04 November 2009

Bad news for Opel, Bad news for Capitalism

Fresh off the resuscitation and flush with about $60 billion in someone else's money, GM is going into battle to prevent the purchase of it's European Opel division by a consortium including Magna, a Canada-based auto parts manufacturer.

This is very bad news for Opel, since of course it means that instead of new ownership and continued operations under the freely negotiated sale deal (crafted by purchaser, governments, and unions to minimize job losses), Opel will get more of the same old management that led to this problem in the first place, along with (presumably) much larger and non-negotiated cutbacks by the New Boss (as a wise man once sung, same as the Old Boss).

It's also bad news for capitalism. Under this system, ostensibly the system in place in North America, corporate failures like GM are supposed to be cut up and sold to new owners and managers who believe they can make a profit with those assets. Giving the owners taxpayer money to continue their losing strategies is anti-capitalist. When the government steps in to bail them out it is the worst kind of corporate welfare, targeted at people who by definition do not deserve to remain in charge. They are necessarily failures from the capitalist perspective.

But armed with money they didn't earn or deserve, GM (and Goldman, and Citi...) get to act as if they never messed everything up, as if their management is still good, as if their ownership is still justified, as if their coffers are overflowing with earnings not handouts, to be used to pursue their same old strategies, which are now cast as success instead of failure.

We had our chance to force them to change, and instead we paid them to get back on that horse and trample us down again. We have no one to blame but ourselves... other than the managers of GM.



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