America, You Asked For It!

Political News and Commentary from the Right

$4 billion down the drain…

…as Chrysler files bankruptcy.

You might recall that in December, we were told bankruptcy of any one of the Big 3 auto companies would take down the entire economy. So then-President Bush shoved the bailouts of GM down the throats of Americans in spite of the fact Congress refused to do so legislatively. The US Treasury made a $4 billion loan to Chrysler along with $13 billion to GM.

Many of us predicted the loans couldn’t cure the auto companies’ ills, and we were slandered and maligned by left-leaning pundits and politicians of both parties. We recognized these loans would simply subsidize failed business models and encourage a continuation of the same failed strategies that put them in this position to begin with.

We said at the time, bankruptcy was the way to go. A court-ordered restructuring would have allowed Chrysler to negotiate concessions with its creditors and unions under the court’s protection and direction. Now, we’re $4 billion poorer and Chrysler’s right where we knew it was headed from the start.

It wasn’t ESP that allowed us to see these months into the future. No crystal ball, no special powers.

The administration, the unions, and management at Chrysler and GM like to blame the current economic crisis for the auto industry’s woes, but it goes so much deeper than that. If the credit crunch was truly the spark that started the fire that burned down the American auto industry, why are foreign companies with manufacturing facilities in the US not closing down too?

The problem with the American giants was smoldering long before the current economic crisis flared up. GM posted record sales in 2007, but also record losses that same year. Figures are harder to come by for Chrysler because it’s not a publicly traded company, but its former owner Daimler has released some figures that show its problems began long before the current downturn. The company lost $3 billion in 2007 and $1.6 billion in 2006. In May of last year, GM was burning cash at a rate of $1 billion a month. All of this before the economy crashed!

Now that our $4 billion have been squandered, the Obama administration is promising another $8 billion in aid in exchange for an 8% stake in the company. The UAW will take a 55% stake in exchange for money owed to its pension plan. So 63% of Chrysler shares will be owned by a partnership of the inefficient UAW and the inefficient US government. Is that likely to result in a streamlined, efficient, and profitable business model. I doubt it.

With the Obama administration preparing to take control of GM, we may need a new bureaucracy (the Department of US Auto Manufacturing?) in DC. Hell, UAW employees may well be integrated into the federal employees’ pension system before it’s all said and done.

This whole ordeal reminds me of a gambler whose lost everything and borrows to “double down” thinking surely he’s due to win. All too often though, the house takes what he’s borrowed as well.

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May 2, 2009 - Posted by | Socialism | , , , , , ,

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