Sanity Injection

Injecting a dose of sanity into your day’s news and current events.

Good God, when will the corporate welfare to automakers end?

Posted by sanityinjection on October 28, 2008

Last month I blogged about the $25 billion in loans that Congress handed to domestic automakers. I criticized this bailout as corporate welfare disguised as a jobs provision, and watched helplessly as the Democrats in control of Congress – the very same people who usually complain about corporate welfare – shepherded it into law, without much opposition from the GOP either.

Now it appears that $25 billion is not enough. GM and Chrysler are asking the feds for an additional $10 billion to help facilitate a proposed merger between the two auto giants. Part of that would include the government paying off $3 billion in pension obligations owed by the companies to their retirees. Are you kidding me?

Everybody knows that mergers, while they may be necessary in order to keep companies afloat, always mean job losses. The people who would benefit from this merger are the companies’ investors, including their CEOs, as well as all the companies that do business with the automakers. But why should the federal government pay to keep them fat and happy? Here’s a thought: What if the automakers actually had to live with the consequences of their failures? Maybe they would be forced to make changes that would allow them to become competitive again, instead of being sheltered and coddled by the government.

Let me be very clear: I am not against a GM-Chrysler merger. I am against having it paid for by the taxpayers while the CEOs ride off into the sunset with preferred stock options and golden parachutes and workers lose their jobs. Have we learned nothing from the behavior of the execs at AIG? How many more times will the taxpayers be robbed to reward incompetence?

The worst part of all is the significant possibility this will sneak through without sufficient media attention, just like the last one did. Then later when the whole thing fails and we, the taxpayers, are on the hook for it, the new Congress and Administration will blame it all on Bush and the previous Congress.

Aren’t we tired of this?

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5 Responses to “Good God, when will the corporate welfare to automakers end?”

  1. yvm said

    actually, the $25 billion “loan” was to help them retool in order to meet the increased cafe standards the democrats passed last year. same thing happened back in 1979 with the chrysler bailout after cafe standards were first introduced. chrysler could not afford to retool to meet the standards so the government stepped in instead of letting them fail.

  2. tubby said

    Yvm, does this justify the bailout? I still agree with the original post; these companies should be responsible for their own bottom line. God forbid all three automakers go bankrupt and America loses hundreds of thousands of jobs…(said partially tongue-in-cheek, partially serious). I realize it would be a major jolt, but if the economy favors smaller, more fuel efficient vehicles that American automakers aren’t good at producing, why not let these companies fail if they must?

    The net result? Foreign automakers build more factories here and employ more Americans – perhaps the same Americans that were laid off by GM. Like sanityinjection said, keeping these companies afloat basically salvages pensions and paychecks for executives. Corporate welfare, plain and simple.

  3. sanityinjection said

    Good news: The Bush Administration rejected the request for the $10M:

    http://www.iht.com/articles/2008/11/03/business/03gm.php

    Of course, this does not mean they are ruling out additional aid to the automakers…but at least this one time, Treasury made the right decision.

  4. […] by sanityinjection on November 7, 2008 It hasn’t even been one month since GM and Chrysler came to the Feds asking for $10 billion of taxpayers’ money to prop up their p… For once, the Treasury Department told them no, the automakers having already been granted $25 […]

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