I awoke this Sunday morning earlier than expected so I put on some coffee and picked up the paper outside. I noticed that this morning the cool temperatures, fog, and dew that are benefits of living on the coast were on full display. It felt good to take a few deep, controlled breaths and enjoy the calm of an early dominicus.
The coffee maker was percolating in the background, emitting little wisps of aroma – soon I would come out of a deep Saturday slumber, ready to take the day. So I pour myself a cup and enjoy a bit of nature’s legal-drug, Investor’s Business Daily in hand. While scanning the business pages, I decide to turn on the boob tube. ABC it seems was the last channel that was on late last night, I went to bed early, my late-night t.v. watcher wife was to join me in slumber hours later.
As it were, ABC news, Sunday morning edition, turns to their headline story – General Motors impending ‘bankruptcy.’. The reporter says that GM is taking the plunge on Monday. The ABC bobblehead is well-kept – perfect hair, teeth, smile; very smart talking of such things. Details on the bankruptcy not forthright, the sad story of a Union worker of 30 years past on full display. Such a sad, sorrowful story that this man might lose 50% of his pension due to “Union concessions.” A real face on the ‘news,’ a Mr. Smith Public shall we say.
I awake from a bobblehead, Ken-doll info-man haze while reading Larry Kudlow’s piece here in my paper, titled “Little Green Cars.” Again, GM is going bankrupt on Monday. Yet how can they even call it a bankruptcy when the American taxpayer will effectively own 70% of the company and the Feds are calling the terms? Is the caffeine inducing my critical-thought synapses? As Kudlow points out, will it be renamed Government Motors? Points to ponder as a taxpayer and someone that favors free-minds and capitalism vs command and control of industry, eventual freedom suppression that comes with such command and control, and bureaucratic entanglement by pols such as Chief Obamanation. A man,(and administration), who ostensibly has not the experience in business to run a neighborhood corner lemonade-stand and is motivated by redistributionist, William Ayers type Chicago-thuggery.
Points –
- $20 billion of TARP dollars already in GM, another $50 billion on it’s way. TARP dollars never intended to ‘bail-out’ car companies. Big government rule-changing at it’s finest.
- Taxpayers won’t see their dollars returned as the pols are promising until the company hits 14 million in car sales. The current sales? 9 million. Ostensibly, we will never ‘see our money back.’ I would bet my life savings on it.
- Pols using their new power to force the greenie agenda on GM and thereby the taxpayer, UAW huckster mafioso chief Ron Gettelfinger has expressed that Obamanation greenie cars will be manufactured only in high union-cost US facilities, not in competitive overseas plants, therefore taxpayers could be forced to prop up unprofitable production into perpetuity.
- Socialization of unprofitable businesses spells doom for American capitalism, they should have been allowed to go bankrupt without government intrusion, thank you Bush administration for kicking the can down the road, thus giving us this.
- Feds agreement to ‘back up GM warranties’, endless taxpayer liability as such.
- Reminiscent of crony-capitalism in countries such as Russia, in bankruptcy, bondholders get a smidgen of control and slice of the pie while the Union, (UAW), due to cronyism, gets a far bigger stake Likewise the Federal government. Read a real-life story of a GM bondholder named Jim Modica here at New Conservative Generation. Real-life stories like this ignored by the press because they are only interested in the plight of the Leftist Union mentality.
- Government intervention, secret or not, in closing GM dealerships in the future may hinge on cronyism and political interests. Case in point, recent stories in a similar vein re: Chrysler dealerships. Check here, here, and here for stories that confirm this. Hat tip to Eric at Libertarian Republican for leading on the Chrysler dealership closing cronyism story.
Did I miss anything? Feel free to add your thoughts in the comment section and I will take good points from the readers and update this post with them. Free Market RIP.
Update 1 :
In a note to the Left Coast Rebel, Conservative Generation offered up the following – 
On the UAW –
“People incorrectly assume the UAW and the workers are one and the same. They are not. The UAW gets dues, part of the worker’s salary in exchange for the UAW to represent them in labor decisions. In this deal the job bank is gone, some of their sick/vacation time, and new employees start at competitive vs. inflated salaries. Also, in moving the pension into GM stock, (completely undiversified…much like Enron), the pension funds are both less valuable and riskier. As noted by the paper you read the autoworkers actually gave up quite a lot here. Who sold them out? The UAW of course. The UAW will lose some union due funds because of the plants that are shutting down, but they also get to run Chrysler and GM. Before they only were representing workers, but now they get to do that plus they get the keys to the company.”
“People incorrectly assume the UAW and the workers are one and the same. They are not. The UAW gets dues, part of the worker’s salary in exchange for the UAW to represent them in labor decisions. In this deal the job bank is gone, some of their sick/vacation time, and new employees start at competitive vs. inflated salaries. Also, in moving the pension into GM stock, (completely undiversified…much like Enron), the pension funds are both less valuable and riskier. As noted by the paper you read the autoworkers actually gave up quite a lot here. Who sold them out? The UAW of course. The UAW will lose some union due funds because of the plants that are shutting down, but they also get to run Chrysler and GM. Before they only were representing workers, but now they get to do that plus they get the keys to the company.”
Bondholders –
“Chrysler’s were left high and dry and so were GM’s unsecured bondholders. GM’s secured bonds holders were actually fully paid off. At least from what I’ve read. Obama didn’t have a choice on this one though. He was able to strong arm almost all of Chrysler’s bondholders, because a majority of them were accepting TARP funds. The unsecured bondholders were also left high and dry. The dealers clearly lost big.”
