The GM Investment Won’t Work

Posted: June 1, 2009 in Technology and Business
This is a great time to be the investor of last resort… i.e., we taxpayers.
 
We’re loaning money to some great businesses and actually getting (1) our money back, and (2) ownership in the form of inexpensive warrants.
 
Which is why our investment in GM stands in such stark contrast:  Just because the U.S. taxpayer is the investor of last resort… doesn’t mean we have to be the investor of last resort. 
 
It was clear as daylight that we should have passed on "loaning" (a.k.a. wasting) the auto companies that $17 billion last December… that the auto makers didn’t need a bail-out… they needed tough love
 
… by the way, the same kind of tough love that all businesses around the world had to go through over the last nine months.
 
I didn’t speak to a single person — and I speak to people from all walks of life — that thought bailing out the auto companies was a good idea.
 
It was so un-Obama-like for Mr. Consensus himself to have missed this one.
 
Which kills me to see him make the same mistake twice.
 
The GM investment we the taxpayers made today won’t work.  Chopping a business down to size is excruciatingly difficult work.  Truth be told, the only way a person makes really hard, really necessary cuts is when they have no choice.
 
Think: "We have to cut off the entire leg… or else the patient will die… tomorrow."
 
No, there are no "cut off the leg" decisions when you can go back to a sugar daddy investor like the U.S. government — driven by politicians who will fight tooth & nail to keep the aging, inefficient plant in their district open.
 
Don’t believe me?  This is the second time GM has been back to the well in less than five months!
 
Nothing would please me more than to be wrong about this one.  But, can anyone say good money after bad?
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