Sanity Injection

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

Posts Tagged ‘GM’

The “Obamagenda”?

Posted by sanityinjection on July 13, 2009

Rex Murphy argues in an opinion piece for Canada’s Globe and Mail that the main initiatives of the Obama Administration so far – massive federal intervention in the economy, nationalization of GM, energy sector regulation and a national health-care system – are not reactions to events but rather were all planned well in advance of the inauguration as part of an agenda to radically transform American government. In other words, the economic crisis is being used as an excuse to ram a sweeping liberal agenda down America’s collective throat.

While I’m not sure that Obama lay dreaming in his bed last fall of having the government run General Motors, I think there’s some truth to this. Even Obama would agree that health care reform and climate change legislation have been long-term goals. Murphy’s point is that if Obama had articulated clearly during the campaign exactly what he would end up doing in these areas, American voters probably would have run screaming in the other direction. It’s a lot easier to vote for “change” when you’re not told exactly what that change is going to mean. But it does make you wonder – What else is on the “Obamagenda” that we don’t know about? After all, the Administration has been very clear about wanting to get its health-care bill passed within the next few months. That suggests they have something planned to come later in the year.

Of course, Obama is hardly the first politician to prefer vague generalities on the campaign trail. It will be a little while before we learn – first with the 2010 Congressional elections and then with the Presidential race in 2012 – whether the voters have developed buyer’s remorse.

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Throwing money down a rat hole

Posted by sanityinjection on June 1, 2009

If you loaned a failing company $20 billion and they didn’t pay it back, what would you do? (Besides kill yourself or take on a fifth job to make ends meet.) Well, if you are the Obama Administration, you’d declare like Victor Kiam, “I liked it so much, I bought the company!” and promptly promise them $30 billion more.

Now if a loan officer for a bank did that, they’d not only be fired by the Board of Directors but prosecuted as well. In this case, the loan officer is Barack Obama, the failing company is GM,  and we, the voters and taxpayers of America, are the Board of Directors.

Obama swears that just because the federal government will now own 60% of GM when it emerges from bankruptcy, doesn’t mean he’s going to run GM’s day-to-day operations.  Instead, the guy he handpicked to be GM’s new CEO will do that. Honestly, I don’t know which is more frightening for my invested tax dollars to depend on: federal bureaucrats who lack the aptitude to make the right decisions to make GM profitable, or the idiots in GM’s management group that have proven for years they lack it.

Obama says, “Don’t worry, it’ll work out fine, just like Chrysler.” Well, Chrysler got sold to Fiat, and the Feds get 10% of that company too. Meanwhile, everyone agrees Chrysler was in better shape than GM to begin with. What we should have done, of course, was to let GM go bankrupt last year instead of paying $20 billion to stave off the inevitable. 

House Republican Leader John Boehner’s words sum it up pretty well:

“The only thing it makes clear is that the government is firmly in the business of running companies using taxpayer dollars. Does anyone really believe that politicians and bureaucrats in Washington can successfully steer a multinational corporation to economic viability? It’s time for the administration to fully explain what the exit strategy is to get the U.S. government out of the board room once and for all.”

Of course, the Administration can’t do that, because they haven’t got an exit strategy.

Incidentally, I did learn one asnwer to a question that has puzzled me. With all the talk about the various GM brand names that will be discontinued (Saturn, Hummer etc.) I was puzzled as to why Buick was to be spared from the chopping block, given dismal domestic sales and the lack of a niche market in the US. According to my radio this morning, it turns out that Buick is huge in China, having rather recently grabbed significant market share away from Volkswagen there. In fact, GM’s Chinese sales have been critical in keeping the company afloat as long as it has. So for my older readers: Any idea what the Chinese character is for “porthole”?

Posted in Domestic News, Politics | Tagged: , , , , , , | 3 Comments »

Union concessions mean Chrysler may survive; Pontiac won’t.

Posted by sanityinjection on April 27, 2009

AP is reporting that both US and Canadian auto workers’ unions have made concessions that may allow Chrysler to enter a partnership with Fiat that will keep the company afloat – and save over 50,000 jobs:

http://news.yahoo.com/s/ap/us_chrysler_labor

The article doesn’t say what specific concessions the UAW is making, but if they are similar to the ones made by the Canadian Auto Workers, the Obama Administration (particularly Larry Summers and the folks at Treasury)deserves credit for holding the UAW’s feet to the fire just as they have done with management.

