Written by Frank Li
Here are two recent news stories about GM:
- GM to halt production at 5 plants in U.S. and Canada, cutting up to 14K jobs.
- Trump threatens to cut GM subsidies in retaliation for U.S. job cuts.
So, there is no better time than now to seriously talk about America’s crony capitalism in general, GM specifically …
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1. What is GM?
General Motors Company,[1] commonly referred to as General Motors (GM), is an American multinational corporation headquartered in Detroit that designs, manufactures, markets, and distributes vehicles and vehicle parts, and sells financial services, with global headquarters in Detroit’s Renaissance Center. It was originally founded by William C. Duranton September 16, 1908 as a holding company. The company is the largest American automobile manufacturer, and one of the world’s largest.[7] As of 2018, General Motors is ranked #10 on the Fortune 500 rankings of the largest United States corporations by total revenue.[8]
General Motors manufactures vehicles in 37 countries; its core automobile brands include Chevrolet, Buick, GMC, and Cadillac. It also owns or holds controlling interest in foreign brands such as Holden, Wuling, Baojun, and Jiefang.[9] Annual worldwide sales volume reached a milestone of 10 million vehicles in 2016.[10][11][12]
2. GM and America
The image below is worth more than 1,000 words.
3. GM’s restructuring
Below is an excerpt from GM’s Big Restructuring Is the Right Move.
Earlier this year, Ford Motor (NYSE: F) announced big changes to its North American product portfolio. Ford plans to discontinue all of its traditional passenger car models Opens a New Window. in its home market over the next couple of years, reacting to a massive shift in consumer tastes toward crossovers, SUVs, and trucks.
On Monday, General Motors (NYSE: GM) announced a similarly aggressive restructuring plan. GM plans to idle numerous factories and make deep cuts to its salaried workforce. It will also discontinue a handful of key products in the North American market. Making these tough decisions now will dramatically improve free cash flow over the next two years while ensuring that the company can remain profitable through a recession.
End of story?
No!
Why not?
This leads to a profound issue …
4. GM and capitalism
Two basic questions:
- GM, as a company, is to make money, right?
- GM, as an independent company, is free to operate, right?
No and no!
Why not?
GM is not really an independent company per se!
5. GM and America’s crony capitalism
For big American companies like GM, crony capitalism works as follows:
- Reward: Profit? Keep it private (i.e. the shareholders)!
- Risk: Trouble? Count on the public for a bailout (Auto Industry Bailout)!
What an irreconcilable contradiction to “free market” (What is ‘Free Market’, Anyway?) and “free trade” (Free Trade and The U.S.)!
6. Discussion
America is a very confused country, starting from its very beginning (The American Revolution is a Lie!). This new GM thing is just yet another example of confusion!
In good times, American confusion is less a problem. In tough times like today, when many Americans seem to be yearning for a king, if not a living God (Is Donald Trump a God?), the confusion becomes a much bigger problem, even totally polarizing!
Specifically, in a hugely polarized country like America, the folks tend to see everything in black or white, with nothing in between, while the real world is mostly grey. Two big examples:
- A free market economy vs. a planned economy: Many Americans favor the former exclusively, while the real world requires both, with the challenge being to balance between the two. For more, read: What is Globalism, Anyway?
- Socialism vs. capitalism: Many Americans argue for one without the other, while the real world requires both, with the challenge being to balance between the two. For more, read: What is China, Anyway?
For an accurate diagnosis of America, as well as the best solution, read my last book: American Democracy – Why is it failing & how to fix it?
7. Closing
Leave GM alone, and stop all the subsidies to GM!
If not, we may soon need another bailout for the auto industry! Any doubt? Hot news off the wire: Morgan Stanley Predicts Ford to Cut 25,000 Jobs in Overhaul.
More profoundly, reform our political system, as I have suggested (American Democracy – Why is it failing & how to fix it?), or become a fiddle, second to China!
Now, please sit back and enjoy the short video below.
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