Monday, November 01, 2010

What's Good For General Motors

Cadilac Logo

It turns out that the bailout of GM two years ago is paying dividends.  It may not exactly be a money maker but GM is profitable and is investing money in a new plant in Michigan.  The bailout- or a structured, gov't insured bankruptcy - allowed GM and Chrysler to continue to directly employ tens of thousands of employees.  Indirectly, through parts suppliers, delivery people, and businesses supported by those workers, 100s of thousands have remained employed.

Jonathan Cohn lists some of the "government interferences" that Obama and Congress took as part of the bailout. Most of those were to force the automakers to keep jobs in the U.S.A. One of the key reasons the automakers are profitable though is almost a throw away line in Cohn's article, "and, if you believe the automotive magazines, they are making good cars, too."

This is not a trivial point and Cohn links to the JD Power satisfaction survey. Yes, Toyota was hurt by the bad press and pour corporate response to the recalls but also because they had a lot of recalls. As an anecdote, I have a friend who grew up driving Nissans and Hondas. He makes enough money that he's not severely limited to buying cheap cars. He's and his wife own 2 Chevys and he had 2 before they were married. Making a good product breeds loyalty and repeat business. Repeat business is a key factor in profitability.

As Cohn goes into in more detail, the government assistance to General Motors and Chrysler remains imminently unpopular. Personally, it is not the kind of action I would want to see the government take in normal times but we weren't in normal times. Still the evidence - and it is not all in yet - is that the government assistance saved 100s of thousands of jobs and maintained a domestic car industry. Those people and those companies continued to buy goods and services that helped keep more people employed. It most assuredly lessened the economic damage that otherwise would have been done in this country.

The GOP opposed it at the time it at the time and rail against to this day.

Election day is tomorrow.

Labels: ,


Post a Comment

Subscribe to Post Comments [Atom]

<< Home