Meanwhile, GM’s latest radical restructuring plan is a desperate attempt to fend off bankruptcy and involves killing off the Pontiac brand. That’s not likely to please fans of the flashy, fun, but poorly built line of sports cars. I don’t think GM’s plan is going to work, because it’s going to be implemented by the same people who have run the company into the ground. Firing the CEO isn’t the same as a full overhaul of management. The result is likely to be losses for taxpayers who will end up saddled with half of GM’s debt and a lot of worthless stock.

Posted in Domestic News, Politics | Tagged: , , , , , , , , , , , , | 1 Comment »

Obama Administration holds GM, Chrysler accountable

Posted by sanityinjection on March 30, 2009

I’ve been giving the Administration a hard time in some of my recent posts, so it’s only fair to give them credit for doing something right. Remember the big automakers bailout – which I was against – where they gave GM and Chrysler a certain amount of time to submit restructuring plans, qualify for additional federal money, and avoid bankruptcy?

Well, the time limit is up, and surprise surprise, the plans submitted by both companies suck. (Makes sense, when you consider they were put together by the same numb-nuts that got them where they are today.) To their great credit, the Administration not only recognized that they suck, but has said so publicly.  As AP puts it: “President Barack Obama and his top advisers have determined that neither company is viable and that taxpayers will not spend untold billions more to keep the pair of automakers open forever.”

Lawdy, can I get a Amen? Amen!

As a result, GM’s CEO has been forced to resign. Chrysler has been told it must strike a partnership deal with Fiat in order to survive.

Meanwhile, at the end of the AP story, we get a little more info about why the automakers haven’t been able to right their ships:

“Under the terms of a loan agreement reached during the last administration, GM and Chrysler are pushing the United Auto Workers to accept shares of stock in exchange for half of the payments into a union-run trust fund for retiree health care. They also want labor costs from the union to be competitive with Japanese automakers with U.S. operations.

Little progress has been made between the companies and the union.”

Clearly, the UAW would rather see GM and Chrysler go under than give up any of its benefits. Their reasoning? Someone will buy up the assets and rehire their workers – and they have a cushy fund full of GM and Chrysler’s money to tide them over until that happens.

So the question is: If the workers who will lose their jobs aren’t concerned about GM and Chrysler going bankrupt – why should we be? Kudos to the Administration for playing hardball on this one, I hope they keep it up, despite what must be considerable political pressure coming from the motor industry states – states which were critical to Barack Obama’s election.

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Details of the final auto bailout

Posted by sanityinjection on December 19, 2008

This one comes from the Bush Administration and does not have to be approved by Congress. It consists of $9.4 billion in emergency loans for GM and $4 billion for Chrysler. The companies will have to meet the same conditions specified in the Congressional plan that failed to pass – submit acceptable restructuring plans by March 31 or repay the loans immediately.

President Bush explained his rationale for approving the loans this way:

“If we were to allow the free market to take its course now, it would almost certainly lead to disorderly bankruptcy and liquidation for the automakers. Under ordinary economic circumstances, I would say this is the price that failed companies must pay. And I would not favor intervening to prevent the automakers from going out of business. But these are not ordinary circumstances.  In the midst of a financial crisis and a recession, allowing the U.S. auto industry to collapse is not a responsible course of action.”

The problem with this is that there is no way that GM and Chrysler are going to meet that March 31 deadline. The biggest reason is that without bankruptcy protection, they will be unable to get relief from their creditors and they will be unable to force renegotiation with the auto workers, whom you will recall have refused to discuss changes to their contract which extends through 2011. I don’t see how they can become solvent without these steps.

That is the difference between this plan and the Congressional plan, which in its final form would have required the creditors and the UAW to come to the table. The Bush Administration can’t make that happen by itself. Therefore, while I sympathize with what the President is trying to do, I think it’s misguided and will fail. April Fools will be on the taxpayer when GM and Chrysler default on their loans and go into bankruptcy. With no Congressional law requiring the government to be paid before other creditors, we’ll be lucky to get half of that money back.

