General Motors Corporation

First, Do No Harm

by Bill O'Connell on June 1, 2009

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Stock Market Leads the Way

As I write this the stock market is up nearly 200 points, and it has risen in each of the last three months.  Commodity prices are rising based on encouraging manufacturing data from abroad.  Personal incomes rose 0.5% in April.  Chrysler could exit bankruptcy as soon as Monday.  Citigroup and GM are removed from the Dow Jones Industrial Average, replaced by powerhouse Cisco and Travelers.  Ford motor’s shares rose 4.9% on news that it plans to expand production in the third quarter to try to gain market share from its rivals, and without government money.

The Stimulus Flop

Less than 10% of the $780 billion stimulus package has been spent.  President Obama told us we desperately needed or we may be mired in this recession/depression for years .  The free marketers said that this economy is strong enough to recover on its own, which the statists sneered at.  Government created this mess by their meddling in the housing market and how they mishandled interest rates and the money supply but we were told that “only government” can get us out of it.  More recently President Obama, who has been trying to spend every dime Congress will let him get his hands on has said we are out of money. Here’s a thought:  repeal the rest of the stimulus and get out of the way of the strongest economy on earth.

Things to Ponder

  • Obama opposed bankruptcy for GM and Chrysler.  Free marketers said it should be allowed to happen.  That’s how the free market works.  After pouring billions of taxpayer dollars into these two, where are we?  Both are in bankruptcy.
  • Bankruptcy for GM and Chrysler would be an extraordinarily long and drawn out process costing millions of jobs and killing the auto industry in the U.S.  Where are we?  Chrysler may emerge from bankruptcy as early as Monday, Ford is ramping up for the third quarter.
  • Without the stimulus package, we were told the unemployment rate could hit 9% by 2Q2010, whereas with the stimulus it will peak at 8% at the 3Q2009.  Where are we?  It is now at 8.6% and we are in 2Q2009.  The stimulus passed, little has been spent and the administration has been wrong again.  The free marketers say that unemployment will likely rise quickly and if left alone, the recovery will happen more quickly.  If the government meddles and tinkers, we will likely see what happened in the 1930s where this drags on for years.
  • President Obama says we’re out of money.  So stop spending.  Repeal the stimulus that is accomplishing nothing because the bulk of the spending isn’t due to happen for another year or more.
  • Watching the Information Technology job boards, I see a big rise in the job postings for sales people.  When companies are confident that the economy is turning, they step on the gas for sales to beat the competition.  The operational folks will soon follow.

If the Obama administration is not careful and doesn’t reverse course before he bankrupts us, we may be faced with accelerating inflation and sky high interest rates.  Shall we get nostalgic for the days of Jimmy Carter?

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Unilateral Disarmament

by Bill O'Connell on April 25, 2009

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How much time do we have left before Joe Biden’s prophesy comes true that within six months of taking office Obama, and by extension we, will face an international crisis?  Well, unless you haven’t been paying attention, I think he will hit his mark before his 100 days are up.

Obama and Biden and the rest of their supporters have confused the difference between being liked and being respected.  Daniel Patrick Moynihan, while ambassador to the UN called the world, “A Dangerous Place.”  When trying to be a leader in a world that is dangerous, it is far better to be respected than liked.

The Obama Feel Good Tour

As President Obama tours the world and grovels at the feet of the Europeans, the Saudis, and Latin American dictators, trying to “repair the damage,” done by President Bush, our enemies are licking their chops.  The Europeans flocked to see him, touch him, kiss him, but when he asked for a commitment of more troops for Afghanistan, how did they respond?  Awkward silence and an offer of 5,000 troops to train police while at the same time an insistence that the “world” should have some say in the regulation of the U.S. economy.

While President Obama achieved his goal of improving the U.S.’s likability quotient, pirates were taking ships on the high seas, North Korea sent an ICBM over Japan, Iran celebrated Nuclear Technology Day, and the Taliban made inroads in Pakistan.  How did the popular leader respond?  To North Korea, he scolded that actions have consequences and words have meaning and proposed more words from the UN to be piled on top of the words the North Koreans are already ignoring.

