Congratulations American Taxpayer

You’re now the proud owner of yet another failed corporation!

The week between Christmas and New Year’s Day is usually a week when Americans slow down and take some time off.  Kids are out of school, many companies are shut down or slowed down, and quite a few families are on vacation.  Congress is even on vacation, minimizing the damage they typically inflict on the wallet of the American taxpayer.

This year the Obama administration took advantage of the holiday distractions to seize control of GMAC, the financing arm of General Government Motors Corp.  This third bailout of the company that writes loans for Government Motors and Chrysler Corp. vehicles resulted in the US government increasing its ownership share of the company to 56.3%.  This, of course, once more gives the Obama administration controlling interest in what had been a privately owned company.

When the Bush administration signed off on the first $6 billion GMAC received from the US taxpayer, officials in the former President’s Treasury Department considered it “part of a broader program to assist the domestic automotive industry in becoming financially viable.”  But in May 2009, the Obama administration handed over another $7 billion in taxpayer wages to the beleaguered finance arm of what was soon to become the first US government owned auto maker.

The second bailout netted the Obama Treasury Department a 35.8% stake in the corporation, and an agreement GMAC would take on the additional liability of financing customers of Chrysler Corp.  This followed almost immediately after the President took an 8% stake in Chrysler for the US taxpayer and handed over a 55% controlling interest to the unions.

Much of the initial money will go to help GMAC shoulder new lending responsibilities for Chrysler dealers and consumers after Chrysler’s government-orchestrated Chapter 11 bankruptcy filing last month. As part of the Chrysler reorganization, the government in effect dissolved Chrysler Financial and handed its business to GMAC, creating one big auto-financing arm that would service both companies.–WSJ, May 21, 2009

President Obama had already invested billions in Chrysler and plans to secure US government ownership of General Motors were in the works. Bailing out GMAC became an easy way to launder even more bailout cash to the President’s experiment with union and government ownership of former US industrial icons.  As with other stones forming the foundation of Obama’s economic policies, funneling money to the automakers through loans to their customers didn’t prove too solid.

But that’s not something the President is willing to admit yet–that his policies for stimulating the economy have failed.  No, his newest plan is to throw good money after bad and pile another $3.8 billion of YOUR money onto the still smoldering pile of waste known as GMAC.

The first $6 billion wasn’t enough to rescue the financial firm and its now-nationalized benefactors of its bad loans.  The next $7 billion couldn’t save it, but did put Obama in control of 35.8% of the company.  The second bailout also allowed the President to twist the arm of the company and force it to agree to loan more money to customers of GM, which Obama would soon nationalize, and Chrysler, which the President had recently handed over to his union backers.

Though neither of these bailouts accomplished their (supposed) goal, our omnipotent, omniscient oracle Obama, in his infinite wisdom, has determined the solution to the problem is to pour more of your hard-earned tax dollars into the bankrupt corporation,  $3.8 billion more.  But don’t worry!  The President who brought us $1.4 trillion deficits and a $12 trillion national debt has traded our greenbacks for a controlling interest in the company.

That’s right.  We now own 56.3% of a company that can’t attract private capital because it can’t manage to stem the flow of red ink from its books.  A company that cannot, on its own merits, attract private capital.  President Obama is forcing all American taxpayers to borrow money to purchase a portfolio of profitless companies controlled by politicians and bureaucrats.

So congratulations taxpayers!  Like it or not, you own yet another failed corporation run by Chairman Obama.

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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Obama’s Government Motors demands cash from TN

You read that correctly.  According to Democratic Governor of Tennessee Phil Bredesen went to DC to convince Government Motors to build a new model car in the soon to be shut down assembly plant in Spring Hill, TN.  The Democratic Governor stated GM demanded cash up front–you know, sort of like a leave-it-in-an-envelope-on-my-desk-as-you-walk-out- if-you-want-our-car-built-in-your-state bribe.

From Channel 5 News in Nashville.

“The only one they want to know is how much cash can we put up front, we don’t care about tax credits, we don’t care about any of those other things, we want to know how large of a check are you going to write on the front-end,” said Bredesen.

