Saturday, May 23, 2009

GM - Throwing Good Money after Bad

GM has borrowed another $4 billion from the U.S. government as it prepares for a possible bankruptcy filing.  It just amazes me the amount of money we keep throwing at this problem in the hopes that this will someday be a successful company.  In a world where we are throwing trillions of dollars around, $4 billion might not seem like very much money but this is actually a ridiculous sum.

To put this whole thing in context, keep in mind that this now brings the total that the U.S. government has given to GM to a staggering $20 billion.  Do you know how many global companies have a market capitalization over $20 billion?  Just take a guess.  The number is about 250 companies in the entire world.

$20 billion is about the size of a Costco and a Sony.  It is bigger than well known companies like Dell, Nike, News Corp, and Best Buy.  The U.S. government could have bought any of these companies with the stake that it lent to GM.  Now I know people will argue that GM allows people to keep their jobs and keeps communities open and blah blah blah.  But wouldn't it be smarter to invest this money in companies that actually have a chance of succeeding?  Wouldn't it be better to invest this money at retraining these people for jobs of the future rather than giving them false hope that we can somehow save the American auto industry?  Heck, it would be a better idea to give money to new and innovative companies like Tesla Motors than it would be to keep throwing money at a dying company like GM.

Just one more reason I am certain I never want government deciding where money and capital should flow to.

1 comment:

  1. I think we are behind the curve on Tesla Motors... Daimler AG just invested in them.