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http://www.forbes.com/free_forbes/2008/1110/162.html?partner=yahoomag

Let's stop kidding ourselves. If General Motors is going to survive in the U.S., it will need government-guaranteed loans. Just between us capitalists, is there anything wrong with that? In 1980 we guaranteed $1.5 billion of private loans to Chrysler, which was much smaller than GM is today. The government made $400 million on the deal.

We're lending $120 billion to an insurance company. There's $700 billion set aside for banks and others whose leaders enriched themselves while ruining their companies and our economy.

The leaders of GM have made their mistakes--plenty of them--but they didn't enrich themselves beyond decency as those other executives did. Today's economic problems, brought on by subprime mortgages, credit default swaps, a credit freeze and a stock market collapse, were caused by those other folks.

We need to decide if we want a domestically controlled auto industry. We won't run out of cars. Toyota (nyse: TM - news - people ), Honda (nyse: HMC - news - people ), Mercedes and BMW will make sure of that. But the auto industry created the American society we know today. If this industry can't survive, what can?

We might ask ourselves if Japan would allow Toyota to go down in these circumstances or if Germany would let Volkswagen (other-otc: VLKAF.PK - news - people ) fail. We should also ask whether those foreign companies will build the tanks and trucks that we might need someday.

A collapse of GM would bring a huge job loss, close to 100,000 people on its own payroll, plus hundreds of thousands of others in dealerships and supplier industries, heavily concentrated in the Midwest. We'd pay a price for this in unemployment insurance, medical costs, the squeeze on schools because of tax losses and all the things that go with such devastation.

By now I am sure most of you realize the seriousness. GM could be out of money by the middle of next year. GM has successful operations in Europe, Brazil and China, but sacrificing them to save the American business would fail and would destroy chances for a future recovery.

At the same time it was enacting the bailout legislation, Congress approved a separate $25 billion package for the auto companies in Detroit, but that is only for retooling 20-year-old factories, and I doubt if any of that cash will get passed out for another year. GM needs money now to keep the business running until the tide turns.

There is talk of some sort of GM-Chrysler combination. All this would mean, as far as I can see, is that more factories would have to be closed, more workers laid off, more auto dealers be allowed to collapse.

We owe GM some help. The company helped save this country in World War II. GM paid such great wages and benefits that an entire middle class of workers was created. And it built some great cars.

Maybe you're driving your Mercedes to work and you're thinking: "What has GM done for me lately? We're not a manufacturing economy anymore. We're technology, service, finance. Let those autoworkers, who make too much money anyway, get jobs at Wal-Mart (nyse: WMT - news - people )." But when GM gets killed, it's bad for business everywhere, and we're supposed to do something about it.

Taxpayers should get stock warrants so they win if GM turns around. There should be some sacrifice by the workers whose jobs we would be saving. (Workers gave up $1 an hour in the Chrysler deal.) We should make sure that loan guarantee money does not get moved into union funds, such as the one that GM has promised the UAW in return for taking over health care costs.

The biggest question is the management and board of directors. This company has been sinking for decades, losing market share year after year, building cars that didn't match those of foreign competitors--who build them here, too, by the way. I would demand a new board of directors for sure, including some people who know something about the automobile business.

GM has finally woken up, at least as far as the vehicles go. The new cars and trucks coming off the lines are among the best. But this management doesn't inspire anyone. It will take a great leader to bring GM back to prosperity, the way Lee Iacocca saved Chrysler and, a few decades before that, George Romney saved American Motors.
 

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Very good article - some excellent points made.
 

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I agree that Government backed loans will be needed and must be done to ensure GM has the liquidity it needs to get to 2010 and would like to see the loan amount be enoungh to get to 2012 without having to focus on money, if these are loans then we (American tax payers) will get our money back with interest.

GM can do many positive things with the capitol and will need it to avoid issues like delays in the Cruze (recent rumor) and other critical "must do now" projects.
 

