Ford

General Motors' stock hit an all-time low today of $31 and change. That's right, "all-time." Today's GM is a new company that did not exist two years ago. In an effort to shed liabilities and force sacrifices from creditors while protecting the UAW, GM emerged from bankruptcy as a totally new company. The media inaccurately reported that GM had its best earnings since 1999, but it has not given a clear picture of the situation at GM. Biased media coverage is a story in itself, but let's look at why GM has not done as well as the pundits predicted, and why it is likely to continue to struggle.

Ford stock is taking a hit today after reporting earnings that missed analysts' estimates. European losses accounted for much of the earnings disappointment. General Motors is also known to have major issues with its European brand, Opel. GM recently assigned Alix Partners to oversee their European unit's "turnaround" plan. Alix Partners is a bankruptcy consulting firm that was hired by GM prior to their own bankruptcy filing. This is just one of many risk factors that have been glossed over by media coverage.

The auto bailout is a massive failure. It did not save jobs. It is a fallacy to claim that more jobs exist in an economy because particular firms have been saved from going out of business. Automobile jobs exist in the United State because of consumer demand for automobiles. Bailing out car companies does not increase demand, nor will it increase the number of cars built and sold.

All the auto bailout did was shift jobs from one set of firms to others. Because GM and Chrysler are poorly managed, and are joined at the hip with the United Auto Workers, they will not produce cars as efficiently as competitors. In the long run, the bailout will cost American jobs.

Even the United Auto Workers knows that sometimes it's necessary to bite the bullet to come out ahead in the long term. On Monday, February 23, the UAW and the Ford Motor Co. announced they had hammered out the details of a new agreement to preserve retiree health care benefits without jeopardizing the company's existence. The pact would have Ford to pay the union up to half its liabilities in the form of company stock. Given precipitous declines in auto industry stock prices over the last year, it's a sensible way to avoid disaster.