Your Government, Running The Auto Industry

A review of the government's explantion for why it deems GM and Chrysler "unviable" demonstrates precisely the sort of micro-level intervention in the two companies that the Obama administration had previously sought to avoid.

For example, although the administration disputed GM's contention that the global market conditions would arrest the rate of GM's market share decline, it also blamed the company for retaining "too many unprofitable nameplates" that "tarnish its brands" and "demand increasingly scare marketing dollars."

Further, GM is slammed for producing cheap cars and selling them too cheaply. "These lower price points are an important impediment to enhanced GM profitablility and need to be reversed over time in order for GM to bring its margins into line with its-best class peers."  What that means, in essence, is that the government wants to see GM produce fewer, more expensive cars.

Legacy costs remain unresolved; the government estimates that GM would need to sell 900,000 more cars per year through 2014 in order to meet its obligation.

Elsewhere, the administration has called on GM to fundamentally change its culture. Better brains need to be brought in. Labor/management practices have to change.

All of this is fine. The government is telling GM to be like Toyota. But what if the industry's infection is just too widespread? No amount of patient self-care... "clean those wounds better!  Eat your vitamins! Get exercise!" and no amount of antibiotics (the billions government's pouring in) can arrest the death spiral. Was it totally unrealistic to expect GM to find a way to satisfy the government's demand for positive cash flow by 2014?