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Is Government Motors Inevitable?

With General Motors and Chrysler both facing a critical juncture in their businesses, the idea that a government run automotive company could emerge is a very real possibility. After all, both automakers now owe billions of dollars of taxpayer monies, effectively making the federal government a major stakeholder in each company.

Some have called this investment “Government Motors” to describe what is becoming very apparent: neither company can survive without federal intervention and, with additional funds still needed, we could see the emergence of a government run car company.

But, what would that car company look like? Much is open to speculation but given that the Obama administration has abandoned any idea of a one-person “car czar” to make important decisions about the future of both companies and that a team of advisors will tackle the future of the entire American car industry, there are several scenarios which have a chance of playing out. Please read on for a glimpse of what the future holds for GM, Chrysler and Ford.

More Layoffs – General Motors and Chrysler have laid off tens of thousands of workers and there is every reason to believe that tens of thousands of more workers will end up leaving throughout this year. Expect both companies to offer retirement incentives to thousands of white collar workers and look for each company to thin its executive ranks accordingly. Big pay and bonuses will become a thing of the past too.

Plant Closings – Excess production capacity will be dealt with expeditiously. Any plant that is old and underutilized will be shut down. Look for the feds to take a hard look at plants in Canada and Mexico which supply cars for the US market for closing consideration as well. These closings will have to be held delicately in a bid to preserve trade alliances.

Brand Dissolution – General Motors is very likely to see several of its brands dissolved. While there has been talk that various Russian or Chinese companies are interested in Hummer, in all likelihood this specialty brand will be shut down. Look for Saturn and Saab to also go away with GM holding onto Cadillac, Buick, GMC and Chevrolet. Pontiac is vulnerable but GM could make a case to keep the brand alive given that these cars are typically sold at combined GMC-Buick-Pontiac dealerships. Chrysler can probably keep all three brands alive, especially if Fiat comes to the rescue with cars of its own.

Radical Merger – Should the fortunes of General Motors or Chrysler become even worse off and if Ford should find that it will need billions from the federal government too, the Obama administration could force all three companies to merge in a bid to save what remains. Should that happen, additional jobs, plants, and brands will be vulnerable as the federal government exerts an increasingly larger amount of control over the combined entity.

As I said, the previously mentioned points are speculation on my part, but I believe elements of each will be included in the coming months. A lot depends on the global economy which, if it continues in a sustained downturn, could see a radical transformation in the way that many businesses are managed, besides the auto industry.

About the Author

Matthew C. Keegan is a freelance writer who resides in North Carolina. Matt is a contributing writer for Andy’s Auto Sport an aftermarket supplier of quality parts including Audi 100 wheels and Audi 100 rims.

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