Decades of corrupt collusion with the foreign-aid industry have left General Motors, once the colossus of the auto industry, facing extinction.
by William Norman Grigg
The New American - Cover Story - May 16, 2005 - (Vol. 21, No. 10)
General Motors is not merely the world's largest car manufacturer; it is an institutional icon of American capitalism, a pillar of our manufacturing economy, and for decades has been among the bluest of blue-chip investments. As the industry leader in one of America's signature industries, GM is regarded by economists, sociologists, and pundits as a bellwether of our nation's economic fortunes.
Thus it's a matter of no small concern that GM, the once-unassailable colossus of the auto industry, appears destined either for extinction or a taxpayer-funded bailout.
On April 18, GM announced first quarter losses of $1.1 billion. That dismal report came two weeks after Moody's Investor's Service cut GM's debt rating to what a Reuters report called "a step above junk status." The company is saddled with roughly $300 million in debt, and a descent into outright junk status would make it difficult - perhaps approaching impossible - for GM to borrow money as interest rates begin to increase.
“There seems to be no mechanism for a renewal of the company short of bankruptcy.” Commented Britain’s Supplier Business journal. A leveraged buy-out seems extremely unlikely at best, since GM’s pension and health care liabilities represent “a poison pill to would-be acquirers.”
Over the past several years, GM has capitalized on the Federal Reserve’s efforts to hold down interest rates by avidly promoting zero-interest, no money-down offers to car buyers. And also thanks to the Fed’s loose money and credit policy, GM’s financial subsidiary, General Motors Acceptance Corp (GMAC), has become the company’s most profitable concern.
“If GMAC were an independent company, it would be the eighth-largest U.S. bank,” observed a March 23, 2004 Bloomberg News report. While GM’s auto sales have remained stagnant, “it’s the financial unit GMAC that [has been] most crucial to General Motors’ performance.” In 2003, “the worlds No. 1 automaker earned far more profit - $2.8 billion, or 87.5% of the $3.2 billion total - lending money, writing mortgages and selling securities than it did selling its cars and trucks…Now, GMAC’s ability to prop up its parent could be jeopardized because borrowing costs will rise ‘at some point,’ says Federal Reserve Chairman Alan Greenspan.”
Since those words were published a year ago, “at some point” has arrived - with the expected results for GM’s financial arm. While GMAC remains the “only bright spot in GM’s portfolio,” commented the April 6 Cincinnati Enquirer, its profits “are quickly coming under pressure because of higher interest rates.” This means, once again, that GM will have to borrow money, at rapidly escalating interest rates, in order to finance car leases and purchases (as well as GMAC’s home mortgage loans.) However, customers who bought cars in recent years “will be paying lower interest rates until they turn in or sell their vehicles” - thereby creating another revenue shortfall for the company. Accordingly, it’s not surprising that GMAC, the conglomerate’s only profitable concern, has recently been rated two steps above junk bond status.
Many of GM’s problems stem from a bad business model in which a supposed automobile manufacturer has made seven times a much profit from lending money than it has from building and selling cars - a model based in large part on the engineered boom and bust cycles of the Fed’s own monetary machinations. GM’s decline has also been encouraged by a corrupt relationship with the federal government’s foreign aid bureaucracy, which has subsidized the company’s efforts to move production overseas - especially to Communist China and the former Soviet Union.
Beijing Motors? A press conference held at the Great Wall unveiled the Chinese-built General Motors Hy-wire, a fuel cell-powered automobile. GM began producing cars in China 20 years ago, and the Asian giant may soon emerge as the world’s leading auto manufacturer.
GM Vice President Troy Clarke posed in front of the Chinese-built Sequel automobile during a presentation in Shanghai.
. Yes, this topic (especially at this level) could be a sacred cow. And I might be tarred, feathered and run out of "The Cove" on a rail, for posting this, but I weighed in on this one to see if some brave souls would openly discuss this aspect or condemn it. BTW, What's a "Bubs"? 
