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Is General Motors too big to fail, or just too big?

How did we become so dependent on a single corporation?

By Blogger for The Christian Science Monitor / November 19, 2008

A line of Hummers for sale Los Gatos, Calif., in 2004. Dealers say the three-ton General Motors vehicles average 8 to 10 miles per gallon.

AP Photo / Paul Sakuma / FILE


"What's good for General Motors," goes the old saying, "is good for the country." If that's true, then so is the inverse: If the 100-year-old automaker sinks, it will bring a substantial portion of the US economy down with it.

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As Congress debates an industry bailout, dire predictions are echoing through the Capitol: A GM collapse would almost instantly add tens of thousands of Americans to the unemployment rolls. Auto dealerships across the country would be at risk. A host of suppliers – from aluminum smelters to vinyl extruders to computer-chip etchers – would lose a key customer. According to one leading economist, a GM bankruptcy could send the unemployment rate as high as 9.5 percent, up from a year high of 6.5 percent, and produce a severe recession.

And that's just in the United States, one of the 35 countries that manufactures GM cars and trucks. The company's woes threaten livelihoods of employees around the globe, from Ecuador to Poland to Kenya to Uzbekistan. The potential fallout is so great that even Japan's finance minister says he supports US government intervention to prop up the ailing company.

All of this raises troubling questions: How did we become so dependent on a single corporation?

If we were going to stake the world's industrial vitality on the business acumen of a handful of executives in Detroit, we could have at least picked some better executives. As former Clinton energy adviser Joseph Romm points out in Salon, the company has spent the past quarter century pursuing a business plan with no future. He writes:

When I was at the Department of Energy in the 1990s, we partnered with G.M., Ford and Chrysler to speed the technological development of hybrid gasoline-electric cars, given that increased fuel efficiency and advanced hybrids vehicles were (and remain) clearly the best hope for cutting vehicle greenhouse gas emissions and ending our oil addiction. This partnership was an informal deal between the Clinton administration and the car companies. We did not pursue fuel economy standards and the car companies promised to develop a triple-efficiency car (80 miles per gallon) by 2004.
In one of the major blunders in automotive history, G.M. and Ford and [Chrysler] walked away from hybrids as soon as they could when the Bush administration came in -- and after taxpayers had spent over $1 billion on the program. Ironically, the main result of our government-industry partnership (which had excluded foreign automakers) was to motivate the Japanese car companies to develop and introduce their own hybrids.

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