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The Triumph of Crony Capitalism

by Fred Barnes at The Weekly Standard

First President Bush, then President Obama poured billions into General Motors and Chrysler to keep the companies alive but barely breathing. That was just for starters. Next came Obama’s creation of an Auto Task Force to oversee the auto companies. To head the task force, the president picked Steve Rattner, a Wall Street investor with no experience in automaking but lots in raising campaign money for Obama and Democrats.

GM and Chrysler were quickly restructured, mostly to the benefit of the United Auto Workers, the union which spent millions in 2008 to elect Obama and Democrats. The UAW now owns 17.5 percent of GM and 55 percent of Chrysler–quite a return on an investment of zero dollars. Obama said all parties should “sacrifice,” but only bondholders did. They got a fraction of what they were legally entitled to receive. UAW retirees, in contrast, got a gift of $9.5 billion at GM and $14.2 billion at Chrysler.

There’s an epilogue. Delphi, the auto parts manufacturer once owned by GM and still its biggest supplier, has been in bankruptcy for four years. To acquire its assets and run the company, Delphi and Obama’s Auto Task Force picked an affiliate of the private equity firm Platinum Equity. There was no auction or competitive bidding, though Platinum stands to make millions in the deal. Why Platinum? The UAW favored it, sources said.

There’s a name for all this: crony capitalism. Obama insists he believes in capitalism, but it’s not the free market variety that he’s been promoting since he became president. Obamanomics is a different strain entirely.

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July 7, 2009 Posted by | Bailout | , , , , , , , , | 2 Comments

UAW wins, everyone else loses

GM and Chrysler, in a concerted effort with the Obama administration, are destroying Americans’ lives by colluding with the government to seize and redistribute private property–not to protect consumers, not to ensure fair competition, but to reduce competition as a means to protect the UAW and artificially prop up their already overpriced products.

GM’s own North American sales chief  recently stated “Too many dealers, in actuality, is not the problem.  We’ve got too little industry and too little sales we have to contend with.”  Yet, GM informed more than 1,100 dealers their rights to sell the company’s products will be stripped from them next year and Chrysler axed almost 800 dealers effective next month.

George C. Joseph, President and owner of Sunshine Dodge-Isuzu in Melbourne, FL, gave a 1st person account of suffering being imposed on Main Street America by the failed, soon-to-be-government-owned Detroit automakers.  He explains how he and his family have devoted their lives to his profitable dealership since they first purchased it in 1974.  When Chrysler recently demanded he renovate the dealership, Mr. Joseph financed the multi-million upgrade with the understanding that he would continue to represent the now nationalized company.  He owes $3 million on his new car inventory and holds $300,000 worth of Dodge parts in inventory.  Joseph’s family and the families of his 50+ employees have staked their futures on a relationship with Chrysler.

To the new management at Chrysler–the Obama administration–none of this matters.  The new government/UAW-owned Chrysler makes no offer to purchase Joseph’s inventory, his business, or even make good on the renovation loan.  In short, he’s being thrown to the wolves.  His business is effectively being seized by a US government-UAW cooperative and handed to a dealer down the street who will now be able to charge his customers more.  Joseph and his employees will lose their livelihoods, many forced into bankruptcy so the new nationalized Chrysler can charge more for it’s unpopular products.

Pure and simple, this is payback to the UAW for its support of Obama in the presidential election last year.

Since GM and Chrysler first came begging the government for help last year, Americans have overwhelmingly insisted the UAW make serious concessions.  Instead, the President has given the union a disproportionate stake in the companies for the money it was owed versus bondholders whose debt was guaranteed.  Last month, the administration-brokered deal reached by the UAW and Chrysler grants the union a 55% stake in the company.  Using the bailout money received by the banks as leverage, the executive branch forced bondholders to take about 30 cents on the dollar for their debt with no equity stake in the company.

The UAW can’t even run a golf course, but Obama handed it the keys to the boardroom of Chrysler–to the detriment of Wall Street and Main Street.

Is this the change America voted for?  A government that subsidizes failed companies and institutions by seizing or destroying their successful competition. 

It’s the change we got.


Hat tip–American Thinker

May 24, 2009 Posted by | Socialism | , , , , , , | Leave a comment

$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.

May 2, 2009 Posted by | Socialism | , , , , , , | Leave a comment

Witness to inefficiency of 3 Little Piggies slams bailouts


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Thanks to my father for alerting me to the existence of this letter from Gregory Knox, President of Knox Machinery, Inc. to Troy Clarke, President of General Motors.  Mr. Knox claims to have observed first-hand what those of us who’ve been against the bailout of the auto industry from the start.  He also makes great points (that many of us have been making) against ALL the bailouts.

Snopes has already verified the legitimacy of the letter.

