It'll take a wing and a prayer

When you sign a pack with the devil, hell is right around the corner. And so it is with the "new" GM. I mentioned in earlier posts that government types would find it irresistible not to meddle with a reborn General Motors. After all, the $50 billion they threw at the company, the secured creditors they pushed under the bus, plus shepherding the company through a speedy process that abrogated all previous bankruptcy law, GM was going to pay the piper one way or another. Now we are seeing how.

Ugly payback actually began when President Obama and his government minions called for the resignation of CEO Rick Wagoner. GM's board happily obliged, with Wagoner's head promptly delivered on a silver hubcap. In desperate need of immediate cash, what else could the board do? But this sent the first message to Washington that they did, indeed, have the power to remake GM in their own, dare I say, distorted bureaucratic vision.

Next to follow, with some good old fashioned arm-twisting Obama is now famous for, was GM's reversal of building a new sub-compact car in China. "No way," said the president and his hatchet men at the UAW, "the car must be built in the USA!" And so GM again capitulates and presto, GM will assemble the car in the soon to be remodeled Michigan Orion plant. Forcing the company to build a green car stateside is one thing. Expecting a profit is pure fantasy. But who would presume two entities, Washington and the UAW, that have never garnered a profit on anything they have ever touched, to understand the business decisions necessary to actually make money. How do we know GM won't make any greenbacks on the new compact? Because every other manufacturer, domestic and imported, has studied countless business plans, each with the same conclusion: you cannot make any profit on a sub-compact built in the USA. That the Asian car companies see this says everything about GM's future earnings. And Fritz Henderson, GM's current CEO, says he wants to repay the 50 billion borrowed back to the American taxpayer? How's that going to work when you make no money building cars? Isn't that what got GM in its fix before. Oh, never mind.

Of course, the curse isn't complete until the US Congress gets its grubby little hands in the mix, which they did last week. The U.S. House approved a bill in a 219-208 vote to reverse the closing of more than 2,500 GM dealers. General Motors currently has over twice the number of dealerships they need to do business in North America and had taken rapid steps to address that. But that's a little too fast for government. Nor does it make "sense" to a deliberative body that annually spends more than they take in. Tell me what our deficit is this year... over a trillion?

It should be patently obvious to even a first-year business student that trouble in profit land is brewing for the new GM. But this go round is different from the past. This time GM has a valid excuse: "The Devil made me do it!"