On the automaker pensions –
“Now remember how the pensions are not safe or secure in GM and Chrysler stock? I wonder if any of the pension money would have been left over had Obama and the UAW not needed a reason to let the UAW own part of the company. One has to wonder what options were truly available? Why not let the employees own the stock individually? Why use their pensions specifically and why stock and not whatever they want? The pension funds are managed by the UAW and therefore by moving the pension funds into company stock, the UAW (not the employees) get a major share of the company.”
Contract Law and the government intervention eventually blowing-up –
“They’re trying to avoid having to liquidate these companies. By ignoring contract law, there is the possibility that a bondholder/dealer might sue and they have. If they win, there is potential that the current bankruptcy plan will get thrown out and the company may have to liquidate. There would have been no reason to liquidate if contract law had been followed. It’s a reckless move in my opinion and for little payoff.” I may add here as well that this issue may even go to the Supreme Court. As is the case with many of the Obamanation’s tactics, constitutionally extracurricular activities are present and bountiful.
Thanks to Conservative Generation for the great points and additional insight into this matter. He has a great background in economics/finance and the quality of his blog here represents this. This man knows his subject matter!
Update 2 : Rasmussen reports today here that only 21% of the public supports the bailout/70% ownership situation, Obamanation, are you listening?
Update 3 : Reader Devrim posted a great link here that shows how similiar the GM/Chrysler situation is to the British auto manufacturing sector of the 1960 – you must read this.
17 comments:
As was briefly mentioned on ABC's Sunday Morning, government subsidies to GM will hurt the still solvent Ford motor company. I agree with you & disagree with Gillespie, GWBush should have allowed Chrysler & GM to go into bankruptcy.
I’ve resolved to never purchase a GM vehicle in the future. I hope others will do the same. GM is going to leech off the government coffers until we have a new administration to clean this mess up. They should have been allowed to go out of business like every other failed company. I too was irritated that Bush didn’t leave it alone.
RKL
The number of people that will be killed in these less safe greenie moblies.
Adagio – I didn’t get that mention, when I tuned in, it was just the one-sided sobfest re: the union worker. Of course GW should have allowed bankruptcy, I lay a lot of this nonsense at his feet. As predicted, the Obamanation has been emboldened by Bush kicking the can down the street to him so that he can completely socialize it….
Rkl – I hope a future admin has the cajones to clean this up, that remains to be seen!
Fuzzy – Freedom of choice, I should be able to choose any vehicle that I want, the left only believes in freedom of choice in one are – abortion.
Save the enviorment, risk yourself! Less saftey, more death! Failure is NOW a FACTORY INSTALLED OPTION!
great post
Nobodyof value – Thank you
The government has never operated anything successful except maybe the military. Post Office, Amtrak, Medicaid, Medicare and Social Security et al. GM will be no different from the above listed government failures. I have always been a GM guy in the past, but I will not participate in this socialist experiment. The unions and the government destroy everything that they touch.
Casey – great points, why can’t our media connect the dots on this in that it is out and out socialism? It is prepostorous…..hope to see you more here!
Remember this http://www.youtube.com/watch?v=P36x8rTb3jI ? A new car for all my homies, gotta make sure we keep the Senate in 2010, and the presidency in 2012.
Here is another good read. http://www.openmarket.org/2008/12/05/carmakers-recovery-assistance-program/ .Punchline :
However, the lessons are clear, if you want to run an auto industry into the ground, panic-driven R&D, strong unions and vast government cash infusions are the way to go.
When government bails out failing company, it undermines the whole capital system because the bad company will devalue the product it produces and with government substities, you end up, like the Cable Company, a monopoly of a bad company with bad products. Problem with these greenie cars is unless we’re forced into them, nobody is going to buy them. If forced, which with this group, is more than likely, will the government be driving these pathic tin cans on donuts? My Metro, which has only 3 cylinders, can’t hit the milage they want and that car wasn’t fun, comfortable, or safe to drive (if you got into an accident) and these cars are going to be worse. Thank you Bush for giving us BO and now we’re going to get KO’d while being BS about the state of the US.
Devrim – the lessons you list are now history, are we doomed to repeat it? I can’t believe (from the link you provided) how similiar our US car manufacturer situation is to Britain, I’m going to post this! Thanks for the link.
Madmath – Bush did give all Americans BO….and that stinks
I was against the 1st bailout for GM and Chrysler but once it was given to them I said the government should GET OUT OF THE WAY. However, I knew that Obama wanted to Nationalize the car companies. It fits in so well with his green agenda.
I refuse to buy any of these smart cars. I’ll take my stupid SUV any day.
Pamela – I was adamantly against the 1st bailout as well as a matter of principle. I knew that this would happen by GW kicking the can down the road, a real shame.
Indeed
Matthew Avitabile – Thanks for coming by, I hope to see you more…..
great digs, you have here. great post(s), too.
bush and mccain and obama kept saying these businesses were “too big to fail”. hello?!?!? if the government is providing our tax dollars to keep them ‘afloat’ then they have failed.
just blogrolled you.
Heidianne – great points, earth to all government officials, republican and democrat, if a business cannot survive on it’s own, then let it fail! Glad to have you on board….
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