Political Insight | Editorials from the Habledash Team
General Motors: Bad to Worse After Obama Bailout
Created on Friday, 24 August 2012 08:06
Written by Chuck Justice
President Obama frequently touts the success of General Motors (GM) and Chrysler, particularly how they've come roaring back to life after the government bailout. What the elite media fails to mention is the asterisk attacked to these comments: GM is not in good shape; they were given a borderline illegal bankruptcy deal; politics are driving business decisions. Right now, the government still owns 26% of GM and all of their accounting activities prove its a good idea to side with the government. But GM has gone from bad to worse under Obama's bailout.
That headline comes from Michael Barone's article over at The Washington Examiner, which details, on many levels, so much of what the elite media has obscured because it's one of Obama's few talking points that's not negative.
About two weeks ago at one of his infinite campaign stops, President Obama stated he'd like to do with every industry what was done with the auto industry: a massive government bailout. Forget about how the labor union thugs at the United Auto Workers (UAW) union were delivered the bailout on a silver platter, while non-union Delphi workers had their pension cuts. Forget about the nonstop political favors - Obama wants the government to control every industry.
"When the American auto industry was on the brink of collapse," Obama told a campaign event audience in Colorado earlier this month, "I said, let's bet on America's workers. And we got management and workers to come together, making cars better than ever, and now GM is number one again and the American auto industry has come roaring back."
His conclusion: "So now I want to say that what we did with the auto industry, we can do in manufacturing across America. Let's make sure advanced, high-tech manufacturing jobs take root here, not in China. Let's have them here in Colorado. And that means supporting investment here."
Was he calling for a federal bailout of other American manufacturing companies? And what does he mean by "supporting investment"? White House reporters have not asked these obvious questions, for the good reason that the president, who has been attending fundraisers on an average of one every 60 hours, had not held a press conference in something like two months until recently. They were not asked in his brief, impromptu press conference on Monday.
Obama talks about the auto bailout frequently, since it's one of the few things in his record that gets positive responses in the polls. But he's probably wise to avoid probing questions, since the GM bailout is not at all the success he claims.
GM has been selling cars in the U.S. at deep discount and, while it's making money in China -- and is outsourcing operations there and elsewhere -- it's bleeding losses in Europe. It's spending billions to ditch its Opel brand there in favor of Chevrolet, including $559 million to put the Chevy logo on Manchester United soccer team uniforms -- and just fired the marketing exec who cut that deal.
It botched the launch of its new Chevrolet Malibu by starting with the green-friendly Eco version, which pleased its government shareholders but which got lousy reviews. And it's selling only about 10,000 electric-powered Chevy Volts a year, a puny contribution toward Obama's goal of 1 million electric vehicles on the road by 2015.
"GM is going from bad to worse," reads the headline on Automotive News Editor-in-Chief Keith Crain's analysis. That's certainly true of its stock price.
The government still owns 500 million shares of GM, 26 percent of the total. It needs to sell them for $53 a share to recover its $49.5 billion bailout. But the stock price is about $20 a share, and the Treasury now estimates that the government will lose more than $25 billion if and when it sells.
That's in addition to the revenue lost when the Obama administration permitted GM to continue to deduct previous losses from current profits, even though such deductions are ordinarily wiped out in bankruptcy proceedings.
It's hard to avoid the conclusion that GM is bleeding money because of decisions made by a management eager to please its political masters -- and by the terms of the bankruptcy arranged by Obama car czars Ron Bloom and Steven Rattner.
Rattner himself admitted late last year, in a speech to the Detroit Economic Club, that "We should have asked the [United Auto Workers] to do a bit more. We did not ask any UAW member to take a cut in their pay." Nonunion employees of GM spin-off Delphi lost their pensions. UAW members didn't.
The UAW got its political payoff. And GM, according to Forbes writer Louis Woodhill, is headed to bankruptcy again.
Is this really what Obama wants to do for all manufacturing across America? Let's hope not.
When a company begins making decisions based on politics and favors, they lose any competitive advantage they have. The Chevy Volt, while an engineering milestone, costs upwards of $250,000 per vehicle to the taxpayer. Liberals have learned nothing from the history of Communism - the government doesn't turn a profit, which is why the Volt is a loser.
General Motors is an arm of the White House. No CEO would make decisions that have put GM in its current situation without knowing the government would back them - the White House steered a majority of these decisions.
GM has gone from bad to worse under President Obama's "leadership" and they needed to go through a standard bankruptcy procedure. For GM, it's only going to get worse.
Chuck Justice is the editor-in-chief for Habledash.