General Motors

How is it okay or even legal to have the President of the United States ask for the resignation of a CEO of a company? This should scare the hell out of everyone. This isn't about whether or not the CEO deserved to lose his job, he clearly did. The stock holders of GM should've demanded his head -and many other top executives heads- long ago. They ran his company into $80 billion in losses in the four years leading up to our current economy. What is too much to swallow is the practice of our executive branch dictating  who is allowed to be a CEO. It was fine when our government forced new management of Fannie & Freddie, they're government entities. (Nevermind that our government facilitated the de-regulation that allowed them to open the flood gates of this mess -no, F&F didn't start this crisis; they made it that much worse.) With AIG and CitiGroup, at least we had taken an ownership level of stock (80% and 40% respectively) that forcing new management -again supporting that obvious new management was needed- held water. However, when we simply sacrifice a lamb at the behest of our executive branch because they've decided GM isn't viable moving forward, that is too much government power and intervention. (Let alone the new CEO was hand picked by the one we just forced into resignation and has also been with the company for 25 years).

We had two options with GM: Either allow them to file for bankruptcy and restructure or loan them money until they turn things around. GM had already struck a deal with the UAW and starting in 2010 were going to be in line with Toyota's labor costs -going from about $60,000/yr down to somewhere between $50-52,000/yr. The simple fact though is that even prior to that, the cost of making a roughly $30,000 car is around $2,500 in labor costs. Clearly, that isn't a sizeable chunk of the cost of manufacturing a car. Clearly, the price of materials and the legacy costs of retiree's are the far bigger issue.

Somehow the UAW and our auto companies couldn't figure out the simple concept that trying to pay four generations of workers while paying the current generation wouldn't spell financial problems. It seems to me that in the long term in order to help there viability that they need to shift from employer paid pensions and instead to 401(k)'s or some other form of retirement fund where the company can put money into it (as in a matching contribution plus two or so percent) but isn't the one actually making the payments once it is being collected. Obviously putting money into a 401(k) as a reliable retirement plan doesn't sound all to intelligent given our current economy but our current economy isn't the norm.

Current workers aren't the ones needing their wages cut, its the retiree's that already collect SSN plus their full pensions that need to be shifted off the books somehow. Some retired workers have already had their pensions completely taken away and now only get $200/month to be spent toward healthcare. (Disclaimer, a relative is one of these people).

Something people need to understand with GM is that the government has been dictating the type of cars they need to make since President Bush's (not faulting him specifically) first term -some would argue much longer than that but it wasn't as severe until the start of this century. Our government swore bio-fuels would be the future, we'd subsidize corn and gas stations would jump on board and bio-fuels would be everywhere. What does GM do? They pour billions into research and development of cars that can run on not just bio-fuels but instead flex-fuel cars; meanings cars that can run on both standard gas and bio-fuel. That in turn wastes more billions of dollars in overhauling the manufacturing plants to create these new engines and gas sensor technology's.

It became clear to GM shortly after these new engines hit the market that it simply wasn't viable. The gas stations weren't showing any movement toward carrying bio-fuel and no other car company showed interest in it. It was looking like a gimick. Moving on from flex-fuel cars GM starts pouring billions of dollars into research and development of hybrid's. Today, they still can't make there own car batteries and are buying them from Asia. (The much hyped Chevy Volt not withstanding.) Despite this, GM now makes more hybrid cars than any other car company in the world. This is what we call two major restructurings. On a side note, they've also spent countless billions in creating and expanding there On-Star road service.

Clearly GM has some underlying systemic problems, one of them being there finance division getting involved in loans outside of car loans; i.e. home loans.

GM just can't seem to run a profit. The argument is they make way too many models and have too many off-brands. Heading into 2000ish they did so because they honestly made a profit on selling, for example, a GMC pickup that was exactly the same as a Chevy Silverado, just the name was different. They also have a well deserved reputation of making lower quality cars compared to Hondas and Toyotas, Mazdas to some extent; although in recent years we've even seen the gap in quality close.

One thing that doesn't add up and their hasn't been any reporting on this is: If GM doesn't take a loss on every car sold and there prices are very much in line with foreign car companies, how are they losing so much money and the other car companies aren't? (Pre this current economy). Some where within the company, GM is wasting money. Either they're over supplying relative to the demand for there cars -which is entirely possible given how full GM car lots always are verse how many are actually seen on the road- or they're spending far more on research and devlopment than the foreign car companies. It could also be too much overhauling of their product lines in too short a time. The foreign car companies slowly but steadily progressed into Hybrid's. GM tried going from the 90's to flex-fuel to hybrid's overnight. Could also be all three.

No matter what one thinks of GM and our governments handling of there problems, a President demanding the resignation of its CEO is too much like Russia or China. It is simply too much.