Ahhh, the beauty of having the Chicago political machine wielding its influence from White House.  Expect more and more of this type of thing as this crowd gains control of more and more of the American economy.

“I don’t know anything about cars.”

So said President Obama’s new Chairman of the Board of Uncle Sam’s newest acquisition, GM.  Edward E. Whitacre, Jr went on to say “A business is a business, and I think I can learn about cars.”  Under that premise, a successful hot dog vendor on the streets of New York could lead the board for the bankrupt money pit American taxpayers just invested in.

Whitacre retired from AT & T in 2007 after 44 years with the company.  Though the last 17 years he served as CEO and Chairman of the Board at the telecom company,  his first job at what was then Southwestern Bell was setting fence posts.  Without a doubt, he started at the bottom and worked his way to the top. But telecom analyst Victor Schnee calls his appointment to lead GM “bizarre.”

White House Press Secretary Robert Gibbs explained, “What was required was somebody with savvy, big-business experience that could take a company, change its management culture, make some of those tough decisions to put it on that path toward viability.”  But how does Whitacre’s experience at AT & T compare to that required to turn around the new Government Motors?

At AT & T, he started with the smallest of the “Baby Bells” and gobbled up its competition in mergers to create the largest US telecom company.  Along the way, competitors cried foul, accusing the ever-growing AT & T of using its might to price them out of business and ignoring regulations smaller companies had to abide by.  In reference to a 2001 complaint filed by the Competitive Local Exchange Carriers (CLEC) Association of Michigan, then CLEC-MI president Brad Kruse said “Companies are limited in the service they can provide in Michigan because of SBC/Ameritech’s (now AT & T) actions, and the pace of competition is slowing.  SBC/Ameritech is unilaterally setting telecommunications policy in Michigan, disregarding the rulings of regulators and the policies set by legislators alike, while blocking competition.”

Could this be exactly what the administration seeks for GM?  A go-for-the-jugular Government Motors bent on crushing competition.  Might we see the taxpayer-bought-and-paid-for bankrupt company buy out the smaller Chrysler then use its government backing to try and drive Ford Motor Co. (Which by the way is the only American auto company that didn’t take a taxpayer bailout.) out of business?  If so, and if successful, Obama will have accomplished the nationalizing of the entire American auto industry!  Why else would he choose a Chairman of the Board who, in his own words, doesn’t know anything about cars?

Could the administration’s motivation have been political?  Mr. Whitacre made a lot of political contributions in the ’08 election cycle, mostly to Republicans.  But one donation, in February of 2007, might raise an eyebrow when one’s asking how Whitacre was chosen for his new job–$1000 to Rahm Emanuel, President Obama’s current Chief of Staff.  The natural question is, what would cause a Texas Republican to donate to the campaign of a Democratic Congressman in Illinois?  On the same day Whitacre made his suspicious donation, AT & T’s COO Randall Stephenson also contributed $1000 to Emanuel’s campaign.  Coincidence?  Maybe.

On May 1 of this year, the Wall Street Journal reported that Emanuel has taken a lead role at the Treasury Department and if “Rahm wants it” it’s almost certain to happen.  Just a couple of days ago Kevin Hasset, in a piece on Bloomberg, opined that he believes Obama’s plan is to put policies in place that drive every American business to need a bailout, and then “Rahm Emanuel can stack the boards of all of our companies with his political cronies.”  Perhaps the idea that Whitacre’s appointment, who knows nothing about the auto business by his own admission, to head the new Government Motors is political payback by Rahmbo isn’t so far-fetched.

In either case, if Obama’s seeking to completely nationalize the entire auto industry with the “Kingpin” of the telecom industry or if Rahmbo made the call to pay off a favor, the fact that Whitacre steps into the limelight announcing he knows nothing of the business doesn’t allay my fear that this “investment” is going to be one big boondoggle.

But maybe every GM car will come with a new AT & T phone.

GM, Amtrak and an Increasingly Fascist America

by Ron Paul on Campaign for Liberty

Last week, General Motors finally declared bankruptcy. Many in government thought $20 billion in taxpayer dollars would save the company, but as predicted, it only postponed the inevitable. The government will dump another $30 billion into GM and take a 60 percent controlling interest for it. Public officials are now involving themselves in tactical business decisions such as where GM’s headquarters should move and what kind of cars it will build.

