GM Is Alive, All Right
Gary Gerard,
dumbhoosier.com
I think the media does a pretty
significant disservice when it fails to take politicians to task
with regard to their campaign deceptions.
There is this notion that President Barack Obama’s auto bailout
“saved” General Motors from bankruptcy, while candidate and Mitt
Romney wanted to “bankrupt Detroit.”
Now, see, that’s just really not close to being accurate.
I guess you could characterize what Obama did as “saving” GM from
bankruptcy if you ignore the facts of what really happened to GM.
Essentially, Obama gave GM $50 billion of taxpayer money and then
his team of financial whizzes, known as the Auto Task Force,
shepherded GM though some weird hybrid form of bankruptcy.
But make no mistake about it – GM went bankrupt. It just got to run
afoul of all the bankruptcy laws with impunity. And, of course,
throughout the process, there was a huge nod to the United Auto
Workers union.
Mark Modica, writing for the National Legal and Policy Center, sums
it up pretty well:
This one is not debatable, the court dockets exist. Not only did GM
go bankrupt, but the Obama Administration used taxpayer money to
manipulate the bankruptcy process and assure that political friends
in the UAW received favorable treatment compared to non-union
claims.
The evidence that union friends of Obama received favorable
treatment is also irrefutable. In a normal bankruptcy, liabilities
and creditors would be ranked with unsecured claims being treated
equally (which wasn't done under the Obama manipulated bankruptcy)
and negotiated through a "managed" process.
That’s what Mitt Romney was suggesting, that GM go bankrupt, only in
the normal way where creditors are treated fairly.
Instead, we got this kind of stuff:
Emails obtained by The Daily Caller show that the U.S. Treasury
Department, led by Timothy Geithner, was the driving force behind
terminating the pensions of 20,000 salaried retirees at the Delphi
auto parts manufacturing company.
The move, made in 2009 while the Obama administration implemented
its auto bailout plan, appears to have been made solely because
those retirees were not members of labor unions.
The emails contradict sworn testimony in federal court and in front
of Congress. Obama adminstration officials say they had nothing to
do with the pension cuts – it was all the fault of Pension Benefit
Guaranty Corporation.
Twenty thousand Delphi workers lost nearly their entire pensions
when the government bailed out GM. But at the same time, Delphi UAW
member employees saw their pensions made whole.
That’s the kind of stuff that simply couldn’t happen during a
“normal” bankruptcy. But apparently that’s the cost of “saving” a
company.
And just as a little aside, Obama and others like to say how they
“saved” 1.5 million good American jobs, when actually, GM employs
77,000 people in the U.S.
I guess the 1.5-million employee claim assumes that under a “normal”
bankruptcy, all of GMs production would have been completely halted
and the company would have ceased to exist forever more. That’s
really not an accurate assumption.
I suppose that number also assumes that all of GM’s parts suppliers
would have gone under with them, which, again, is simply not
accurate.
And I suppose that number assumes that all other automakers would
also have gone under. Which, of course, is not accurate.
You see, only 350,000 people in the United States are directly
employed by automakers, according to the Center for Automotive
Research. And a total of 2.1 million jobs are indirectly connected
to the industry including suppliers.
So, basically, that 1.5 milllion jobs thing is just patently absurd.
Proponents of the saving of GM also keep saying that GM is back to
the No. 1 automaker in the world, which is false. It’s Toyota, and
Volkswagen is poised to slip into the No. 2 slot.
Those folks also like to say how taxpayers have been paid back, but
a government inspector general’s report says that’s not true either.
GM still owes $27 billion of the $50 billion it got from the
taxpayers and Ally Financial, formerly GMAC, GM’s lending guys,
still owes $14.7 billion of the $17-plus billion it got.
In addition, GM’s stock price was hovering around $23 a share, down
from the January 2011 high of $38.90.
The inspector general’s report noted that in order for the taxpayers
to be made whole, the U.S. Treasury would have to recover an
additional $27 billion in proceeds. “This translates to an average
of $53 per share on its remaining common shares in New GM,” the
report says.
That’s pretty much why the government is hanging onto a 32-percent
stake in GM and a controlling interest in Ally Financial. Selling
those shares would lead to huge losses for the government.
If this had been a “normal” bankruptcy, union contracts would have
been renegotiated and a new executive team would have been put in
place. The company would have been placed on a trajectory of
efficiency and self sufficiency.
As it is, GM’s sales are up 10 percent from August 2011 to August
2012, but still lagging behind competitors like Ford, Chrysler,
Toyota, Honda, Kia, Subaru and Volkswagen.
And GM is losing market share, down from 20 percent last year to 18
percent this year.
So GM’s sales are lagging behind many of its competitors, its share
price is down, its market share is down and it has a balance sheet
that’s basically on government life support.
And then there was the news this week that GM is losing
as much as $49,000 on every Chevy Volt it sells. Reuters reports
there are some Americans paying just $5,050 on a two-year lease to
drive a car it cost GM as much as $89,000 to produce.
Investors’ eyebrows are rising. And some automotive analysts are
predicting that GM is headed back into bankruptcy – again. Go here
for a chilling analysis: http://tinyurl.com/8pqrqk5
See, this whole GM thing is just a great big bowl of wrong, yet the
Obama team and an all-too-compliant media keep telling us how right
it is.
But not to worry. If GM does go under again, it won’t be until after
the election.
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