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Obama’s GM Decision Will Destroy Wealth

|Includes: General Motors Company (GM)

“GM burns through $10 billion” reads the headline. Surprising no one, “Government Motors” continues to destroy wealth at a record pace.

Zombie companies like GM stink up the marketplace like a dead skunk on a Georgia country road. Bury the corpse we say. Otherwise the same corrupt, failed policies continue. Legally obligated expenses like inflated bonuses and cushy retirement packages, big brand advertising campaigns (such as the company name on a sports stadiums), union costs, health insurance, and over-capacity of office space, all must be paid… and the bill is being handed to the US taxpayer!

Then there are the lost opportunities for innovators and entrepreneurs who could pick up the pieces and create real value. Instead, the birth of new technologies and products is put on hold.

And consider the long term effects of retaliatory bailout policies from foreign governments. They are compelled to prop-up their national industries to stay competitive with free-money-financing from the US government. That’s the way it is with government intervention in the marketplace. The effects are so complicated and far-reaching the average bureaucrat couldn’t possibly fathom it.

GM has spent around $1 million a month on lobbying Washington over the last few years. This includes the first quarter 2009. In return, the company got $13.4 billion in bailout money. That’s a helluva of ROI. But it stinks to high heaven.

Under the restructuring plan GM detailed last month, government loans would convert to stock in the automaker, making Uncle Sam the majority owner. GM also owes the United Auto Workers Union $10 billion for a trust fund for retiree healthcare. If that were converted to stock the union would get a 39 percent stake in the restructured company.

With these two business geniuses as the new owners, the UAW and the US government, we’re sure the new restructured GM will be a great success… a big shining tribute to bailout culture.\

Disclosure: No positons