Disarmament

To continue with the feel good groove, we have stopped calling terrorists terrorists.  Their acts are now to be called Man Caused Disasters and I guess the terrorists themselves are to be called Man Caused Disaster Causing Men (or Women).  After all, we don’t want them to be offended by being called terrorists.  Isn’t that was caused 9/11?  It was merely a response to our bad behavior, no?  Our lack of likability?

There is no longer a War on Terror.  It’s an Overseas Contingency Operation.  We don’t want to raise Osama bin Laden’s sensibilities thinking we might be at war with him, but we do need contingency planning in case something happens.  As a further show of good faith, let’s start re-writing the Al Qaeda training manual for them by telling them exactly what kind of interrogation techniques we use so that they can best prepare the training of their members to resist them.  Of course, we already swore we would never use them again anyway, but we have to make sure they are prepared for the infidel’s trickery.  Repeat after me: “I am not going to drown.  I am not going to drown.  I am not going to drown.”  There, it’s simple, now they can resist even our most diabolical torture.  But we shouldn’t forget to tell them that if an interrogator so much as raises his voice they should do the following:

  1. Ask for a lawyer
  2. Insist on having their Miranda rights given to them in both English (so their lawyers can verify it) and in their native tongue
  3. A clean, untouched by infidels hands, copy of the Koran
  4. Immediate transport to the United States
  5. A green card
  6. A path to citizenship
  7. A tenured professorship at the college of their choice

If that doesn’t get them to lay down their arms, what will?

Respect Not Likability

The only time the United States is both respected and liked is when the bullets are flying and the United States is saving the hides of our new friends.  When the shooting stops or it is confined to a theater far away from the talkers, the United States will be disliked but, however begrudgingly, respected.

Ronald W. Reagan may have been liked personally in private but when the klieg lights were on, he was “an amiable dunce,” and  “a cowboy.”  But Reagan stood firm and put Pershing II missiles in Europe against all protests.  Such steadfastness led to the eventual arms negotiations and winning the cold war.  At the moment President Reagan took the oath of office, the Ayatollahs in Iran released the American hostages they held for 444 days.  They respected that Reagan would act, not just talk.

George W. Bush was not liked.  He was another cowboy, one who was inarticulate to boot.  But he was respected.  After 9/11 the world respected that he would hunt down and kill America’s enemies.  After the Iraq invasion, Libya publicly shut down their nuclear program.  Quadaffi didn’t want to be next.  President Bush kept America safe for seven years after 9/11.  Now, this Congress and this President want set aside over 200 years of precedent and to put them on trial for doing that.

Preparing for Our Enemies

President Obama plans to keep America secure by cutting our defense budget by 25%.  He plans on a staggering increase in our national debt and selling it to the Chinese.  Picture the Chinese doing to the USA what Obama did to General Motors.  Can you just see the head of the Chinese Communist Party saying to Obama, “Well, we own you now.  You’re fired.”

Can this Juggernaut be Stopped?

On April 15th over 1 million people gathered at Tea Parties around the country to protest the growth of government, the taking of our liberty and out of control taxes.  The Obama main stream media largely ignored the event, or willfully disparaged it.

A recent Rasmussen poll, “85% of mainstream Americans say the government has too much money and power, just 2% of the political class agree.”  If they have no bread, let them eat cake! The poll went on to say, “51% of Americans have a favorable view of the Tea Parties but the political class strongly disagrees.” {emphasis added}  How more out of touch with the people can they be?  How more arrogant in their shameless grab for power can they be?

New York City Tea Party, April 15, 2009

I will end this post, my friends, with a quotation from the Declaration of Independence.

