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Wednesday, April 01, 2009

Obama Makes the Right Call on GM

... but I don't think it will last. He's recommending bankruptcy for the big beast.
April 1 (Bloomberg) -- President Barack Obama believes a quick, negotiated bankruptcy is the most likely way for General Motors Corp. to restructure and become a competitive automaker, people familiar with the matter said.
Really, that's the only way to deal with this monstrosity. That's what we should have done with all of these corporations that failed. We should have let them all go under and have had the Fed supply low interest rate loans for survivors to pick up the pieces. None of the banks or auto makers or any of the rest should ever have come under the control of the government except in a very temporary bankruptcy process.

This wisdom isn't going to last, though. In the end, we'll all get stuck with another bill that can't be paid. I can't imagine that a president who thinks he has money for health care is going to put any kind of pressure on the labor unions to reduce their financial load on GM. Instead, my bet is that he will simply transfer GM's obligations to the workers over to the government. That means you and I will cover their debts.

The current crop of politicians, particularly the Democrats, show no understanding of just who pays the bills and how fragile their economic foundation is. Instead, they keep piling obligations on top of the productive, profitable members of society and ignore their needs completely. This is the exact opposite of what Peter Drucker always recommended. He said you should starve the failing parts of your business and feed the growing parts.

While the decision to have GM go through bankruptcy is a good one, there's no sign at all that Obama and the Democrats are capable of taking the correct next steps. They continually go in the anti-Peter Drucker direction. In an argument with Drucker on one side and Obama on the other, who would you choose?

2 comments:

  1. I don't know. I beginning to think there is a shift in the belief that these corporations "can't be allowed to fail." They just seem to be worse off than anybody realized.

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  2. Secular Apostate4:47 AM

    I'm detecting the faintest whiff of a brand-new auto manufacturer waiting in the wings. It will be called Amtrak Motors.

    ReplyDelete