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“Wolf! Wolf!” cried Detroit.

Posted by sanityinjection on December 19, 2008

Amidst all the hand-wringing over the domestic auto industry and the Bush Administration’s plans for a Treasury bailout, come the domestic auto sales numbers for 2008 (through November.) Guess which were the top two cars sold in America this year? The Ford F-150 and Chevy Silverado. In fact, the Ford F-150 has been the best-selling vehicle in America for the past 27 straight years!

What does this tell us? It tells us that there is definitely an area where the domestic automakers can, and do, compete effectively with the foreign companies. It further suggests that the Detroit automakers are to blame for their own problems by trying to make a dozen different types of cars, instead of focusing on the ones they’re good at.

They need to stop wasting time trying to build cars to compete with the Toyota Camry and Honda Accord (third and fourth best sellers.) Maybe GM should build nothing but trucks from now on. There’s also no point in wasting a lot of money developing more domestic hybrid vehicles. The Japanese have such a huge lead in this area that Detroit will never catch up. They are far better off leapfrogging by going straight to CNG, hydrogen and full electric vehicles. Imagine if Chrysler, for example, could devlop a CNG Dodge Ram that delivers the same torque as a regular one!

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Latest on the automakers bailout: The left hand voteth to give, the right hand taketh back

Posted by sanityinjection on December 4, 2008

A few months ago I wrote about the dubious ethics kerfluffle surrounding Congressman Tom Coburn. Essentially, the Senate threatened to instigate ethics charges against Dr. Coburn if he, a practicing OB/GYN, delivered a baby. They argued that this would create a potential conflict of interest if Coburn had to vote on any matters that might financially affect the hospital he works for – even if he did the work pro bono.

Now, with Detroit automakers back in Congress begging, I mean testifying, at hearings regarding a possible second federal auto bailout (remember, the first was a $25 billion loan that slipped by when everyone was distracted by the larger financial crisis), CBS News reports that Congressman John Dingell’s wife is a GM executive, and the couple own substantial amounts of GM stock. So where are the ethics warriors swooping in to demand that Dingell divest or recuse himself, rather than vote for a law that would personally enrich him? Nowhere to be found. Why the double standard? It couldn’t be because Coburn is an archconservative Republican from Oklahoma and Dingell is a Democrat from Michigan….could it?

The article also points out that the very same automakers crying poverty spent over $50 million lobbying Congress this year, with hundreds of thousands of dollars finding their way to individual legislators’ campaign accounts. Do you really have to ask how Dingell and these others are going to vote on any measure to aid the automakers? In fairness, a legislator from Michigan might well have plenty of legitimate reasons to vote to prop up the auto industry. But sometimes the appearance of corruption is almost as damaging as the real thing. How are we, or Dingell’s constituents, supposed to judge whether he is acting based on sincere conviction, or because he has been bought and paid for?

On a related note, Bloomberg has a good piece up exploring the idea of a prepackaged bankruptcy for GM and Chrysler, in which settlements with most creditors are agreed to before bankruptcy is filed, simplifying the legal process and allowing the company to emerge from bankruptcy more quickly and without losing consumer confidence. A federal bailout package could be contingent on a “pre-pack” bankruptcy.

I’m no economist, but I am cautiously in favor of this idea – especially because the automakers and the United Auto Workers both oppose it, which means it’s probably fiscally sound.

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Let GM die!

Posted by sanityinjection on November 17, 2008

Michael Levine writes in the Wall Street Journal to explain why GM is failing and will continue to fail if the federal government hands them billions in bailout money. The best solution is to allow GM to go into bankruptcy, which will force them to renegotiate bad deals and cut dead weight:

http://online.wsj.com/article/SB122688631448632421.html

The bankruptcy process would slim GM down to a potentially viable entity that might actually be worth spending some federal dollars to support at that point.

Posted in Domestic News, Politics | Tagged: , , , , , | 5 Comments »

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

Posted 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 proposed merger. For once, the Treasury Department told them no, the automakers having already been granted $25 billion in loans for plant modernizations.

