Wednesday, April 29, 2009

How You'll Know Ayn Rand Was Right

With news that the governement and the United Auto Workers Union is going to own 89% of GM, it got me thinking. Is this so bad? GM has been in the crapper for years, staying afloat largely through the largesse of the taxpayer. Don't think for a minute that the last couple of bailouts marked the first time your money has been used to help out the automaker. Maybe the government and the UAW will do a better job of running things. They can hardly do worse, right?

Okay, sorry. I just realized that I'm writing this in a garage with no ventilation while someone is painting. There are fumes everywhere. I'll just open a window.

Of course the government and the UAW will do a worse job. That's not really a problem. At least it won't be if the government refrains from using its legislative power to ensure GM's place in the marketplace. I don't care if GM goes under. I'd feel badly for the displaced workers of course; unemployment is a bad thing. But GM, frankly, has had it coming for a long time.

But keep a close eye on the measures taken in the future to make GM competitive. If the plan is to redesign the line to make affordable, good looking fuel efficient cars the public wants to buy, wonderful. That's what they should have been doing for twenty years now.

Here's what I suspect is actually going to happen:

* Overatures will be made to bring Ford, the only one of the big 3 to not take stimulus money, into the fold. There's lots of ways to do this, but the most obvious way is to cripple Ford in the marketplace by imposing costly standards (fuel efficiency, safety, worker compensation) that will push Ford closer to bankruptcy. Once Ford is forced to accept taxpayer money, the government will step in to take over.

* A lot of noise and effort will be made to close foreign plants and open new ones in the U.S. Since the reason for closing American plants and moving them overseas is the lowered manufacturing and labor costs, expect the price of a GM car to climb under the auspices of "Made In America".

* Under the guise of "leveling the playing field", we'll start seeing expensive tariffs on foreign made cars. This will drive up the prices of Hondas and Volkswagons, further eroding the car market.

* Bottom line, cars will be a lot more expensive, the market for new cars will struggle even more mightily, and it won't save GM in the end. It might even take Ford down with it.

Hopefully I'm wrong. Hopefully five years from now everybody is marvelling at how inexpensive cars are and GM models are flying off the lot because they're cheaper, higher quality, and more fuel efficient.

But if what I outlined does come to pass, read (or re-read) Atlas Shrugged (skipping over the longwinded parts) and tell me that Ayn Rand was wrong.

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