The promise that this is temporary and will eventually be profitable is supposed to ease the American people into accepting this arrangement, but it is of little comfort to those who remember similar promises when the American taxpayers bought Amtrak. After three years, government was supposed to be out of the passenger rail business. 40 years and billions of dollars later, the government is still operating Amtrak at a loss, despite the fact that they have created a monopoly by making it illegal to compete with Amtrak. Imagine what they can now do to what is left of the great American auto industry!

In a truly free market, GM would get your money one way and one way only — by selling you a car you want, at a price you are willing to pay. Instead, the government is giving public money to a private company in spite of the market signals it has been sending. Throwing money at GM does not stop it from being an engine of wealth destruction; on the contrary, it simply gives it more wealth to destroy.

Had it been allowed to fail naturally, the profitable pieces of GM would have been bought up and put to good use by now. The laid off employees would likely have found new jobs and all that capital would be in private hands, reinvested in companies that produce products demanded by consumers. Instead, we are all poorer now.

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Have We Got a Deal For You

by George Will on Townhall.com

WASHINGTON — “I,” said the president, who is inordinately fond of the first-person singular pronoun, “want to disabuse people of this notion that somehow we enjoy meddling in the private sector.” He said that in March, when the government already owned 80 percent of AIG, Fannie Mae and Freddie Mac. “When a difficult decision has to be made on matters like where to open a new plant or what type of new car to make, the new GM, not the United States government, will make that decision.” But the government is GM’s largest shareholder, customer, tax collector, regulator, partner in determining employees’ compensation, protector of dealers and pension guarantor. GM’s other large owner, the United Auto Workers, is increasingly a government dependant.

Yet Steve Rattner and Ron Bloom, two of the president’s fixers of Detroit, recently wrote in USA Today that government “will play no role” in running GM. They were not under oath.

“What we are not doing — what I have no interest in doing — is running GM,” says the president who, when not firing GM’s CEO, purging its board of directors and picking new members, is designing new products (imposing fuel economy requirements that will control size, weight, passenger capacity and safety). The president, overcoming his professed reluctance to run GM, resembles the journalist Don Marquis when, after a month on the wagon, he ordered a double martini and exclaimed: “I’ve conquered my g**d** willpower.”

Washington mandates that Detroit must build cars for which there is much less demand than Washington demands that there be. Then Washington tries to manufacture demand with a $7,500 tax credit for purchasers of the electric Chevrolet Volt, supposedly GM’s salvation. So, GM is to be saved by a product people will not buy without a cash incentive larger than the income tax paid by 83.4 percent of America’s families.

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Here’s your car company America

Well, it’s finally official.  We predicted it from the day Bush first loaned GM $13 billion, and now it’s reality.  General Motors has collapsed under the weight of gross mismanagement and an uncompromising UAW.  GM’s incompetent management team managed to lose $38.7 billion in 2007, a period that saw record revenues for the company.  No matter how you slice it, that’s mismanagement!  We’re hearing the latest UAW concessions don’t cut the ~$70 per hour cost of GM’s labor, but freeze it.  In reality, the union hasn’t given up anything.

Now the American taxpayers are the not-so-proud-owners of this bankrupt, inefficient, ineffective corporation.  President Obama is convinced this is a good investment, even though Americans have consistently been opposed to the bailout of the auto industry.  He’s convinced he’s going  to turn GM around by hiring consultants who’ve never worked a day in the auto manufacturing business, including a 31-year-old law student with no background in business or economics who’s become the primary decision maker in the process.

Recall that Obama, immediately following Bush’s decision to abandon any semblance of free market capitalism in the US, was previously convinced a GM bankruptcy “would have devastating consequences for our economy and our workers.”  Now that he has ascended to the White House throne, and inked a deal to make him the de facto CEO of the former industrial icon, he’s “confident that they can emerge [from bankruptcy] and take advantage of that new market and actually be very profitable and thrive.”

In other words, the former community organizer who, as New York Mayor Rudy Giuliani puts it, “has never led anything, nothing, nada,”¹ is narcissistic enough to believe he can take the reins of this monstrosity that was once the very symbol of American capitalism and make it profitable again. With our tax dollars, of course.

