GM has been failing for some time. Look at their product lines over the past 50 years, and you can pinpoint the start of the real demise to the early 1970s. That’s when their lack of strategic thinking/planning and poor design/engineering became really evident.

The nature of competition in the marketplace is that if you have a good thing, someone will want a piece of it. GM proved the US market to be very profitable for decades, which attracted then-foreign makers. As GM failed to handle the post Oil Crisis marketplace, they opened the doors to these other makers, thereby giving their business away. They failed to understand why their products were undesirable, and focused on making money by making cheap cars (to put it politely) or chasing clearly short-lived unsustainable trends (big trucks and SUVs). Outside of the original Saturn SL, circa 1992, I can’t think of any ground-breaking vehicles from GM since the late 1960s. Of course, they destroyed Saturn a few years ago.

My point is, the government will not run GM into the ground; it’s already underground; they’re just briefly brining in some light before nature takes its course. Bailing GM out is not REALLY about saving the company, it is about saving the industry, i.e. saving jobs. That’s what politicians live for. To their credit, you have to remember that it’s not GM employees, but all their suppliers, dealers, servicers that are at stake here. The bailout is just a stopgap measure, a way to ease people into a transition to other employment.

What is interesting is the ongoing obsession with protecting American-owned car companies. While GM and its cronies have shifted plants to other parts of the world, ALL the leading Japanese car manufacturers build cars in the US—they have been for years, and making a profit in the process using American workers. It helps that they not only make cars people seem to want, but they also make them efficiently. That these makers have also suffered double-digit sales declines in the past year is proof that the real issue is much bigger than individual manufacturers. And yet, Toyota, Honda, Nissan etc are neither asking for nor getting any bailout. My guess is it’s because the government has faith that these companies know how to run their business and will survive on their own. Their American employees are not at risk.

The government’s intervention in the American-owned car makers is evidence of two things:

1. The general public’s current lack of faith in capitalism and market forces. If GM is left to fail, the gap left in the market will be taken over by other makers. A saturated car market will not shrink with fewer suppliers, it shrinks from lack of demand. Unfortunately, the transition process is painful, and it’s politically undesirable. Politicians survive by doing the general public’s bidding. It doesn’t matter that Americans scream to save American carmaker jobs while they buy Hondas and Toyotas.

2. The Government knows GM can’t run their business on their own, so they feel the need to prop them up for a while.

Government-run auto industry can give you products like Trabants or Ladas. It can sometimes lead to something like VW too, which was started by a totalitarian regime and is now part owned by the State of Lower Saxony (and the union has seats on the board, I think). The big difference is that VW knows how to make good cars, and that’s why they’re in the top 3 makers globally (would be top 2 if we get rid of GM).

To summarize, what you are dealing with here is just politicians being politicians. I don’t think the government has an agenda to take over private enterprise per se; they’re just saving the big idiot from tripping as he takes his long walk off the now-short pier. Think of it as slow Euthanasia.