Is GM the New Amtrak?

In the world of bailouts and high priced subsidies, the government takeover of America's largest automaker is really no surprise. Most economists put the taxpayer's stake somewhere in the 60 to 70% range. GM announced today the sale of Saturn to Penske Automotive for less than $200 million and the sale of Hummer to a Chinese company for an undisclosed amount. The initial amount of GM's bailout was $25 billion. It has grown since then and the company may need as much as another $50 billion to make a go of it. That Saturn deal looks like chump change now.

This week, GM's vice president blamed a lot of their misery on "Legacy" costs. That is the term used for retiree pensions and health care. I am not a big union man, but the UAW is not the major factor in this scenario. You see, all three of the American based car companies have these costs. Some just prepared for them better than others. If you hire a person, agree to pay them a certain amount, agree to pay them a pension and health care, then you can't claim that a cost of doing business that you knew about from day one is your downfall. GM was way too fat and lazy.

Now we shall all see what will become of this rusty ole giant. I see years and years of subsidizing a company that can't turn a profit, like Amtrak, and the government forcing it to make products that won't sell. Add to that the crazy fuel mileage standards and ethanol quotas that play in the market and you have a recipe for disaster. I read today in the June issue of National Geographic that "The corn used to make a 25 gallon tank of ethanol would feed one person for a year." Really? GM's answer is the Volt. The Volt is a plug in electric car that will have an MSRP of $40,000, a range of 40 miles and a replacement cost of batteries at a reported $6000 each. You think that car is going to save this company? No chance. I will be putting my money on Ford because of their foresight and management style. I am sure General Motors will be around for a long time, but it will likely be propped up with your money and the CEO will in Washington D.C.