In 2009, I accidentally bought a Pontiac.
I stress the word, “accidentally.” I’m convinced it was the worst car to roll off an assembly line since the foot-powered buggies on “The Flintstones.” Between what I paid for it and the number of tows and repairs, which I believe was enough to put my mechanic's kid through college, I never saw a proper return of investment. I named it The Rolling Turd – a flattering term of endearment it lived up to.
I never second-guessed General Motors' decision to stop the Pontiac line in 2010. Not surprisingly, consumers were turned off at the idea of buying two tons of junk. But last month, we leaned General Motors reputation of making a bad product runs deeper than my personal contempt for The Rolling Turd. The company was recently accused of knowingly manufacturing vehicles equipped with a faulty ignition switch, which is being blamed for the deaths of 13 people. According to the House committee on energy and commerce, evidence suggests GM's knowledge its wrongdoing dates back as early as 2007, if not sooner.
All this is to say, perhaps General Motors should have been allowed to fail. As I'm sure most people can recall, GM happily received a government bailout when the auto industry tanked in 2008. The move ultimately lost taxpayers $10.5 billion of their original $49.5 billion investment. To GM's credit, charges currently faced by the company predate the help it received from the federal government. Nevertheless, Americans duped into believing the company had good reason to be saved.
“Too big to fail.” That's what we were told again and again. And to a certain extent, that could have been right. After all, GM maintains well over 200,000 people on its payroll, not to mention the hundreds of thousands who indirectly benefit from GM production: new car dealers, mechanics, car parts dealers (and tow truck drivers in my case), and everyone in between. Had the company gone bankrupt, it may well have sucked billions from the economy in lost wages, and billions more in lost personal and social insurance tax collections, according to a December report from the Center for Automotive Research.
Conversely, had GM been allowed to fail, it would have left a hole in the market to be filled by another automaker. Whether that company be foreign or domestic, I'm not sure it really would have mattered. GM's production facilities and equipment would have been handed down to the highest bidder. Since the manufacturing equipment is domestic, GM’s facilities are domestic, and the market is domestic, it's reasonable to think the next big car company would likely have produced here in the United States, meaning the job market would have taken a hit; but it would have bounced back.
Regardless of whether the long-term consequences of GM's bailout is good or bad, I think recent developments in the company make me lean toward the latter. From my standpoint, the trouble GM finds itself in today shows government bailouts just aren't worth it for the simple fact that corporations don't change. More than $10 billion lost in the 2009 GM bailout, and what's to show for it? A company that swept safety concerns under the rug in favor of a healthy bottom line. Maybe Washington was wrong. Maybe Detroit should have gone bankrupt.
Maybe. For my own benefit, I should clarify at this point that I'm not an economist. To say the bailout was definitely worthwhile isn't exactly my forte. Nevertheless, in light of recent events and GM's less than flattering history (and the Rolling Turd), I don't believe it was. I'm not sure any company is.
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