12 February 2008

Transfer of Wealth

While this story is hot:

Today, General Motors announced it's biggest loss ever: $38.7 billion dollars last year.

This comes on the heels of Exxon Mobil announcing record-setting profits of $40.6 billion.

And so, one might say, that this represents a transfer of wealth from GM to Exxon, from recalcitrant manufacturers to robust suppliers. In retrospect, it seems obvious: by resisting a move to more fuel-efficient cars, GM essentially ensured that this would happen. The more people buy cars that burn fossil fuels, the more oil companies will profit; the more car companies resist consumer demand for more efficient cars, the fewer cars they'll buy; but all the cars already on the road, those cars still need gas, meaning still more money for oil companies, and still less money for the car manufacturers.

I have been crapping on General Motors for years, for their less-than-visionary products and their less-than-brilliant management. Even with the introduction of their recent "flex-fuel" products, they still seem resistant to making the wholesale changes to their product line that would ensure they are competitive. I cannot say I am happy that GM lost $38.7 billion; unless you bet short against their stock, it's just plain bad news. But if this spurs stronger action (as it seems to have done already) then maybe something good will come of it - which might mean less use of oil, and lower profits, for the likes of Exxon.

UPDATE: I'm not the only one on this beat... Will Bunch, over at attytood.com, made a similar observation.


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