From Gregory Knox, President Knox Machinery, Inc., Franklin, Ohio 45005

In response to your request to call legislators and ask for a bailout for the United States automakers please consider the following, and please also pass this onto Troy Clark, the president of General Motors North America for me. You are both infected with the same entitlement mentality that has bred like cancerous germs in UAW halls for the last countless decades, and whose plague is now sweeping the nation, awaiting our new “messiah” to wave his magical wand and make all our problems go away, while at the same time allowing our once great nation to keep “living the dream”.

The dream is over!

The dream that we can ignore the consumer for years while management myopically focuses on its personal rewards packages at the same time that our factories have been filled with the world¢s most overpaid, arrogant, ignorant and laziest entitlement minded “laborers” without paying the price for these atrocities. and that still the masses will line up to buy our products.

Don’t tell me I’m wrong. Don’t accuse me of not knowing of what I speak.. I have called on Ford, GM, Chrysler, TRW, Delphi, Kelsey Hayes, American Axle and countless other automotive OEM’s and Tier ones for 3 decades now throughout the Midwest and what I’ve seen over the years in these union shops can only be described as disgusting.

Mr. Clark, the president of General Motors, states: There is widespread sentiment in this country, our government and especially in the media that the current crisis is completely the result of bad management, it is not.

You’re right – it’s not JUST management. How about the electricians who walk around the plants like lords in feudal times, making people wait on them for countless hours while they drag ass so they can come in on the weekend and make double and triple time for a job they easily could have done within their normal 40 hour week.

How about the line workers who threaten newbies with all kinds of scare tactics for putting out too many parts on a shift. and for being too productive (mustn’t expose the lazy bums who have been getting overpaid for decades for their horrific underproduction, must we?) Do you really not know about this stuff?!?

How about this great sentiment abridged from Mr. Clarke’s sad plea: over the last few years .we have closed the quality and efficiency gaps with our competitors.

What the hell has Detroit been doing for the last 40 years? Did we really JUST wake up to the gaps in quality and efficiency between us and them?

The K car vs. the Accord? The Pinto vs. the Civic? Do I need to go on?

We are living through the inevitable outcome of the actions of the United States auto industry for decades. Time to pay for your sins, Detroit.

I attended an economic summit last week where a brilliant economist, Alan Beaulieu surprised the crowd when he said he would not have given the banks a penny of “bailout money”. Yes, he said, this would cause short term problems, but despite what people like George Bush and Troy Clark would have us believe, the sun would in fact rise the next day, and something else would happen. where there had been greedy and sloppy banks new efficient ones would pop up. that is how a free market system works. It does work, if we would let it work.

But for some reason we are now deciding that the rest of the world is right and that capitalism doesn’t work – that we need the government to step in and “save us”. Save us, hell – we’re nationalizing. and unfortunately too many of this once fine nation’s citizens don’t even have a clue that this is what’s really happening. But they sure can tell you the stats on their favorite sports teams. Yeah – THAT’S important.

Does it occur to ANYONE that the “competition” has been producing vehicles, EXTREMELY PROFITABLY, for decades now in this country?…

How can that be? Let’s see.

Fuel efficient. Listening to customers. Investing in the proper tooling and automation for the long haul. Not being too complacent or arrogant to listen to Dr W Edwards Deming four decades ago. Ever increased productivity through quality, lean and six sigma plans. Treating vendors like strategic partners, rather than like “the enemy”. Efficient front and back offices. Non union environment.

Again, I could go on and on, but I really wouldn’t be telling anyone anything they really don’t already know in their hearts.

I have six children, so I am not unfamiliar with the concept of wanting someone to bail you out of a mess that you have gotten yourself into – my children do this on a weekly, if not daily basis, as I did at their age. I do for them what my parents did for me (one of their greatest gifts, by the way) – I make them stand on their own two feet and accept the co nsequences of their actions and work them through. Radical concept, huh?

Am I there for them in the wings? Of course – but only until such time as they need to be fully on their own as adults. I don’t want to over simplify a complex situation, but there certainly are unmistakable parallels here between the proper role of parenting and government. Detroit and the United States need to pay for their sins.

Bad news people – it’s coming whether we like it or not. The newly elected Messiah really DOESN’T have a magic wand big enough to “make it all go away”. I laughed as I heard Obama “reeling it back in” almost immediately after the vote count was tallied.” We might not do it in a year or in four.” where was that kind of talk when he was RUNNING for the office? Stop trying to put off the inevitable.

That house in Florida really isn’t worth $750,000.

People who jump across a border really don’t deserve free health care benefits.

That job driving that forklift for the big 3 really isn’t worth $85,000 a year. We really shouldn’t allow Wal-Mart to stock their shelves with products acquired from a country that unfairly manipulates their currency and has the most atrocious human rights infractions on the face of the globe.

That couple whose combined income is less than $50,000 really shouldn’t be living in that $485,000 home.

Let the market correct itself people – it will. Yes it will be painful, but it’s gonna be painful either way. The bright side of my proposal is that on the other side of it is a nation that appreciates what it has, and doesn’t live beyond its means. and gets back to basics. and redevelops=2 0the work ethic that made it the greatest nation in the history of the world.. and probably turns back to God.