If this company were such a great investment, why didn’t left-leaning billionaires like George Soros, Warren Buffet, Michael Bloomberg, and Obama’s Auto Czar Steven Rattner place their bets on this gamble?  The answer is simple.

Regardless how often Obama refers to the bailout as an investment, it’s really one great big experiment–an experiment in Socialism.  The fear tactics employed by the President and his cronies–basically screaming that life as we know it would cease to exist if the banks, Chrysler, and GM were allowed to fail–were used to foment a paranoia in the American citizenry that would allow him to force feed us a Socialist economic system that we would never have otherwise approved or endorsed.

In a recent Fox News poll, only 46% of Americans will even consider purchasing a GM product when they go to buy their next vehicle.  Compare that to the 54% who will consider buying from Ford Motor Co., the only American auto manufacturer who refused government money, and we see the citizens of this country are quite put off by this whole idea of taxpayer financing of failed corporations.  These numbers are even more impressive when you consider that GM has long been the dominant domestic manufacturer in terms of US market share.  Ford has gained an edge by simply insisting on standing on its own.

And how is Obama’s Socialist experiment going so far?  What innovative management decisions has the President made that will save our way of life and perhaps the world?

The closure of more than 1,100 dealerships nationwide will surely alienate customers.  Never a smart move if you’re seeking to grow market share.  Not only will loyal customers be forced to go elsewhere when purchasing a vehicle, but vehicle prices are also certain to increase with diminished competition among dealers.  This trick wasn’t designed to streamline GM.  It was intended to help them survive while maintaining much of the structure that made them unprofitable in the first place. 

The biggest beneficiaries of this strategy are UAW workers.  By increasing the price of GM products, Obama believes he can make the company profitable without demanding any real concessions from his supporters in the UAW.  We the American people are not only being forced to fork over our hard-earned tax dollars to keep this behemoth afloat, but will also be forced to pay more for its products if we purchase them.  The UAW’s over-generous compensation and benefit packages, a major source of GM’s inability to compete with foreign competitors, will be borne by consumers as a result of this move.

The new Government Motors has also announced the closure of several manufacturing and assembly plants.  So, far this sounds like it might actually be a good decision.  But what if the plants to be closed aren’t chosen for profitability, but for political payback?  That certainly appears to be the case in the closing of the Spring Hill, TN assembly plant. 

Obama has called for GM and Chrysler to move away from their large, gas-guzzling models so you would expect plants manufacturing these vehicles to be shuttered.  But the Spring Hill plant was actually built to manufacture GM’s smaller vehicles to better compete with its foreign competitors.  The plant shut down for retool to produce the Chevrolet Traverse, which claims to have the “best fuel economy of any 8-passenger crossover.”  According to Mike Herron, chairman of UAW Local 1853’s bargaining committee, “There’s a billion dollars worth of equipment put in this place over the last 18 months.”

A billion dollar investment in the last year and a half for a vehicle that boasts the best fuel economy of its class and the doors are closing.  Not because GM is discontinuing the Traverse…production of the model will be shifted to Lansing, MI.  And therein lies the rub.  Erich Merkle, an auto analyst based in Grand Rapids, MI recognized the danger to the Spring Hill plant in early April.

At current sales levels, all four vehicles could be built at either plant, but politics could give the Michigan plant the edge, Merkle said. “Spring Hill could be on the bubble because it’s in a red state, and Michigan is a blue state,” Merkle said. “The governor of Michigan is a Democrat, too, and she needs all the plants she can get.”2

I would love to see a per-unit cost comparison between the Michigan and Tennessee plants, but somehow I doubt the “most transparent administration in history,” which now manages GM, will be offering the American public such information. I would have to bet, though, that the plant in conservative Tennessee is cheaper to operate than the one in liberal Michigan.  If it’s obvious to a Michigan-based analyst though, it should be obvious to everyone that Obama’s management decisions at the helm of GM will be based more on politics than on practical business concerns.