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GM has finally woken up, at least as far as the vehicles go. The new cars and trucks coming off the lines are among the best. But this management doesn't inspire anyone. It will take a great leader to bring GM back to prosperity, the way Lee Iacocca saved Chrysler and, a few decades before that, George Romney saved American Motors.
I wonder...if something came of this, is Lee Iacocca too old to run a car company again? Or, how would George Romney's son fare running a car company? It'd be an interesting reverse parallel if that happened.
 

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Wow, I am so sick of hearing the argument that since we bailed out financial companies we should therefore bail out the auto industry. How 'bout we should not have bailed out the financial institutions in the first place?

And I love the fact that people believe that if Toyota was going under the Japanese government would do everything in its power to save Toyota. So? The last time I checked, America had the richest, most diverse economy on the planet despite having less government intervention. The entrepreneurial spirit that has built our country I think rests in large measure in the general freedom from government intervention that exists here and that is a model for the rest of the world, however poorly some interpret that model. That freedom provides greater opportunity for success, and it absolutely means that there's a greater opportunity for failure. We've seen other industries unfortunately fail, and yet the U.S. somehow didn't fall into the abyss. Instead, we managed to create and dominate totally new industries that just 25 years ago didn't exist but now employ hundreds of thousands of people! Fancy that!

Europe and Japan are nice places to visit, and they have certain, limited appeal that the U.S. can't duplicate. But I'll tell yah, I thank my lucky stars every day when I wake up under Old Glory (and for all of what she stands). I know that that means I have nearly infinite opportunities to succeed (and the threat of failure that makes me take advantage of those opportunities).
 

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...Just between us capitalists, is there anything wrong with that? In 1980 we guaranteed $1.5 billion of private loans to Chrysler, which was much smaller than GM is today. The government made $400 million on the deal.

We're lending $120 billion to an insurance company. There's $700 billion set aside for banks and others whose leaders enriched themselves while ruining their companies and our economy...
The U.S. government should never be in the business of taking taxpayer money and betting on corporations. Sure, sometimes that may mean the government makes a buck like it did with Chrysler, but that doesn't mean that the government should engage in the activity.
 

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The U.S. government should never be in the business of taking taxpayer money and betting on corporations. Sure, sometimes that may mean the government makes a buck like it did with Chrysler, but that doesn't mean that the government should engage in the activity.
If other governments do it and it makes our domestic companies uncompetitive, we'd damn well better help out and not just in hard times.
 

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Honestly, I am going back and forth on this one. It would seem that to 'bail out' the auto industry, what was once an unthinkable ammount of govt money now seems not so bad compared to what the financial industry is getting from the government. On the other hand...I still can't get behind this. A lot of us have come to think of the government as a seperate entity from individual citizens...almost as "better the governments money than my money", when in fact it is the SAME money.

I'm not saying I want GM to go under...but isn't a recession (economic downturn, whatever you want to call it) supposed to 'weed out' the companies that made bad decision...to make them pay for the mistakes they made? To 'remove' the bad decision makers and the poor risk takers from the market and allow the economy to move forward with the more prudent decision makers still in power? I realize things are more complicated than that....and there would be a lot of consequences. However, there is one thing I keep coming back to. If the government HAS to be involved...how about making regulations, bailouts, the economy...all of that stuff SIMPLER rather than just thowing more money and more regulations onto the pile already? Isn't bad debt one of the biggest things that got us into this situation? If so, they why create more debt to solve it? Why reward or 'bail out' the companies that created the situation. If the government is going to help the auto industry..it has to be done in a way where there is a HUGE ammount of accountability...and no free money. Obviously people much smarter than I have to figure out how to do it...just do NOT make it so complicated so people like me cannot understand it.
 