Sorry – don’t cut my head off, I’m just the messenger sharing with you the “bad news.”

Gregory J Knox
President Knox Machinery, Inc.
Franklin, Ohio 45005

Bravo, Mr. Knox!


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January 4, 2009 Posted by | Bailout | , , , , , , , , , , , , | 1 Comment

Little Piggies’ Activity 12-19-08

We now know Little Piggy Wagoner was in Detroit yesterday, where he gave a press conference at GM headquarters.  I’m not sure if he took questions from reporters because the only video I can find only shows him reading a prepared statement.

Wagoner thanked everyone at GM, his competitors, Little Piggy Gettelfinger, the President, Congress, etc. for their work in getting Bush to approve the taxpayer bailout “loan”.  He went on to say he is confident GM can meet the requirements laid out by the administration.  (I don’t know if he’s considering Gettelfinger’s threats to challenge the UAW’s part of the requirements.)  He also wants GM to lead the country’s recovery during the economic crisis.  (I don’t know how he can lead it when he’s part of what’s holding it down.)

I wasn’t impressed, but here’s the video so you can judge for yourself.

I still can’t find anything on the whereabouts of Little Piggy Nardelli, but he did send a lengthy letter to Chrysler employees yesterday.  Like I said, it’s lengthy so I won’t clutter this post with it.  You can read the text of the letter here.  It doesn’t do anything to make me feel like Bush’s investment in Socialism was money well spent.  He uses a lot of words to say Chrysler is the victim of a global recession and everyone’s been doing a great job and they should simply keep doing so.  Everything will be fine.

Right.

I haven’t found anything new on Gettelfinger today.  Last word I have on him is still that he plans on pressuring Obama to remove the “unfair conditions” Bush’s Socialist agreement makes on the proletariat.

Remember, at TCOT we’re looking for any info readers may find on the Three Little Piggies.  So if you see them out and about, snap a few pictures or video them (if you can do so without being intrusive) and let us know.

December 21, 2008 Posted by | Bailout | , , , , , , , , , , , , , , | 2 Comments

Senator Graham (R-SC) Statement on Automotive Bailout

Press Releasebush

WASHINGTON – U.S. Senator Lindsey Graham (R-South Carolina) today made this statement on President Bush’s plan to offer $17.4 billion to General Motors and Chrysler.

Graham said:

“I’m disappointed with President Bush’s decision in many respects. 

“I do not believe it’s appropriate to use the TARP (Troubled Asset Recovery Program) funds to bail out the automotive companies.  These funds were supposed to be used to stabilize financial institutions.  The TARP legislation would certainly not have passed it we had known it was going to be used for this purpose. 

“The plan announced by the President today will not lead to the necessary reforms which will make these companies profitable.  The only viable solution is for them to enter Chapter 11 reorganization. 

“There the companies would be able to renegotiate their labor and health costs to make them competitive in the global marketplace.  It would also allow the reorganization to be accomplished without political considerations.  Presidential or congressional restructuring will end up being a political exercise more so than a business exercise to make these companies profitable. 

“If we continue down this road, I expect this will be the first of many government payments to the Big 3 automotive companies.”

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December 19, 2008 Posted by | Bailout | , , , , , , , , , , | Leave a comment

3 Little Piggies Activity, 12-18-08

I haven’t had any luck pinning down two of the little piggies, GM CEO Rick Wagoner and Chrysler CEO Bob Nardelli, but it seems the third was hanging around Detroit today and did an interview with WXYZ Channel 7 in Detroit.

Here’s a report on Channel 7 that leads saying Gettelfinger has not been directly involved in talks with the White House.  You may have already heard that Bush hinted today that an “ordered bankruptcy” may be the best course of action.  Well, evidently that has Gettlefinger feeling a little nervous because today he began talking like the UAW knows it’s going to have to make concessions.  This is a dramatic reversal from a month ago when he emphatically stated there would be no more concessions from the union.

The UAW chief flatly states he’s not sure what an administration bailout will look like, but hopes it will look like the bill that passed the House of Representatives and subsequently stopped by conservative Republicans in the Senate.  He’s clearly nervous though because he goes on to basically say that he’ll take anything at this point, even if it’s just “a bridge to a bridge,” which means at least give him enough to tide him over until Obama takes office.

Clearly our concerted efforts are making an impact.  We finally have Bush considering bankruptcy for the auto companies and Gettelfinger considering concessions that may well lead to GM and Chrysler once again becoming competitive, eventually.  But now is not the time to pack it in.  Let’s continue to hold their feet to the fire.  Keep the pressure on by contacting the White House and letting them know that you’re against the bailout!

Gettelfingers Bridge to a Bridge

Gettelfinger's Bridge to a Bridge

December 19, 2008 Posted by | Bailout | , , , , , , , , , , , , | Leave a comment