The Undoing of the American Auto Giant: Why General Motor's New Economic Plan Won't Pan Out

With Uncle Sam now owning and controlling the Big-Three American auto companies, everyone has wondered with the future holds for General Motors. There's really no need to wonder so much. GM's future isn't much of a question anymore. First of all, it will never be the same, and if if recovers at all, American's no longer feel the same affinity with it. Overall, what we do know is that the majority of Americans do not approve of the government ownership of GM, or any of the big three auto makers for that matter.

Since the truth of GMs financial hardships became more wide spread in 2008, Americans have been far less supportive. The conversation in general has turned political of course. The latest Gallup Poll (June 9-10, 2009) shows that 41% of Americans approve of Government owning 66% of GM's stock, a towering 55% do disapprove, and 5% had no opinion. With the results as cut and dry as this, one might suggest that the majority did not want Uncle Sam to own our largest motor company; so how did we get here?

Would closing GM down have been such a bad thing in view of the other options? It's quite apparent that sales have slowed greatly in the last year and it's hard to tell when things will start moving again. The funny thing is that the latest Gallup Poll also shows that only 20% of Americans say they intend to purchase a new car in the next 12 months anyway, and of that, only 7% are likely to do so. Are Americans confident enough in the reform of GM to buy a new car?

It appears that the current Administrations thought that GM and Chrysler were too large to fail. It is this cavalier attitude that led to the decision to spend over $50 Billion of American tax-payer money to keep GM afloat for just a little bit longer before their eventual bankruptcy. After this, American support has only declined. "We do not endorse hemorrhaging excess monies that we don't even have to support a failing business model," says Jon Kjorfe, a business owner and interviewee.

History has always shown that when the government attempts to alleviate the burden of the country by assuming control of a public asset, it never pans out. I don't expect to see anything different here. Free market is always the best model by which operate. If you can't pay your bills and you don't have a plan to recoup your losses, throwing money at the situation won't solve anything.

Sources:
http://blogs.suntimes.com/sweet/2009/06/general_motors_bailout_over_vi.html
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