Wednesday, December 14, 2005

Will Toyota Take Over GM?

Things must be getting chilly in Hades because there is talk in some surprising quarters of the Blogosphere that Toyota may be considering a buyout or takeover of ailing General Motors. Karen DeCoster at the Ludwig Von Mises Institute blog lays out the situation:

"Rumor has long been that Toyota will/may acquire the GM behemoth. That is unlikely to happen in any straight sort of business sense. Perhaps GM has two options for survival: a bailout by the Feds, which Leviathan likely couldn't afford, or, an acquisition by a foreign company such as Toyota.
"But why would Toyota, with its masterful financial outlook and its vastly different culture, want to acquire an inefficient, union-laden abnormality with $300 billion in debt? It wouldn't, unless of course, the acquisition was bankrolled by the US government, which would be far less costly than a total bailout.
"Bankruptcy is one way in which Big Guv could subsidize a merger/acquisition, but a dangerous move for an auto manufacturer that relies on brand loyalty."

DeCoster's comments drew a number of rather interesting comments. Check them out here. If nothing else, her post and the comments it inspired demonstrates that the Toyota/GM topic is generating serious commentary among economically literate people on the Right, where it would not be expected.

What struck me about the DeCoster analysis was less its substance than where it appeared. The Mises Institute is devoted to the application of the economic principles and perspectives of the famous Austrian economist. These folks are traditionalists and generally associated with the conservative wing of American politics.

Heretofore, much of the speculation and commentary regarding Toyota and GM was found on the other side of the political spectrum among folks such as New York Times columnist Tom Friedman, who thinks (requires free registration) the environment would be better off if the Japanese firm took over the General.

Peter Brown thoroughly dissassembled Friedman's take while noting that "his argument is a pure expression of anti-American, pro-Anybody Else nonsense. It's a romantic fantasy that 'those others' are on the side of the angels, while our guys are a bunch of dunderheads."

There has also been talk of a Renault take-over or "alliance" with GM, or perhaps Ford.

Here at Tapscott Behind the Wheel, I continue to think GM will avoid bankruptcy (or takeover) for the reasons described here. That doesn't preclude the possibility that one or more of the plants GM is closing won't end up being bought by Toyota or, more likely, another foreign company looking for an opportunity to enhance its North American production capability.

But for GM the process of working out of its current predicament is going to be painful, like nothing the giant corporation has before experienced and getting back to health will require multiple major surgeries to remove foreign growths, marketing malfunctions and efficiency blockages. Look for a long recovery period.