Sunday, June 12, 2011

Dan Akerson is No Charles Wilson

Dan Akerson is definitely not Charles Wilson

Charles “Engine” Wilson was President of General Motors from 1941-1953 and then served as Secretary of Defense from 1953-1957. He was asked during his Senate confirmation hearings if he would make a decision inconsistent with the interests of GM. In other words, would he have a conflict of interest?

His responded that “For years I thought what was good for the country was good for General Motors and vice versa.” His statement became misquoted as “What’s good for GM is what’s good for America.”

Thus, he was quoted as placing General Motors on a higher plane than the country, when what he said is that the success of each was critical to the success of the other.

Dan Akerson, GM’s new CEO, has adopted the misquoted Charles Wilson approach.

Detroit has been on the skids for decades. GM’s market share progressively dropped from almost 60% in the late 1960’s to less than 20% in recent years. Japan was eating GM’s lunch and the UAW GM’s cash flow. The last GM dealership in San Francisco closed over 2 years ago.

Chrysler was even more of a basket case, stripped of products and product development by Cerberus after Mercedes ran it into the ground.
The economic collapse 2 ½ years ago doomed the old, inefficient GM and Chrysler.

The Bush Administration kicked the can down the road by loaning $17.4 billion to GM and Chrysler in December 2008, which would carry them through to March in the new Administration. The Obama Administration then bailed GM out with an additional $30 billion, Chrysler with $15 billion, and an additional $12.5 billion went to GM’s former subsidiary GMAC (ALLY Financial). GMAC thought it could make more money from mortgages than auto loans.

The government also loaned money to all three Detroit companies for product development.

GM and Chrysler entered bankruptcy in cooperation with the Obama Administration. Factories were shuttered, car lines eliminated (Pontiac, Saturn, Hummer, Saab),
dealers terminated, shareholders wiped out, and creditors stiffed, with the exception of the UAW.

The government, i.e. tax payers, and the UAW assumed ownership of the two companies.

The government also purchased tens of thousands of cars from the three Detroit companies, and sponsored Cash for Clinkers to keep the assembly lines rolling. The Japanese were the major beneficiaries of Cash for Clunkers.

The Obama Administration could just as easily given $250,000 to each UAW worker and walked away.

So how does GM repay the citizens of America?

Dan Akerson has proposed that the federal gas tax be raised to $1/gallon. He believes that a government-imposed tax hike would drive more people to buy small cars, such as Chevy’s Cruze, and do more good for the environment than a government imposed gas-mileage standard.

GM was the beneficiary of the capitalistic marketplace. If it still believes in freedom of choice, then it should compete in the marketplace. GM’s problem is that a majority of Americans believe the Japanese, and now the Koreans, build better small cars at a lower price. That’s the marketplace. Indeed, a number of the closed dealerships in Southern California are now successful with Hyundai or Kia franchises.

$4 a gallon gas is damaging to consumers and $5 devastating to the American economy.

High gas prices drain discretionary spending out of consumers’ pockets. The purchase of big ticket items is postponed.

Once upon a time, in my younger and naïve days during the Arab Oil Embargo, I supported a $.50 gas tax to be used for mass transit. Now I know such funds would simply be blown by government.

Charles Wilson recognized that what’s good for the country is good for GM and vice versa. Akerson believes that what’s good for GM is good for the country.

Akerson’s final comments recognized that it is a decision for the politicians. He must know that in this Congress a gas tax increase is a dead issue. So why raise it?

Is the new GM just as shortsighted as the old, failed GM?

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