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Jonathan A. Schein

Jonathan A. Schein

Posted April 15, 2009 | 01:44 PM (EST)

Is What is Good for General Motors Actually Good for America?


The President has announced that the United States government is purchasing 17,600 fuel-efficient and hybrid vehicles to add to its fleet. The total amount of this purchase, approximately $285 million, will be drawn from stimulus funds; the cars will be operated in part by the General Services Administration. Although the expenditure barely scratches the surface of the $17.4 billion in loans to General Motors and Chrysler, it is still a rather healthy amount--most likely the largest single purchase of automobiles in the nation's history.

From a strictly "green" point of view, this is a terrific gesture. The new fleet is expected to decrease fuel consumption by 1.3 million gallons and prevent more than 26 million pounds of carbon dioxide from entering the atmosphere. This is a nice annual environmental return on the investment.

However, from a strictly business point of view, is this a good deal? Detroit's woes are not simply due to poor marketing and a poor economy. This isn't exactly breaking news, but America's auto industry has been declining for more than thirty years due to some rather lousy management and the mediocre quality of its products. There is no need to go into every aspect of this because it is well documented. It's been so bad that the president of the United States fired the chairman of General Motors. You can't get a worse vote of no confidence than that. So the real question is why the president would authorize the purchase of automobiles from a company when he doesn't even believe in its management's abilities. If the products were good--and selling--then these companies wouldn't be on the brink at this point.

There is another issue of governmental responsibility involved, and it relates to the federal transparency that the Obama administration has touted vociferously. These types of transactions are now supposed to be fully vetted. Did this purchase go out to bid to several car manufacturers? It appears not.

What is the message here? Put out a mediocre car, close in on bankruptcy, and then the federal government will buy your products--without even asking you to compete in a bidding process with other manufacturers. Does this mean that every federal employee must now get their mortgages through Bank of America and Citigroup? President Obama's verbal message has been that we need to grow up and accept where we are so we can find our way out of this economic situation. The act of buying all these vehicles with taxpayer dollars sends a different message, one that doesn't suggest that we're actually on the road to responsibility.

Jonathan A. Schein is the publisher of MetroGreenBusiness.com and GreenBusinessCareers.com