Government Motors fails again

Investors Business Daily:

General Motors’ decision to close four U.S. plants and lay off 14,700 workers, 15% of its domestic workforce, is an economic tragedy. And it might have been avoided if GM had listened to the market, rather than the Obama administration.

During and after the financial crisis, GM decided to do the government’s bidding in exchange for billions in subsidies. At one point, the federal government owned more than 60% of its shares, costing it more than $50 billion. By the time it sold the shares in 2013, U.S. taxpayers had an $11.2 billion loss.

How’s that working out for GM now? Not very well.

GM’s CEO Mary Barra, who took over the company in early 2014, reshaped the company’s offerings to please the Obama White House’s leftist auto czars, as did her predecessor. Barra has bet the company’s future on electric cars and other less-popular offerings, instead of what people want.

“The (GM) restructuring reflects changing North American auto markets as manufacturers continue to shift away from towards SUVs and trucks,” Reuters noted. “In October, almost 65% of new vehicles sold in the U.S. were trucks or SUVs. That figure was about 50% cars just five years ago.”

So what was GM making? Well, electric cars, for one. But even with a $7,500 subsidy, they don’t sell fast enough. Why? As the joke goes, the extension cord isn’t long enough. For anyone who has a long commute or wants to take a road trip, an e-car makes no sense. As such, GM’s commitment to electric cars is emblematic of its recent market failures.

Worse, it’s based on a kind of environmental fraud. Electric cars aren’t “zero emission,” as we’re constantly told.

For one, building an electric car produces more CO2 than building a regular car. For another, if the car’s batteries get their charge from electricity generated by a coal-fired plant, that makes an “electric car” really a coal-fired car.

It’s the electric-car industry’s dirty secret, one that undermines GM’s rationale for making such a big bet on electric cars.

As for President Trump, he hasn’t directed his anger at electric cars per se. He has directed it at GM’s layoffs from closing four plants here in the U.S., idling nearly 15,000 people.

Very disappointed with General Motors and their CEO, Mary Barra, for closing plants in Ohio, Michigan and Maryland,” but keeping plants in Mexico& China, Trump tweeted Tuesday. “The U.S. saved General Motors, and this is the THANKS we get!”

In particular, Trump’s says the corporate tax cuts and sharply lower taxes on repatriated profits from overseas should be going straight to the bottom line of comes like GM. So he’s now promising to look into cutting subsidies on electric cars and imposing tariffs on domestic car imports.

We understand Trump’s ire. But it’s misplaced.

Government shouldn’t pick winners and losers. Period. And that’s exactly what subsidies are: the government substituting its judgment for that of the marketplace. Why do we do it at all?

It never works as expected. It can’t. The government, despite delusions to the contrary, can’t possibly know what people want and need. Yet, a perpetual leftist dream remains an economy run and funded by government “experts.”

We see that in the Obama administration’s decision to subsidize GM during the financial crisis by investing tens of billions of taxpayer dollars in its stock and propping up money-losing operations. By ignoring the supply-and-demand signals of the marketplace, it only made GM’s problems worse.

More specifically, it led to GM committing itself to the unprofitable electric car market, one of President Obama’s pet projects. At one point, Obama even vowed to buy a Chevy Volt when he left office. He didn’t.

Not only has GM’s Barra embraced electric cars, but she sees the government as her partner in the enterprise, as she wrote in a recent USA Today op-ed. In it, she noted that her electric car plan “requires collaboration by the private and public sectors, supported by comprehensive federal policies.”

It’s no joke that some today call GM “Government Motors.”

Ironically, one of the victims of GM’s cutbacks will be the hybrid plug-in Chevy Volt. Even so,  GM’s commitment to the subsidy-sucking electric-car market remains unshaken, Barra says.

After all, who needs to please actual customers when government can compel people, either by huge subsidies or outright regulation, to buy your product?

And who buys those electric cars, anyway? Mainly those whom the left calls “the rich.”

“Overall, the top 20% of income earners receive about 90% of EV tax credits,”  noted The Hill. “Additionally, data from 2014 indicates that over 99% of total EV tax credits went to households with an adjusted gross income above $50,000.”

So we subsidize wealthy consumers at the expense of lower-income consumers, who can’t afford electric cars. That’s economic perversion, “regressive” not “progressive.”

“Barra wants taxpayers to foot the bill for her speculation on what the future will look like,” economics writer and Wall Street analyst John Tamny recently noted. “If Barra were truly certain, she wouldn’t ask for taxpayer support.”

Lest you think we’re being too harsh on GM, it’s not alone. Once-dominant GE’s shares have plunged nearly 60% this year. There’s a common theme here: GE’s long slide from grace began when Jeffrey Immelt, GE’s former CEO, began spending more time at the Obama White House than running his company.

There’s a lesson in this for other companies, summed up in Instapundit Glenn Reynolds’ catchphrase: “Get woke, go broke.” Immelt already learned that bitter lesson; Barra is learning it now.

Sadly, GM is just another once-great American company that went wrong trying please a government master, and not the customer. We can only hope other companies will learn from GM’s error.

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