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

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    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.
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"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.

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.

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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.

Romm singles out GM for particular scorn. The company once held the technological lead in electric drivetrains, but instead of taking advantage of this lead, GM opted to pour millions of dollars into lobbying efforts against stricter fuel economy standards so that it could continue to sell its behemoth trucks and SUVs.

Now Toyota and Honda have a 10-year head start on hybrid drivetrains, and the companies say that the costs of producing hybrids could drop by two-thirds over the next decade, but of course only for companies that have the experience making them.

Had GM's shortsighted executives been at the helm of a much smaller company, then all of this would have simply been sad, not catastrophic.

But GM is the world's second-largest automaker (it was overtaken by Toyota this year). When it seeks to block Congress from raising gas mileage standards, when it keeps churning out gas-guzzling suburban tanks instead of innovating safe, fuel-efficient vehicles, and when its vice chairman tells reporters – this year – that Toyota's hybrids "make no economic sense" (and then casually adds that the scientific basis of global warming is "a total crock"), these actions have far-reaching consequences. They influence what kinds of vehicles hundreds of millions of people drive, and what kind of air billions of people breathe.

Sure, all of the world's automakers are suffering to some degree. It's very hard to get a car loan these days. But not all are teetering on the brink of bankruptcy like GM. On Tuesday, as Congress debated the auto industry's request for a $25 billion bailout, Honda opened a new plant in Greensburg, Ind., to the cheers of more than a thousand US workers.

If GM goes under, perhaps Japanese, Korean, and German automakers could step in and make up for the lost jobs. But I bet I'm not the only one who would be demoralized by seeing such a large piece of America's homegrown auto industry transferred to foreign ownership, benevolent as it may be.

Wouldn't you rather see a flourishing of smaller US automakers like Tesla, Fisker, Aptera, and Commuter Cars? Companies that can take bold risks without threatening to bring down the entire economy? With the right incentives, these companies, and many like them, could determine transportation for the 21st century, just like Ford and General Motors determined it for the 20th.

And if we can't get smaller car companies, can we at least get smaller cars?

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