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That's not our system, we are traditionally free market capitalists. GM doesn't need a bailout, they need to find a way to sell cars people want at a profit. If they can't outcompete their competition they shouldn't exist as a business.
So, if GM can't compete with one arm tied behind their back and two broken legs, they shouldn't exist as a business? Good luck in that ideology. Free markets only work when all participants play by the rules. By that measure, the U.S. government should be financing Volt development, healthcare, and pensions.
 

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So, if GM can't compete with one arm tied behind their back and two broken legs, they shouldn't exist as a business? Good luck in that ideology. Free markets only work when all participants play by the rules. By that measure, the U.S. government should be financing Volt development, healthcare, and pensions.
Those are mainly self-inflicted wounds, I think we all know that if GM hadn't signed very poor union contracts with heavy legacy costs they would be fine.
 

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Those are mainly self-inflicted wounds, I think we all know that if GM hadn't signed very poor union contracts with heavy legacy costs they would be fine.
You're missing the point. Legacy costs wouldn't even be on the radar if GM was based anywhere outside the U.S., because they'd be on the Government from the start. That's where the playing field is heavily biased.
 

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GM isn't doomed to failure, innovation and smart business decisions could save GM easily. Throwing money at a poor business model will help nothing.
That's a very easy and naive thing to say, but "doing" is where that solution falls apart. No amount of innovation is going to erase thousands in costs per vehicle, unless you consider off-shoring an innovation.
 

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Our automakers have made mistakes. They made their biggest mistake by making the trucks and SUVS that were, until very recently, the majority of units sold in the US.
We have contributed heavily to their failure by putting politicians in place whose solution to every problem is to lay more regulations on business. When people were squawking about gas prices a few months ago, the geniuses in Washington responded by raising CAFE standards. See, it's the car companies fault! They are forcing us to use too much fuel.
We do the same thing with the energy companies. Who was it that met recently to cut oil production? It was the Organization of Petroleum Exporting Countries.The oil companies don't really own much oil; they buy it from the governments that own it. Yet we, us, you and I, continue to elect politicians who badger the oil companies.
We can't fix problems if we don't analyze them properly. We can certaily cite examples of poor management, and unrealistic actions by workers. Union leaders can be cited for some of the difficulties, as well. In the final analysis, however, we are better off fixing the problem than fixing the blame.
By the bye, many of the benefits autoworkers have today were, essentially, forced on the automakers by . . . . . . the government. After World War II wage controls remained in place for some time. During that period, companies offered benefits beyond wages as a way to recruit the skilled employees they needed.
A modest suggestion: have the government guarantee 0% loans for an auto purchase by every member of our Armed Forces who has served In Iraq and Afghanistan. The VA has, or did have, a zero down program for veterans to buy homes. It worked. I know a lot of soldiers that would buy a new Camaro!
Cheers,
Ed Arcuri
P.S. I'm not a big fan of Lido, but any new GM Board should definitely make room for Mitt Romney. He seems to have the same great business sense that helped his father make the Rambler such a great seller in its day.
 

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Our automakers have made mistakes. They made their biggest mistake by making the trucks and SUVS that were, until very recently, the majority of units sold in the US.
You can't blame them for that, there was virtually no profit on passenger cars but trucks and SUVs had huge profit margins. It was one of the few good business decisions that the Big 3 made.
 

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You can't blame them for that, there was virtually no profit on passenger cars but trucks and SUVs had huge profit margins. It was one of the few good business decisions that the Big 3 made.
Except that when the market shifted, small cars went into high demand and became profitable. At that point, every automaker with a well respected, highly efficient small car lineup was all set to rake in massive profits.

GM leadership should have anticipated the move. That's why they're paid millions of dollars more than your average person. They failed to do that.
 

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GM isn't doomed to failure, innovation and smart business decisions could save GM easily. Throwing money at a poor business model will help nothing.
True, innovations and forecasting what the future will be will keep any company on the right track. Look at Apple. However, if another government's protectionists policies aren't allowing our domestic companies to compete in their own country, but allowing their products to flood ours, we are setting ourselves for failure.
 
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