“WE hold these Truths to be self-evident, that all Men are created equal, that they are endowed by their Creator with certain inalienable Rights, that among these are Life, Liberty and the Pursuit of Happiness — That to secure these Rights, Governments are instituted among Men, deriving their just Powers from the Consent of the Governed, that whenever any Form of Government becomes destructive of these Ends, it is the Right of the People to alter or abolish it, and to institute new Government, laying its Foundation on such Principles, and organizing its Powers in such Form, as to them shall seem most likely to effect their Safety and Happiness.”

July 4, 1776

I hope to see you at the Tea Party on July 4, 2009

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Taxpayers to GM — Get Yourselves Out of This Mess

by Bill O'Connell on November 18, 2008

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It’s hard to read the news about the auto industry and not clench your fists at the outrage.  GM and to a lesser extent, Ford and Chrysler, are asking the American taxpayer to bail them out, but what is their position?

  • The unions say they are not going to negotiate anything to help the situation
  • The CEO of GM says that they are not filing for Chapter 11 and not preparing to file, despite that they may run out of cash by the end of December.  Not even as a contingency, Mr. Wagoner?
  • Wagoner refused to consider resigning, even if it would help them get aid
  • GM’s board is supportive of Wagoner

This company negotiated an agreement with its union that pays them almost full pay if they are laid off.  Let me get this straight.  You lay people off, as painful as that may be, to cut costs.  GM negotiates an agreement that keeps the costs, but sends the people away.  From their perspective, it’s free labor, they pay for it either way so put them to work!  But no, I’m sure there are union restrictions about what you can put them to work doing.

Remember the Dot.com Bubble?

In 2000 we saw the Dot.com bubble.  What was the fallout?  Millions were lost on Wall Street.  Companies by the bushel basket went out of business.  Thousands were thrown out of work.  How much did taxpayers cough up to bail them out?  Nothing.  The market dealt with it.  The strong companies re-grouped, the weak fell by the wayside.  John Chambers, CEO of Cisco Systems, changed his own salary to $1 per year until he righted his ship.  Today Cisco has $26 billion in the bank and Chambers is still at the helm.  Nice work, John.  It wasn’t done with arrogance and going hat in hand to Washington looking for a hand out.

Deja Vu

In the 1970s and 1980s in the UK, British Leyland, maker of the Triumph, MG, Rover, Jaguar, Austin and five others, was in need of a bailout to keep going.  The British government complied eventually pumping in $16.5 billion in taxpayer money to the company.  It limped along for another few years and then went out of business.  It sold its Jaguar and Land Rover brands to Ford, which then poured $10 billion into Jaguar.  It recently sold both brands to Tata of India, getting back about half of what it paid for the brands.

Did the British economy go under?  Is the British military without tanks?  Let’s not forget that the Jeep was made by American Motors.  Where is American Motors today?  A company named AM General makes the military Hummer.  Guess what the “AM” stands for?  GM, Ford and Chrysler combined made about 17 million vehicles in 2007.  Does anyone think this demand will vanish if GM, Ford and Chrysler vanish?  Of course not.  Either GM, Ford, and Chrysler will re-make themselves, new companies will emerge, or U.S. based foreign companies will grow to take up the slack.  The jobs will move around.  The demand is there, the supply will emerge to satisfy it.

The Way Out

The way out of this mess is to go Chapter 11, reorganize, renegotiate onerous labor contracts, sell off properties no longer needed but tied up in commitments to bonds that were sold to attract a factory, etc.  The government should do their part and dump the CAFE standards.  Americans will still want high mileage cars and companies will build them.  It may not be GM, Ford and Chrysler who build them, but if they trim down, maybe they will.  But they do make a profit on their premium models and light trucks.  Let them.

But keep your hand out of my wallet.

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Bailing Out the Auto Companies

by Bill O'Connell on November 11, 2008

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The conga line for companies with their hands out forms on the left.  The next ones bellying up to the slop trough are GM and Chrysler.  They need $25 billion to help them through a tough patch or they may go out of business.  It is a loan?  Is it buying a stake in the company?  Is it that thing of which we dare not speak– socialism?

