Today’s Philadelphia Inquirer had a fairly lengthy story starting on the front page about General Motors’ dealerships which will be closed under the bankruptcy reorganization plan. Fred Beans of Doylestown has a network of 22 dealerships, employing around 1,500 people, and he’s hired a lobbyist to help in Washington to fight the closures:
Dealership fighting back against closures
By Maria Panaritis, Philadelphia Inquirer Staff WriterFred Beans taught his daughter Beth to use a sledgehammer when she was 12. They busted down a wall together 31 years ago in their Doylestown new-car showroom.
Yesterday, father and daughter brushed up on their swing and took aim at Washington and taxpayers, whose bailout billions for U.S. automakers were enabling bankruptcy plans that Beans said were putting good local citizens out of business.
Beans, among 1,300 General Motors Corp. dealers with franchises the automaker recently said it wanted to eliminate, has launched a public relations and government-lobbying campaign against further closures, including an impassioned, full-page ad in yesterday’s Inquirer.
“I believe right is right and wrong is wrong, and I’ll be damned if the federal government gave GM billions of dollars, and gave executives millions of dollars to go away, to put me out of business in Doylestown,” said Beans, 70, who last month learned his GM dealership in Limerick, Montgomery County, would be phased out by 2011 under GM’s government-backed bankruptcy plan.
“I don’t think so,” he said.
Much more at the link.
Now I’ve heard a lot of people ask, how will closing down dealerships help save the automakers? Well, you get a vague answer about how Government General Motors is worried about having too many dealerships, too close to each other, and competing with each other. By having too many different GM brands, there was internal competition, between Pontiac and Buick and Chevrolet and Oldsmobile. Oldsmobile is history, and Pontiac soon will be.
But there is a lot unsaid here. The dealerships bought the cars from the manufacturer, so it shouldn’t matter to GM whether they were selling a million cars to 2,000 dealerships or a million cars to 1,300 dealerships. Manufacturer participation in bargain opportunities should also be even across dealerships.
Let’s look at the real answer: if GM (and Chrysler) were worried about too much competition with themselves, between dealerships, what they were worried about was that the prices for the cars were too low. That’s what is meant by too much competition.
So, let’s look ahead. They cut the number of dealerships, and manage to get car prices a bit higher due to decreased competition. This leads to two things:
- GM can charge the dealers more for the cars; and
- If the total sale price is higher, GM can make more money via financing the automobiles via its in-house finance company, GMAC.
Now, there’s one huge assumption behind all of this, that an action designed to raise prices won’t mean that GM loses even more market share to Ford and Toyota and Nissan. But, ignoring that part of the equation, GM hopes to come out of bankruptcy and become successful again by digging deeper into your pockets! And the Obama Administration is thoroughly committed to helping GM dig more deeply into your pockets. With the United States government now owning 60.8% of GM, the Canadian government with an 11.7% share, and the United Auto Workers union health care trust, the Voluntary Employee Benefit Association, holding 17.5% , all of the interests of the government in general, and the union-beholden Democratic Party in particular, are geared to getting more money from you.
This shouldn’t be a surprise, really, but nobody is talking about it. For GM to become profitable again, it must not only shed much of its debt — which bankruptcy will enable — but it must get a higher per-unit return on its cars. Being horizontally integrated, GM could make money by selling cars on a break-even basis, as long as it could reap profits via financing through GMAC, but that’s too unreliable a plan. If GM were its own parts supplier, it could also make money by breaking even on car sales, as long as it was making money on parts, but much of that business has been farmed out. The only reliable method for Government General Motors to return to profitability is by making a profit on cars manufactured and sold.
And that’s why their prices have to rise. GM knows this, and President Obama’s economic advisers know this, but that means that they have to get more money from you.
Of course, there’s the little problem of the competition, too. Toyota and Ford might respond as real competitors, trying to take more of GM’s current (dwindling) market share, in which case GM fails. Or Ford and Toyota and the other manufacturers might welcome the rise in prices, and use them as an opportunity to increase their own profitability. But in either case, it’s going to cost you more money.
- If the other automobile companies push their prices higher, then cars will cost you more because there will be no opportunity to buy lower priced cars.
- If the other automobile companies try to use competitive means to increase their market share at GM’s expense, the federal government, now with a 60.8% vested interest in not seeing GM fail, will resort to the coercive measures that only a government can use.
Either way, it’ll cost you more money.
Will the company produce the cars that people really want or what some bureaucratic hack thinks the public should buy?
The postwar cars from the Big Three were rather dull but they seemed to be the only game in town. Few bought foreign cars but their numbers began to rise. Some of the British offerings were quirky but the were interesting. My first and last English machines were not the most reliable but they were fun.
Then the performance era began. Buick restored the Century series, with the big Roadmaster engine in the Special chassis. Chevrolet offered a V-8 that had a lot of performance if certain options were chosen. The cars still handled poorly, with live rear axles and mushy suspensions. Mr. Deming was unappreciated at home and found an audience in Japan and a great quality change began.
The little Datsun 410 had great handling and did not seem underpowered.
GM did produce the GTO and offer real performance. Zora Arkus-Duntov kept improving the Corvette but there was a bad year during the Carter era when the Naderites had their way.
Will performance cars be defined as clunkers and be scrapped by Government dictate? Buying examples and storing them for later resale might be a good investment. Sell any government sucker bonds you hold and stock up on the more interesting Detroit iron. Let the Chinese take a bath when hyperinflation kicks in.