Don’t expect it to get better from here.  The President has stated he wants to make GM a “leaner, meaner” company, more efficient and more competitive.  This from a President who quadrupled the national deficit in his first 100 days in office.  He’s pointed out that he doesn’t want to run GM, but now his administration holds 60% of the voting shares of the company.  He’s told us he wants to bring the country together, but his management decisions appear to be based largely on blue state vs. red state lines.

Government Motors, the new GM, the Obama Socialist Experiment…bought and paid for with your money.  Enjoy.

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¹From former New York Mayor Giuliani ‘s address to the Republican National Convention Sept. 3, 2008.

²Union worries about GM plant in Spring Hill–Oakridger.com

Little Green Cars

by Larry Kudlow on Townhall.com

Get ready folks: America is about to own a car company. As of Monday, we the taxpayers will own more than 70 percent of GM. Whether the company will be formally renamed Government Motors remains to be seen. But that’s what it will be.

Instead of putting the failed car enterprise into bankruptcy six months ago — where Carl Icahn or Wilbur Ross could have bought it — the Bush administration chose Bailout Nation. Under Team Obama, that bailout has morphed into full-scale government ownership. Twenty-billion dollars of TARP money is already invested in GM, with another $50 billion on the way. And that number could easily double unless GM car sales miraculously climb back to 14 million this year. That’s highly unlikely, with car sales presently hovering around 9 million a year.

In other words, taxpayers are not going to get their money back. Yes, we the people will be left holding the bag for the mistakes of GM’s management and labor leaders over the last four decades.

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Nero fiddled while Rome burned…

…and President Barack Obama follows suit.

Recall that he flatly stated private industry couldn’t accept government cash and hold soirees in Vegas, but he never prohibited himself from taking such pleasures. Though he managed to quadruple the deficit in less than 100 days, leaving the taxpayer on the hook for $1.8 trillion more than the government will collect in taxes this year, the President’s most pressing pursuit yesterday was passing time at Caesar’s Palace in Vegas to prompt liberal idealogues to part with $2,000,000 to prop up Senate Majority Leader Harry Reid’s (D-NV) place in the Democratic party. This little party will cost the taxpayer a paltry $265,000.

Now all Presidents pass time protecting their parties by pandering for funds, but at the moment more pressing problems are plaguing the US.

You’ve likely read here that N. Korea tested a long range missile last month and here the same rogue nation tested a nuclear device and here the test was followed by more missile launches, all aggressive acts that defy Obama’s vain attempts to coddle the Communist state into compliance with international demands. Today, the inhospitable neighbor to our two most valuable allies in the region cranked the crisis up a notch (while Obama traverses the US to shore up the coffers of his political allies stateside) by making clear it is abandoning the 1953 armistice agreement that ended the Korean Conflict and threatened a return to a state of war.

South Korea reported an increase in patrols by North Korean fighter jets on the border between the two states and there were reports of naval exercises close to the sites of previous skirmishes with the South Korean Navy.

While I’m sure those responding to the solicitation of funds by Obama still swear by the President’s foreign policy, I hope the majority of Americans will finally awaken and realize how grossly naive such an approach really is.

The North Korean situation is by far the most pressing issue taking place while Obama parades himself around the country as primary panhandler for his party faithful, but other problems persist that could probably benefit from the President’s attention.

It was predicted here days ago, but the President who publicly professed that he doesn’t want to run the auto companies is about to be promoted to CEO of General Motors now that bondholders rejected the company’s offer of pennies on the dollar for the debt owed by the defunct former pillar of American industry. The bankruptcy deal penned by the Obama administration will propel the US government to the position of majority stakeholder in the company, owning approximately 70% of GM shares.

The President, who claims he’s not a Socialist, has plunged us headlong down the path to Socialism and can now proudly proclaim that we have arrived. In a short four months and one week, he has completely abandoned our free-market capitalism to pursue an economic model that seizes private assets and places them under control of government bureaucrats.

One might expect the President to cut short his pursuit to empty the pockets of party patrons, but he presses on.  Tonight, he’s in Beverly Hills rubbing elbows with more high-browed Democratic admirers who refuse to face the fact that his policies have placed our country on a perilous path.

Sleep tight America, your President is partying in Beverly Hills.

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.

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Hat tip–American Thinker