GM’s Failure Would Send the Country into a Depression

By now you are probably tired of hearing about the US automakers asking the government for a loan. I get asked by friends, what really happens if GM fails? The simple truth is that a failure of GM is just not an option. Let’s examine some facts, many of which you won’t hear in the media because it isn’t a fit with the story line. Most of us including me, feel that the labor union and past GM executive decisions put GM and the rest of the domestic automakers in a weak competitive position. We see the current situation as an opportunity to break the union contracts. It is a position of power over the union and GM brass we have never experienced before. We want retribution on the automotive executives that made us accept inferior products like the Citation and the Granada. But are these really the guys we should be angry with?

Rick Wagoner, the chairman of GM, along with Vice Chairman Bob Lutz, President and Chief Operating Officer Fritz Henderson, and Mark LaNeve, Executive Vice President Vehicle Sales Service and Marketing North American Operations and cousin of local Little League World Series Coach Tom LaNeve, are the ones responsible for GM’s recent turn-around in product design and quality. GM’s vehicles have quality ratings equal to or exceeding the imports. They lead more segments in fuel economy than any other manufacturer. GM’s service satisfaction scores beat every manufacturer except Porsche. GM is still the leader in vehicle sales in the U.S. and is in a virtual tie with Toyota for world vehicle sales leadership. GM is the leader in hybrid technology, fuel cell technology and will be the first to bring a plug in electric car to market in about 18 months with the Chevy Volt.

GM’s problems began with labor contracts signed decades ago, not with recent contracts signed by current leadership. It is GM’s legacy costs that make their cost per vehicle higher than the imports. Those costs are being phased out in the current contract negotiated by the current leadership team, and will begin to pay off in 2 years as the retirement health care costs are being assumed by the union. GM’s need to ask the government for loans was triggered by the collapse of the banking industry. Without cash to sustain them through the recession, they cannot pay their workers, vendors and dealers. Dealerships are independent businesses with their own capital at risk. When a dealer sells a car with a big rebate, they have to wait for their money from GM to be made whole in the deal.

GM’s car and truck prices when adjusted for inflation as a percent of family income and when you consider product content are the best since WWII. If people don’t buy these incredible vehicles at these ridiculously low prices, and if GM doesn’t get the financing it needs, it will kill the entire US auto industry taking Ford, Chrysler and many of the imports’ US assembly plants with them. GM’s suppliers who also supply the other manufacturers that build cars in the US will not be able to survive without GM’s business. GM’s 6,000 dealers will close or become used car lots. These dealers often are the pillars of their communities donating hundreds of thousands of dollars to local charities. Those donations go away along with the 1,000,000 jobs they provide in the US. Businesses that rely on dealerships for revenue will loose jobs or close. The center for automotive research estimates the job loss in the first year after a GM failure to be 4,500,000. And that is just the beginning. Some estimates reach 13,000,000 jobs lost within 2 years. The failure of the US auto industry is simply not an option we can afford.

My advice is to support the government loans to GM and take advantage of the incredible prices by purchasing GM cars and trucks. Businesses even qualify for a $25,000 deduction in their 08 taxes for purchasing certain trucks, SUV’s and crossovers. If you have a job and want a new car or truck, you can help yourself and help the economy by purchasing a new American car or truck. Tell your Congressman and Senators you want them to help save the US auto industry that is responsible for the employment of 1 in 10 Americans. For more information and to see how you can contact your Senators and Congressman log onto www.gmfactsandfiction.com. Pray for our auto industry and our economy.

On behalf of everyone at the Bob Smith Automotive Group - the GM Giant and Giant GMC – and Giant Fishing Charters, Happy Thanksgiving! Drive safely.