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Wasting General Motors

What neither Wagoner nor Obama wants to talk about.

By 3.31.09

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What a sad spectacle: The man who helped ruin GM has been ousted by a man who seems determined to finish the job.

Over the weekend, we learned that, under pressure from President Obama, GM CEO Rick Wagoner flew the coop, golden parachute strapped tight. While he's off to greener pastures, GM's neck is still on the chopping block.

Meanwhile, it's clear President Obama has no more clue what to do than Rick did -- beyond issuing the usual boiler plate about the automaker figuring out how to make itself "leaner and meaner" and "more competitive."

Rick was saying much the same thing.

But that hasn't been the problem for years. Let's keep in mind that until the bottom fell out of the stock market last fall, GM was doing fine. Go back a few years when SUV and truck sales were booming on the strength of cheap fuel and easy credit and GM was plenty "competitive" and "mean" -- if not altogether lean.

The truck/SUV market was so white hot that the major Japanese automakers were literally falling over each other to get in on the action. First Nissan and then Toyota came out with full-size trucks and SUVs with huge V-8s every bit as "wasteful" (and then some) as the vehicles so many pillory GM and Ford and Chrysler for having made.

The plain fact is people -- the market -- wanted these vehicles. Desperately. GM et al. (and that includes the sainted Japanese) responded rationally and accordingly.

Blaming GM -- or Toyota -- for supplying what the market asked for is asinine. Had Wagoner or any other major auto industry CEO said, circa 2004, "Hey, let's stop building these 'wasteful' trucks and SUVs. People need to drive efficient compacts and hybrids that get 40 mpg" -- two things would have happened: Bankruptcy would have come in 2004 -- and Wagoner (or whoever) would have been shown the door a lot sooner.

The only reason the Japanese get a pass from the media -- and the Obama Crew -- and are able to maintain their image as "responsible" purveyors of "efficient" small cars is that they had the good luck to be late to the game. When things went sour, they were only minimally invested -- and so their losses were correspondingly smaller. But to suggest they weren't salivating to cash in on the V-8 4WD juggernaut is beyond asinine.

Meanwhile, Chrysler.

Its problems stem from being bled white by Daimler AG -- parent company of Mercedes-Benz. The "merger of equals" (in honest language, it was a buyout) transformed what had been a hugely money-making business into the automotive indigent Chrysler LLC is today.

In both cases, circumstances that have little, per se, to do with either automaker's products or business model have led us to the current debacle.

And as for "fixing" it?

The problem no one really wants to discuss is this: People are tapped out -- and terrified. Buying a new car is not about "quality" or "MPGs." It is about discretionary spending on a consumer product. Until consumers have the discretionary income -- and the confidence -- to consider a major purchase such as a new car, car sales will remain in the toilet. No matter what GM or Chrysler or anyone else has to sell. If that were not the case, then Toyota's sales would not be off 30-40 percent.

Wasn't Toyota the exemplar of "lean and mean" and "competitive"?

Apparently, not so much.

And how -- and when - will consumer spending return? Not by turning on the Fed's printing presses, that's for sure. All monetary inflation (the honest term for the $1 trillion "stimulus" plan) does is create higher prices for the same goods. Buying power is not increased. The only way to achieve that is via productive enterprise. You know, making useful things that people want to buy.

We Americans need to relearn how to do that. If we do, the auto industry will eventually take care of itself.

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About the Author

Eric Peters is an automotive columnist and author of Automotive Atrocities: The Cars You Love to Hate (Motor Books International) and a new book, Road Hogs.