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First, the UAW is a labor cartel. Unless the supply and cost of labor can be controlled by the manufacturer and not labor, the industry will succumb to bankruptcy as we’ve seen with GM and Chrysler.

Second, GM was building cars we were willing to buy – they were supplying the gas-guzzlers people wanted, even if they couldn’t afford them. It was only until the rising cost of fuel made owning them prohibitive that people turned away leaving an industry that needs long lead times for product development with nothing to sell.

Third, just as money flowed to people who otherwise could not buy a house (thus creating the housing bubble that burst), so too has money flowed to people who should not have been buying cars.

Fourth, government policy is always addressing the wrong party. For example, raising CAFE standards does not address people’s behavior. It is like penalizing the fast food industry for people overeating and becoming obese.

In the face of this, its difficult to advise GM what to do. The knee jerk reaction is to tell then to build small, fuel efficient cars. But Americans have shown they will not buy them unless fuel prices are high. So the government needs to address fuel prices that incent people to buy fuel efficient cars, if that is our goal. They need to do away with labor cartels that control the supply and cost of labor (but that is not likely). Car manufacturers are precluded from collusion in setting prices for their products but unions are free to set prices for their labor. Unless that is addressed, the non-union manufactured Hondas and Toyotas being built elsewhere at less cost will put any re-emerging Detroit auto manufacturer out of business in short order.