General Motors Acceptance Corp (GMAC) has now applied to receive bailout money as, supposedly, a bank. But the mortgage crisis was about real banks that had loaned money, perhaps unwisely, on "real property", homes and land. With some exceptions, GMAC in fact financed gas-guzzlers for poor credit risks at inflated prices. While real estate has an enduring value, an auto is in general an asset of declining value. The past bad loans that were made by dealers desperate to stay in business have little or no collateral. In the case of GMAC, it's not a bailout; it's pure corporate welfare with no discernable return. What led GMAC to this sad state of abject failure?

More generally, the bigger part of GM's failure has been its "war against its own workers", and its continuing "war against its own customers". GM has been shedding the very workforce that made it great and has deserted and even arrested its own customers.

GM's campaign to reduce its US workforce involved outsourcing its operations. Outsourcing is the transmission of good, skilled, well-paid US jobs to countries that don't have health care, worker safety, retirement, pollution or other laws. Behind every cheap Chinese product is a tale of misery and woe, a trail of severed limbs, polluted ground, toxic waste, early death, child and slave labor. GM's plan has been to move as many jobs as it can to places where it can avoid US labor and environmental laws. The loss of US jobs ironically contributes to the inability of US buyers to afford GM's products. Low prices, it turns out, don't have enough benefits to compensate for lost jobs.

In order to reduce the number of UAW workers, GM resorted to "mandatory overtime", forcing fewer UAW workers to work more hours. It's true that this piled up the labor costs, but it also meant GM didn't have to hire new union workers. GM management thought this was a good bargain, since wages in any case are such a small part of the cost of building a car, less than 5%.

While GM kept its white-collar workforce inviolate, it handed out early retirement packages to lower the number of wage earners. The result, which perhaps GM didn't anticipate, is that only 77,000 line workers are now supporting over 350,000 retirees. This level of active worker to retiree is unsustainable; the normal ratio, one in four, would be just the opposite, 350,000 active workers supporting 77,000 retirees.

Retirement and health care plans that GM once maintained in a healthy and vital state are now strained, not just by rising costs, but by this huge army of early retirees created as part of GM's plan to reduce union members. GM would like the government to take over these plans and fulfill commitments that it is unable to meet, with some justice. After all, Japan and other civilized countries have universal health-care and retirement.

Perhaps the most important part of GM's failed business plan was the huge, inefficient dealer network. GM dealers sell fewer cars per square foot than Toyota, require a larger profit, and depend on cheap financing. Each GM dealer must purchase the vehicle when it leaves the factory; but GM's financing arm, GMAC, steps up with cheap "floor money" financing to pay for huge numbers of currently unsaleable SUVs on GM lots.

In better times, GMAC became the lender of last as well as first resort, providing "zero percent" financing to poor credit risks for purchase of overpriced gas-guzzling GM vehicles. Because of GM's formerly excellent credit rating and internal financial strength, GMAC could afford to borrow money very cheaply and loan it out for GM products.

This worked when GM was stronger, before it reduced its US workforce and financial clout.

But now, GM is on the hook for billions of loans backed by depreciating hordes of unsaleable gas-guzzlers.  Part of the condition of the loan is that GM's ownership stake in GMAC be reduced; in reality, since GMAC is a liability, not an asset, this takes away a negative from GM and allows it to avoid huge bond indebtedness that it incurred by its bad business practices.

GM should not be allowed to step away from GMAC's losses.

Remember all those ads, "$5000 rebate" and "no interest loans", you should remember the sales pitch "sure, it's a gas-guzzler, but you can buy a lot of gasoline with $5000...".

This meant GM was selling vehicles that were profligate with gas by discounting and giving away the money that they should have had to keep them solvent.

Money that flowed from GMAC to Big Oil.

Money that GM didn't make, but Chevron did make.

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