Auto Industry US Gov. Loan

By the looks of things, the request by GM for a loan will be used partially for operating purposes.  With annual sales of cars and light vehicles in the US projected to be weak, giving GM a loan means the money will probably be used to pay the lighting bills for idled auto plants.  This is hardly a good use of money.  

I see nothing in the near term that will increase auto sales in the US because most vehicles are so expensive that consumers need to take out a loan.  With credit still tight, auto sales will trend at least 35% lower on average.  There has to be a great deal of excess capacity in the auto industry.  For a company with cash flow problems, like GM, excess capacity is a huge problem.

I believe domestic auto sales for 2007 equalled 16 million units.  It looks as though sales for 2008 will be less than 11 million units.

I do not think most people understand the magnitude of the shortfall, or the impacts of trying to balance capacity in the auto industry.  Of course if GM had maintained market share at the post WWII high of 54%, then the impact of the downturn on capacity and fixed costs would be less.  It was nothing more than poor management decisions and probably the impact of the union that led to GM losing so much share for US sales.

I also think the union in the Midwest had unanticipated consequences.  I think most people would agree that labor union formation for the purpose of confronting corporate abuses in pay and working conditions is acceptable.  However, the union became so strong that alternatives, like new business activity, fell by the wayside.  For example, comparing new business activity in Cambridge, MA to Cleveland reveals drastic differences.  The Midwest will suffer because few could see beyond the auto industry, and new technology businesses never developed.