But like spoiled children who can’t accept that Mommy and Daddy can’t afford to give them more and more toys, America’s domestic automakers have shamelessly returned to beg for more money once again! This time, Ford, GM and Chrysler want the government to give them $50 billion in federal loans! Half of that money would go to pay for the health care coverage of auto workers, and the rest is for “general liquidity”, which is a fancy way of saying that the automakers can spend it however they please with no accountability.

The automakers claim that without this aid they may go under, which in turn would allegedly put other companies that do business with the auto industry out of business as well, creating massive unemployment. What they don’t explain is why those other companies wouldn’t just start doing more business with Toyota, Honda, and other foreign car companies manufacturing here in the US. The domestic automakers somehow expect us to simultaneously believe that their market share is plummeting, *and* that they represent a critical mass of the auto industry. To quote Scooby-Doo: “Hunh?”

Needless to say, the United Auto Workers has come out in support of the request, since it means somebody else’s money being spent to pay for their health care. How enlightened. Funny how you don’t see UAW sitting down with the automakers to discuss ways to work together to make mutual sacrifices to become competitive and profitable again. If the auto industry were really in such dire straits, don’t you think this would happen? Or does the UAW figure that their members will just get hired by Toyota and Honda, who probably pay better benefits anyway?

Here’s the point: Why should the federal government react with disaster aid to the domestic automakers, when they and their workers are unwilling to make any sacrifices of their own to keep their business afloat? That would be like a bankruptcy court judge writing off someone’s debts without even making them file for bankruptcy. (Oh wait, that’s what the Democrats wanted to do to fix the mortgage crisis.)

Regardless of whether the automakers get their money or not, is there anybody left on earth who doesn’t get that they will just be back asking for more again and again until and unless the government learns to say NO means NO?

Enough is enough. It’s got to stop.

Article here: http://www.bloomberg.com/apps/news?pid=20601087&sid=aWj2UUIE4ofU&refer=worldwide

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The mini-bailout no one is paying attention to

Posted by sanityinjection on September 25, 2008

All political eyes are currently on the $700 billion financial bailout proposal currently being negotiated in Washington. And understandably so, as it’s an extremely important issue. I am waiting to see exactly what the legislation is going to look like before weighing in. I have concerns, but I also know that the mortgage sector is *very* complex and there are factors you and I as laymen don’t understand.

However, at the same time there is another bailout going on, which is not gathering much attention, and this one is a bad mistake. It comes in the form of a stopgap spending bill which has just passed the House and is expected to be taken up by the Senate shortly. You may recall this is the bill House Republicans threatened to hold up – which would shut down much of the government – if the Democrats insisted on keeping an extension of the offshore oil drilling ban in the bill. The Democrats gave in on that issue and took the extension out, meaning that the ban will expire, and the Republicans in turn voted to pass the bill. (The Democrats know they can pass a new law limiting offshore drilling in the new Congress after they pick up more seats.)

The problem is that there is something else stuck in this bill that does not belong. It contains a $25 billion loan program for automakers, to allow them to modernize their plants which will supposedly help them stay competitive and preserve jobs. The language is crafted to exclude most foreign auto companies even if they have plants in the US. So what this amounts to is a bailout for American auto companies. When did Ford, GM, and Chrysler become federal charities? You may remember in the 1980s the Feds bailed out Chrysler. That didn’t stop the company from being sold to the Germans twenty years later. Similarly, this bailout will do nothing to preserve auto industry jobs or make American car companies more competitive. It’s a reward to these companies for failing. And there is no argument that the risk of failure of these companies approaches what we are talking about with the financial sector. So why is the House perpetrating this corporate charity?

Because it can. The spending bill has to pass, and the Congressmen from Michigan and Ohio have the clout to put this provision in. It is possible the Senate could strip the program out of the bill (and I have asked my Senators to do just that), but more likely they will just let it go under the radar while everyone is focused on the bigger bailout bill. So we, the taxpayers, will lose about $7.5 billion, the cost of offering these loans to the automakers at below-market rates. That my friends, is corporate welfare, and Democrats and Republicans alike should be aghast at it.

http://www.ft.com/cms/s/0/83bfe68c-8a8f-11dd-a76a-0000779fd18c.html

http://politicallydrunk.blogspot.com/2008/09/house-passes-no-strings-attached-25.html

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