General Motors: An American Zombie

President Trump turned to Twitter to comment on the historic Lordstown, Ohio, plant. General Motors operated the Lordstown plant for 52 years until the company opted to shut it down in March. The decision cost 1,500 jobs and landed GM in a lawsuit against the United Auto Workers.

President Trump urged GM to either sell the plant or reopen it. But, there is not much hope of either happening soon. GM is a zombie. It was destined to disappoint the moment its management went begging on Capitol Hill in 2008. The reorganization was a political decision, not a financial one. GM survived the last financial crisis because of TARP bailouts. That GM required taxpayer funds means nobody in the private sector — who would have skin in the game — thought it made sense to preserve GM as it now stands.

Maybe the Obama administration exercised the sort of foresight that only wise politicians possess. But, it was not their money they ponied up. They had no skin in the game and no real incentive to judge the economic merits of GM’s reorganization plan. GM ultimately sold a few of its subsidiaries and renegotiated some of its obligations to stakeholders. But, there was no “rebirth” of GM.

GM’s failure in 2008 was partly due to labor disputes. The company is now embroiled in a lawsuit against the United Auto Workers. Things have not changed for GM.