers live in states like Ohio, Indiana and Michigan, states that voted Democratic. This will be a political bail out, not a smart business bail out. President-Elect Obama is very smart and very politically savvy. He also knows that the country does not need any more bad news that could cause people to go from a recession mentality to a depression mentality, because he knows that economics is part perception and part financial.

This is a no win situation for everyone.