In February 2007, I wrote in this space about how even a modest downturn in new car sales would almost certainly lead to a massive government intervention in the auto industry, and that the resulting mismanagement would inevitably lead to even more financial problems for car makers and taxpayers alike.
Two years and change later, we’re $10 billion and counting into GM and Chrysler. The signs of typical government gross mismanagement are being painted as we speak.
If you think this is a good thing, I want you to take some time and think about the Canadian Wheat Board for a few minutes.
For now, forget the fact the Canadian government elected to treat a legitimate political protest of wheat board policy as a criminal action, and punished those protesters far more harshly than it has seen fit for a violent gang that is engaged in an ongoing political protest in Ontario.
The reason you need to think about the CWB when you consider the implications of using $14.5 billion of your money to “save” GM and Chrysler is all about grain prices.
You see, the federal government knows less about building cars and selling grain than I do. And I don’t know much.
Here’s what I do know: If you’re being forced to sell your grain via the CWB, you’re being ripped off.
Imagine for a minute that you managed 50 bushels to the acre of spring wheat on a quarter section last fall, and you sold all 8,000 bushels on the lowest day of the open market sometime between August and now. If so, you would have beat the CWB price by $.12 per bushel, netting an extra $960 for your efforts.
At the average open market price over the same time period, you’d be some $9,400 ahead of the wheat board with the added bonus of having your cash in hand, as opposed to having to wait several months for the board to mail you a cheque.
Right now, a farmer with 1,000 bushels (about a truckload) of wheat to sell, and the willingness to sneak it across the border into North Dakota, could get some $3,000 more for that load of wheat than if he sold it to the wheat board.
These same people just got into the car business. Big time.
The point is not so much that these people have essentially nationalized a big chunk of the auto industry, as it is they have completely absolved the unions of their role in the auto industry’s woes and sent mixed messages to managers for theirs.
At GM, gross mismanagement was instrumental in creating GM’s issues over the last few years. Yet, the Obama administration simply fired the very man who was probably vital to GM’s revival.
At Chrysler, Daimler Benz took the hottest car company in the world, bled billions of dollars from its cash reserves, and ran it into the ground in 10 years.
Can Chrysler be saved? Maybe, maybe not.
Missing from the normal finger pointing, though, is the role of government in creating problems in the car industry.
Billions of dollars per year of shareholder money gets squandered on regulatory excesses, and that’s where the real problem begins.
As I mentioned a few years back, a federally mandated airbag standard that was deeply flawed, has cost the lives of hundreds, and maybe thousands, of female drivers since the early 1990s. There has been no accounting for this. No bureaucrat in Washington or Ottawa has taken responsibility for this gross misapplication of regulatory might.
Now, if you think that the feds are going to sit back and let these two car companies try to figure out which kinds of cars might sell profitably in the next few years, I’ll sell you some old UFO parts I found. Of course, that leads us to the real problem.
Ottawa and Washington will meddle with product planning, as sure as the sun will rise tomorrow.
When the federally mandated products hit the showrooms and don’t sell, whose fault is that? Who takes responsibility for the losses when Government Motors builds politically correct cars and trucks that languish on dealer lots and won’t sell at any price?
Who is responsible when the companies go bankrupt again? Who pays?
You see, the one hard rule of socialism is that you eventually run out of other people’s money.
Bill Greenwood is a local freelance columnist.