What’s Next?

The question is are we, by the continued intervention of the government, managing our way out of a recession and into a full blown depression?  For all the warm memories of FDR, the depresion lasted more than twelve years thanks to, “We’re from the government and we’re here to help.”  Perhaps it’s time to take our medicine, pull the covers up under our chin, sweat it out, and get back on our feet.

Business, like many things, runs in cycles.  There are up cycles and there are down cycles.  We can’t eliminate them, they are a necessary part of the process.  But just as there is no cure for the common cold, sometimes it is best to let it take its course as soon as possible and be done.

Was Government Intervention Wrong?

I don’t believe so.  It was unfortunately necessary to end the panic.  When lenders have no confidence that if they lend they will be paid back, and if they have non-performing assets and they can’t sell them because they don’t know how to price them, the whole system locks up.  The system needs a lender of last resort and the only one big enough to step into that role is the government.  However, that should be for the least amount of time possible.

The Problem with the Auto Industry

The auto industry has had 35 years to figure this out.  With the Arab Oil Embargo of 1973, Japanese auto companies made major inroads into the automobile markets.  Imagine buying a car that got 20 miles per gallon, rather than 8, was better built, and cost less.  Well, that’s what the Japanese companies were offering, but what did Detroit learn?  Union contracts too expensive, let’s invest in robots and get rid of the expensive people!  GM bought boatloads of robots and later ended up scrapping them.  Why?  Because the workers weren’t the problem.

Who transformed the Japanese auto industry?  An American by the name of W. Edwards Deming.  After World War II, Japan’s industry was in shambles.  Deming went to help them get their industry back on its feet and taught them about statistics and quality control.  They learned their lessons well.  They focus on incremental changes every day.  If someone sees a problem on the assembly line and takes action to stop the line, he doesn’t get chewed out, he gets applauded.

The Big 3 have had all this time to figure out what they were doing wrong and fix it, but what did they do?  During the good times, they just rolled along.  If signing a big labor contract kept the peace and kept the factories running, they would buy off the unions.  But when the trouble starts, there’s no room to maneuver.

Leading the Way to the Future

The Japanese saw the need to cut back further on fuel consumption, but they knew there was a limit as far as how much mileage you could squeeze out of a gasoline engine, so they came out with hybrids.  Initially they were a novelty, but when gas was headed for $4 per gallon, they we economical.  Where was Detroit on this?  Lagging behind, of course.  Don’t develop a hybrid car until your customers demand it, but by the time they do, they would rather buy the tried and true hybrids being built by Toyota and Honda.  Ford promised to produce 250,000 hybrid cars but rescinded that pledge nine months later.  Why?

According to a Ford spokesperson, an internal panel of experts analyzed customer interest in hybrid cars and did not feel that there was enough demand to warrant the expense of building 250,000 hybrids.”

What was the price of a gallon of gas when they made that decision? $2.20, the lowest it had been in ten months.  The other half of that article quoted above said, “Toyota remains top hybrid producer.”  GM is now placing a very big bet on the Chevy Volt, which will be an electric car scheduled to launch in 2010.  Although there is little fanfare, Toyota, Nissan and Mitsubishi are all planning electric cars in the next two years.

To Bail or Not to Bail?

So why should the taxpayer be on the hook for the mistakes of the Big 3 auto maker’s management for these past 35 years?  Perhaps they should just go into Chapter 11, reorganize and come out as more competitive companies.  Why prop them up so that they can stumble along for another 5-10 years until the next downturn and come back to the trough?  The stockholders have been electing the boards of directors for these companies for 35 years and buying their stock.  The boards have been hiring the management team and providing them with their compensation.  The management team has made the product decisions, negotiated the labor agreements, and all the other missteps.  Why should American taxpayers have to step up to the plate and bail them out.  They got themselves into this mess, let them get themselves out.

But that’s just my opinion.

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