Barack Obama has set himself up nicely to become Chairman at General Motors. According to a new report from Reuters, the federal government is set to control up to 72.5% of GM as part of its bankruptcy agreement. Coupled with the Obama Administration's previous moves to seize control of large portions of Chrysler, the fast-tracked Treasury-backed bankruptcy plan places the majority of the American automotive industry firmly within the iron grip of government, leaving Ford as the only major player in the game to attempt to make it as a member of the private sector. It breaks my heart to see billions of taxpayer dollars thrown down the black hole that is GM. Despite America's history of producing cars, the automotive industry's business model is broken, and the only way that these companies will ever become profitable again is to radically change how they make cars. That means substantial changes to their collective bargaining agreements with the United Auto Workers. American car producers are trapped in a scenario straight out of a first-year economics textbook, where the costs of labor are being held high by an artificial mechanism. As a consequence, they are passing the costs on to their consumers, who respond by buying cheaper, more efficient foreign-made automobiles. For companies like Ford to succeed in the modern economy, they are going to have to reduce the costs of the manufacturing process by either reducing the price of labor, laying off substantial numbers of workers, or finding a way to make the actual process of production substantially cheaper and more efficient. These are the only ways that car companies can rescue themselves.
But rather than reform, these companies are selling out to the Obama Administration, and will in the future be run by people who are far too worried about keeping foreign car companies out of the country and protecting union interests to actually make the positive substantial changes needed to rescue the dying firms they have been tasked with managing. I'd like to believe that Ford will be able to overcome their challenges (they are currently predicted to break even financially in 2011), but my gut tells me that the Barack Obama Motor Company will use its new found power and influence to undercut its private industry competitor every chance it gets, driving Ford out of business just before collapsing in on itself.
And in case you were curious, I drive a Toyota.