A case for government intervention?

[Bilge_Rat]

When the U.S. and Canadian government pumped billions of dollars and took over ownership of GM, it looked like a case of throwing good money down the drain. Based on pure free market theories, GM should have been allowed to fail and the market left to more efficient foreign automakers.

Now GM is turning a profit, planning a new stock offering and it looks like the government will eventually make its money back:

DETROIT — A week before its initial public offering, General Motors reported its largest quarterly profit in 11 years on Wednesday, showing that the slimmed-down automaker no longer needed huge sales to generate significant earnings.

http://www.nytimes.com/2010/11/11/bu...1auto.html?hpw

so, is all government intervention in the marketplace bad?
...or is it just one additional tool that can be used on a case by case basis.

[GoldenRivet]

If you injected a trillion dollars into my small business... I'll bet i could show a profit on the books.

its the principle of the matter. So many people were opposed to the bailout and they did it anyway.

GM may be turning a profit, but this is only after massive restructuring.

The GM you see now, is essentially not the same GM that collapsed a few short years ago.

problem is they are probably going to have themselves back in the same crappy situation in several years again anyhow.

[tater]

What helped GM, the bailout, or the restructuring? They fired a fair % of employees, closed a bunch of plants (over a dozen facilities I think), dumped some brands (Saab, Hummer, Saturn, Pontiac), etc.

All they need to do is to get rid of their insane reimbursement to workers and they'll be more like the Japanese companies that are kicking their butts (oh, and make some cars that don't suck).

[SteamWake]

Just wait till they put that 'volt' on the market.. thatll turn things around

I dident see any mention of the pension issue there

[AVGWarhawk]

What helped GM, the bailout, or the restructuring?

Ultimately restructuring. Pontiac just died a silent death last week. Saturn died a silent death. Oldsmobile died two years ago. What is left? Chevy, GMC, Caddy and Buick. If not for the Chinese loving Buicks this arm of the GM company would have gone the route of silent death.

However, the bailout did allow GM to silently restructure. I do not feel GM is a survivor though.

What the article failed to mention.....

But GM warned that it expects fourth-quarter operating profit to come in well below the level of the first three quarters of the year because it is pulling back on production of trucks and making more small cars, which have narrower margins.

and........the gouging of the very folks who own GM.

GM's results indicate the company's North American unit earned an average of $3,005 on every vehicle it made in the third quarter, a reflection of its drive to boost truck output during the summer. GM also is commanding higher prices for cars and smaller sport-utility vehicles. By comparison, Ford Motor Co. earned $2,710 on each vehicle it produced in North America in the quarter, and Chrysler Group LLC earned $593 per vehicle.

http://online.wsj.com/article/SB1000...306436706.html

[the_tyrant]

What caused the problem at GM?
is it because of the managements bad management?
Or was it that they over payed their employees?

[Bilge_Rat]

Originally Posted by tater

What helped GM, the bailout, or the restructuring?

no doubt the restructuring was the key, but they could not have restructured without the bailout and no one but the Government was willing to lend/invest funds.

Would the U.S. economy be better off in the long run if GM had been allowed to fail? This would have had an impact not only on GM, but the thousands of other companies which supply products to GM.

[GoldenRivet]

Originally Posted by Bilge_Rat

but they could not have restructured without the bailout

Its called "Restructuring under Chapter 11 Bankruptcy"

its what every other business has had to do up until the dangerous precedent of the government bailout - the message the government has sent to management and CEOs is clear: "Screw up all you want... we will save your asses."

Originally Posted by Bilge_Rat

Would the U.S. economy be better off in the long run if GM had been allowed to fail? This would have had an impact not only on GM, but the thousands of other companies which supply products to GM.

we will never know the answer to this question... we will only know that - if it had failed and vanished another would have risen to take its place.

its called the free market. by allowing GM to fail, who knows? perhaps it could have given rise to companies producing highly stylish electric cars, like Aptera or some other small company.

[mookiemookie]

Originally Posted by GoldenRivet

Its called "Restructuring under Chapter 11 Bankruptcy"

its what every other business has had to do up until the dangerous precedent of the government bailout - the message the government has sent to management and CEOs is clear: "Screw up all you want... we will save your asses.".

Nail on the head. Prepackaged bankruptcy would have avoided a lot of problems and not set bad precedents. The pandora's box of moral hazard has been opened by bailouts going all the way back to Lockheed in the 70's

[Takeda Shingen]

Originally Posted by GoldenRivet

we will never know the answer to this question... we will only know that - if it had failed and vanished another would have risen to take its place.

its called the free market. by allowing GM to fail, who knows? perhaps it could have given rise to companies producing highly stylish electric cars, like Aptera or some other small company.

^^This.

One of the major tenants of free market capitalism is that companies that are unable to sustain themselves, as well as the needs of the public, fail. GM was and is unable to do so. What is clear now is that instead of going out of business and possibly giving rise to companies that offer a superior product, it is now a dinosaur on interminable life support from the federal govenment, which has the clear intention of nationalizing the American automotive industry; a result that will be vastly more catastrophic than the loss of General Motors.