The “Looming Disaster” At GM

Is Toyota in a position to take it over?

Rumor has long been that Toyota will/may acquire the GM behemoth. That is unlikely to happen in any straight sort of business sense. Perhaps GM has two options for survival: a bailout by the Feds, which Leviathan likely couldn’t afford, or, an acquisition by a foreign company such as Toyota. But why would Toyota, with its masterful financial outlook and its vastly different culture, want to acquire an inefficient, union-laden abnormality with $300 billion in debt? It wouldn’t, unless of course, the acquisition was bankrolled by the US government, which would be far less costly than a total bailout. Bankruptcy is one way in which Big Guv could subsidize a merger/acquisition, but a dangerous move for an auto manufacturer that relies on brand loyalty.

FILED UNDER: Economics and Business, General, ,
Kate McMillan
About Kate McMillan
Kate McMillan is the proprietor of small dead animals, which has won numerous awards including Best Conservative Blog and Best Canadian Blog. She contributed nearly 300 pieces to OTB between November 2004 and June 2007. Follow her on Twitter @katewerk.

Comments

  1. If GM goes into bankruptcy and is able to shed some of its debt, I might then believe that Toyota would buy it. Of course, once the debts have been given a “haircut”, the managers will likely say “problem solved” and go back to business as usual.

  2. cathy says:

    It is probably best for the world to see GM go out of business. Americans simply do not value production. It is beneath them. They are too god to make anything. Why should an American manager deal with production? It is messy.

    Seriously, it is a great tragedy to see GM in the mess they are in. My suggestion is demanding senior management resign. How do they tell their family and friends that they have destroyed one of the greatest US companies? How will they tell their grand children that they led the demise of the US auto industry. How do they tell them that their stupidity, arrogance and greed blinded them form acting in a rational manner?

    A terrible tragedy is unfolding before us. Their only response is to blame others. Appalling!!!

  3. James Joyner says:

    Cathy: While GM’s current managers have made some poor decisions, much of the American auto companies’ problems comes from overly generous pension benefits and other deals they made with the United Auto Workers and other unions in the 1940s. They’ve boxed themselves into a corner and they haven’t figured out a way to come up with a new paradigm for labor relations.

  4. DC Loser says:

    While GM’s current managers have made some poor decisions, much of the American auto companies’ problems comes from overly generous pension benefits and other deals they made with the United Auto Workers and other unions in the 1940s. They’ve boxed themselves into a corner and they haven’t figured out a way to come up with a new paradigm for labor relations.

    James, I would argue that by agreeing to those union contracts were the epitome of bad management decisionmaking.

  5. bryan says:

    I would argue that GM’s inability to produce quality vehicles and sell them without giving away the store is the reason they are in the predicament they are in. “Overly generous pension benefits” don’t mean a damn if they don’t pay them (see United Airlines).

  6. Herb says:

    GM’s predicement can be summed up with two words.

    BAD MANAGEMENT