There is zero chance that I will buy a GM car. Buying a GM car is supporting the fascist takeover of the automobile industry.
edgycater.blogspot.com
Well, Craig, if you think that you’ll be needing a new car anytime in the near future, you need to buy a Ford, and buy it now! If Government Motors can’t make a success of things the way they’re planning to go now, what is to say that the United States government, owner of 60.8% of GM, won’t mandate that all new cars sold in the United States be produced by GM?
If the price of the products of GM go up, then Toyota, Honda and Nissan go down. Guess where the customers go?
Craig: “There is zero chance that I will buy a GM car. Buying a GM car is supporting the fascist takeover of the automobile industry.”
Here we go with more of this extremist language showing up on this blog!
Craig, isn’t it obvious that GM has gone bankrupt due to its poor decisions over the decades, to the point where they could not survive in the current economic climate.
The government takeover of GM is meant to guide them through a quick bankruptcy, to restructure, and to emerge leaner with a more competitive product line. Once on their feet, Obama wants out, as he has said.
This is a gamble, of course, using taxpayer money for what may turn out to be a lost cause. I hope not, as it would be a great benefit to America to have a competitive American automobile industry again.
Let us all hope for a GM resurgence!
Oh sure. The Obamanauts are going to force GM to make weinermobiles that make the Greens happy, but that no normal person wants to buy.
Eric: Oh sure. The Obamanauts are going to force GM to make weinermobiles that make the Greens happy, but that no normal person wants to buy.
The East German regime showed the way with the Trabant. Government Motors may do a bet better job in the pollution department, but will the dreary offerings be any better in other respects?
Remember that Big Nanny (Big Brother in drag) will make you happy and safe (even if it kills you) and protect you from your own foolish decisions. A bevy of bureaucrats obviously know better than you.
Note that when the East German proletariat was stuck with their ‘Trabbies’ (a lucky few might get the fancier Wartburg) the commissars and others in the nomenklatura had their BMWs, Porsches, and Mercedes.
The Limousine Liberals will still glide about in their splendid motorcars and the Hollywood glitterati will still have their exotic machines.
As stated in that documentary History of the World, Part I “It is good to be king” (or czar).
Who in the world is going to buy an automobile from a company headed by the Obama administration? For that matter who would invest real money in that company? If Obama wants the company to survive, He needs to get the federal government out. Unfortunately, that will require allowing a bankruptcy judge to void the UAW contracts. Obama needs the UAW in place for the 2012 election run.
One can only imagine what the GM product line will look like by then. ( for a sneak peek at the 2012 GM line, you can view: http://firstconservative.com/blog/political-humor/political-humor-general-motors-in-2012 )
Obama’s intent in taking over GM was to keep the company afloat with tax dollars to keep the Union in place.
Remember that Big Nanny (Big Brother in drag) will make you happy and safe (even if it kills you) and protect you from your own foolish decisions. A bevy of bureaucrats obviously know better than you.
What the hell are you talking about?
What the hell are you talking about? Mike G
Obviously, MikeG trusts Big Brother (in the form of a collective Big Nanny) to make all sorts of decisions for him. Perhaps MikeG may be admitting that he needs such guidance. Some would rather reject it.
Should we be obliged to drive underpowered and fragile ‘econoboxes’ or rely on mass transit? Should we eat only bureaucrat-approved food?
Should higher and higher tobacco taxes be imposed because of the cost of related health care? I am a non-smoker and never have been. Yet I am no neo-puritan.
Imagine if there was a program to discourage male homosexual activity because of the cost of dealing with AIDS? Would their be a massive stamping of feet in protest?
Should we believe the myth that the police will protect you and that the tools of self defense are more dangerous to their owners than criminals?
Should we entrust health care decisions to bureaucrats who will ration on the basis of one-size-fits-all schedules?
Some prefer liberty to tyranny, even when the tyranny hides behind a facade of compassion and faux egalitarianism.
This post by Art is nothing more than a series of straw man fallacies, an endeavor in which he is quite skilled.
Let us put the blame where it belongs, Art. What sort of tyranny has produced the deep recession in which we find ourselves?
Here is a good part of the answer: “America’s Sea of Red Ink Was Years in the Making “
http://www.nytimes.com/2009/06/10/business/economy/10leonhardt.html?_r=2
Be sure to click on the graphic.
Obama is attempting to respond to this “sea of red ink” by using some rather draconian measures, temporarily. On the other hand, you and your ilk offer nothing more than to go back to the policies that produced the “red ink” to begin with? Or, you just say “no, no, no” How wise is that pray tell???
Now what do you have to say?
The sea of red ink was begun by the housing fiasco in which bad paper was securetized. There was money to be made in this scam and the names of Franklin Raines and Mozillo stand out. Both hustlers had their powerful political friends and favors were done. Could Bush have ousted Raines without a firestorm from the left? How many elected officials got sweetheart deals from Countrywide?
Barney Frank was in bed with Fannie Mae in more ways than one. The name of sometimes lover Herb Moses should ring a bell.
While President, Bush never had an ideological majority in Congress and was circumscribed in the extent of possible reforms. The same was true of Reagan. Obama can generally run wild and do as he pleases.
Right. Wesley Mouch is in charge of Government Motors, and he’s gonna make everything all better by taking Draconian Measures. It’s sorta like going to the hospital for chest pains, and the “doctor” is a bus driver who’s been pulled in off the street to do heart surgery. With a chainsaw.