Obama's Own Report on GM Says Plan to Build Non-Gas-Burning Car Would Not Save Company

April 1, 2009 - 7:29 PM
A White House assessment of General Motors says the company's restructuring plan will not lead to a viable enterprise, in part because the beleaguered auto giant's proposal to rely more heavily on advanced, enviro-friendly cars is not commercially workable.

Chevrolet Volt at Detroit Auto Show, 2009 (AP Photo)

(CNSNews.com) – The report on General Motors released by the White House says the company’s restructuring plan will not lead to a stronger company, in part because the beleaguered auto giant’s proposal to rely more heavily on advanced, fuel-efficient cars is not commercially viable.
 
The report’s findings stand in stark contrast with the President’s chief goal for America’s auto industry: leading the world in green car production.
 
“I am absolutely committed to working with Congress and the auto companies to meet one goal:  The United States of America will lead the world in building the next generation of clean cars,” Obama declared Monday at a press conference marking the report’s release.
 
The GM portion of the report, authored by the President’s Auto Task Force, finds that GM’s restructuring plan is not viable because it is based on economic assumptions that leave too little room for error, should any of the company’s ideas fail.
 
“In the end, GM’s plan is based on a number of assumptions that will be very challenging to meet,” the report finds, adding “after substantial effort and review, the President’s Designee has concluded that the GM plan, in its current form, is not viable and will need to be restructured substantially.”
 
Among the assumptions the report finds unrealistic is GM’s plan to place greater emphasis on advanced, ultra-fuel efficient vehicles such as its upcoming Chevrolet Volt, the all-electric car that the report found will not be commercially viable.
 
“While the Chevy Volt holds promise, it will likely be too expensive to be commercially successful,” the report said. “It is currently projected to be much more expensive than its gasoline-fueled counterparts and will likely need substantial reductions in manufacturing costs in order to become commercially viable.”
 
In fact, the report found that even if GM can successfully make and sell green cars, it will still not lead to a viable company because it will not be able to make enough money to weather future economic slowdowns.
 
“Even if the projected plan is achieved, the cash flow forecast is quite modest, leaving the company little margin for error in what will be a very difficult turnaround.”
 
Another problem the report found was that GM’s current fleet would almost certainly be hindered by any increase in the federal Corporate Average Fuel Economy (CAFÉ) standards.
 
“GM’s product portfolio is more vulnerable to CAFÉ standard increases than the portfolios of many of its competitors,” the report reads. “Many of its products fail to meet the minimum threshold on fuel economy and rank in the bottom quartile of fuel economy achievement.”
 
CAFÉ standards are set by Congress and were last raised in 2007, when Congress ordered that they rise from the current 27.5 miles per gallon to 35 miles per gallon in 2020.
 
While the report cites many well-known causes of GM’s financial woes – such as poorly designed products, shrinking market share, and a bloated brand portfolio – it does not mention GM’s crushing labor costs.
 
As CNSNews.com has previously reported, hourly workers at GM made an average of $73.26 per hour, almost $30 more per hour than autoworkers make at non-union plants. In fact, modifications to labor contracts are one of the conditions GM was required to meet under the original terms of its December 31, 2008 bailout.
 
The report acknowledges that GM has failed to successfully renegotiate its labor contracts but strangely does not cite that fact as a reason that GM’s plan is not viable, despite that fact that it was one of the original requirements of a viable plan.
 
Labor costs are also left out of the administration’s recommendations for returning GM to profitability. The four areas the government will focus on are: sustainable profitability, healthy balance sheets, operational restructuring, and technology leadership (green cars).