Just say no to Government Motors, and to the rush to corporatism and socialism that the Obama administration has pushed
Under the proposed restructuring, about 60 percent of the new GM would be owned by the United States, about 12 percent by the governments of Canada and Ontario, a union health trust would own 17.5 percent, and the company’s current bondholders would get 10 percent.
The essential issue isn’t fairness, it’s legal and financial equity. We saw this during the Chrysler bankruptcy as well, when senior creditors got intimidated into accepting far less per dollar than Fiat and the UAW received from the proceeds. The Obama administration did an end run around long-established laws governing the priority of liquidation of assets in bankruptcies, in order to give a big political payoff to the union.
Buy Ford. Buy Toyota. Buy anything that isn’t owned and operated by the federal government. There are plenty of great cars out there. You don’t have to buy one that costs not just your cash, but also your commitment to free enterprise and all the benefits that flow from it.
Keith Hennessey has the basics on GM and the deal.
Key sentence in the government’s GM bankruptcy release (via Ambinder) highlighted:
The U.S. Treasury is prepared to provide approximately $30.1 billion of debtor in possession financing to support GM through an expedited chapter 11 proceeding and transition the new GM through its restructuring plan. The U.S. Treasury does not anticipate providing any additional assistance to GM beyond this commitment.
Hmm. If $50 billion ($30B plus an earlier $20B) really is the limit of the taxpayer subsidy, fine. Then GM and the still-privileged UAW will have to make some tough choices down the road–and whatever happens the bailout could be justified by the backup, background rationale of ‘we delayed the end until the economy could handle it.’ But is the Obama Administration really planning to cut off GM’s intravenous drip of federal billions, if when the $50 billion doesn’t put the company back on its feet? It doesn’t look that way, from this quote in the NYT:
“We don’t think that after this next $30 billion, they will need more money,” one administration official said. “But the fact is there are things you don’t know — like when the car market will come back, and how much Toyota and Honda and Volkswagen will benefit from the chaos.”
Jonathan Cohn in TNR:
GM was the symbol of American industrial might and, for three-quarters of a century, the world’s largest carmaker. Now, in order to qualify or government financial assistance, GM is eliminating half of its brands, shedding dealers by the thousands, and laying off a third of its already diminished hourly workforce.
Even if the Obama administration’s plan works–even if GM re-emerges from bankruptcy as a leaner, more competitive company–it will never regain its iconic status. It will be just another company, albeit one whose majority owner is the U.S. government, at least for the time being.
It’s not the kind of result that inspires great enthusiasm. And perhaps that helps explain why the administration has been collecting critics not only on the right but, lately, on the left as well.
PHIL KERPEN: It Didn’t Work for Amtrak and It Won’t Work for GM, Either
In 1971, Amtrak was created, the Nixon administration said, “It is expected that the corporation would experience financial losses for about three years and then become a self-sustaining enterprise.” The Obama administration now claims that GM will be a publicly traded company again in six to 18 months. Expect that, like Amtrak, GM will be government-run and subsidized to the tune of billions of taxpayers dollars for decades to come.
The worst part is that government entities are run according to political, not economic, considerations. Every decision—about dealerships and plant closings, about suppliers, about which vehicles to build—will have to pass the Washington tests of political and environmental correctness.
June 1, 2009 - 01:44 PM on June 1st, 2009
Team Obama is now running GM.. Can’t wait for the results on this one.
These are the same folks that tried to close Guantanamo prison without a plan. They’ve now taken over a huge company (or…at least the parts of it they haven’t killed yet) and are trying to figure out what the next step might be. The concept of profit is completely foreign, as profit is a term used in describing evil corporations.
The Obama administration has a host of changes they want to make now that they are in charge. Unfortunately, without business background, this could well be a disaster costing American taxpayers over $50 billion when it is all done. ( for a top ten list of the silliest changes to GM, you can view: http://firstconservative.com/blog/political-humor/political-humor-running-general-motors )
At least this will make the news worth watching.
June 1, 2009 - 05:32 PM on June 1st, 2009
Let’s see, Hitler came up with the idea for the Volkswagen (people’s car); that was his contribution to the German auto industry.
Maybe the Marxists that are now in charge can come up with an idea for a new vehicle they will force GM to produce. Now what would that look like? What could it be?
Something like the Tata Nano? The new vehicle should incorporate every Leftist desire as a specification. It runs on Hemp oil. Produces no Global Warming. It sounds good but is totally impractical. When you purchase one, show your Leftist/Marxist ID and someone else is forced to pay the sales tax. The radio gets only two preset stations, Air America and NPR. And so on…