Monday, March 30, 2009

Mr. Hatfield meet Mr. Obama?

The US administration seems to be about to make some of the same mistakes every Tin Pot Dictator, seems to make. By this I mean trying to control major industries directly. The Obama administration has just “ordered” the resignation of GM’s CEO. While I’m not a supporter of auto industry bailouts, this is very dangerous.

There’s a very simple reason for my views. Governments have done a piss poor job of running automakers. Consider the Lada, the disaster forced on Soviet consumers who had the patience to wait for one. Strike one for government controlled auto makers. I know the US isn’t the Soviet Union and Obama isn’t running the Kremlin, I have a couple of other examples.

Next up, the Yugo! Any child of the 80’s can remember that running joke made in communist Yugoslavia. Yugo was launched in the US in 1985 to huge consumer demand. 1500 cars were delivered, but initial orders were for roughly 5 times that amount. Yet but 1989, Yugo America was bankrupt and no cars were imported to the US. Strike two. The remarkable about the introduction of the Yugo to the US, is the link between this and my next grotesque failure.

My last example for today will be familiar to fans for flawed sports cars and Maritime government screw-ups. I’m referring to the New Brunswick manufactured Bricklin, named after Malcolm Bricklin, the same man that brought the Yugo to the US market. This plan to government back auto manufacture in NB was the brain child of Mr. Richard Hatfield. While many still love the Bricklin (a nifty looking sports car with some neat safety features) it was a total failure in sales. The company went into receivership owing the NB government about $23 million dollars. Again a government tried directly invest in an automaker and failed miserably. Strike three.

There are some success stories, of automakers receiving help from governments. Chrysler received help from the US in 1980. Some of the Asian automakers have received a variety of supports from their respective governments. To the best of my knowledge none of them have looked like this.

My suggestion for Mr. Obama is to either prop up GM and keep your mitts off or to let it fail. Direct intervention of this sort isn’t likely to end well for GM or the US.


Michael said...

Wasn't the Bricklin a stainless steel car built on the DeLorean model?

Also, are you posting this blog from an alternate universe in which Chrysler is somehow not a failure?

economistatlarge said...

The bricklin design did draw some elements from the delorean, but much worse. The gull wing doors are reported to have weighed 100 lbs each.

As for Chrysler. The bail out in 1980 wasn't a disaster. The government was paid back and Chrysler was reasonably success for while, then they got stupid again.