The federal government will soon be assuming ownership of both GM and Chrysler, leaving only Ford as the major American auto manufacturer in private hands. The question now is, how will the government run its companies? To make a profit, or to fulfill government policies? From The Washington Post:
In the new upside-down world of automobiles, the U.S. government will be the majority shareholder of both GM and Chrysler, giving rise to gibes that GM now stands for Government Motors.
“What is the role of the board of directors in this case?” said Maryann N. Keller, an independent auto analyst and author of a history of GM. “To operate in the economic best interests of this company? Or to operate it based on government policy, which may be in conflict with the profit motive? We’ve never had an entity like this, and we’re all going to watch it unfold.”
ad_icon
What’s good for the country might not be good for GM. Some difficult decisions could include whether to outsource manufacturing to countries such as China, South Korea or Canada where costs might be cheaper. GM has said it would buy components for electric car batteries from a South Korean company, though many U.S. firms are vying for that business.
President Obama has also urged car manufacturers to make fuel-efficient vehicles, but if oil prices stay low, demand for such vehicles could be weak. Last year, U.S. small-car sales held steady at 2.5 million, increasing market share to 19 percent as sales of big cars fell. “Small cars are a bit of a challenge for any carmaker in the U.S.,” said Itay Michaeli, an auto analyst at Citigroup. “They are entry-level cars and don’t command much premium. So it is difficult to make much money selling small cars without substantial volume and market share.”
Ad-Free & Subscriber Log-In