Monday, November 8, 2010

In the case of bailing out General Motors, the government did everything right

Not even a week has passed since Election Day, when it seemed American voters obsessed on throwing the bums out because of the belief that the government does the whole thing wrong. Yet I want to tell you that, in the case of General Motors, I think the government has done most everything correct.

As someone who's been involved in the auto industry as an analyst and saver, I looked at GM as the business equivalent of a departed man walking.
It had lousy cars, too much capacity, high union salaries and valuable health care plans. Just a few years ago, it price GM about $2,000 more to build a car than Toyota or Honda.

GM also had thousands of wasteful dealers. The average Toyota dealer sold six times as several cars as the average GM dealer. This made Toyota dealers far more gainful. They could use up money to upgrade their facilities, while GM dealers looked increasingly shopworn.

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