http://www.detnews.com/article/20090...wed-auto-logic

Thursday, May 7, 2009
Manny Lopez

Obama's flawed auto logic

President Barack Obama insists he doesn't want to run the domestic auto industry -- and we should all be thankful for that.

But his actions speak differently -- and we should all be worried.

"... I rejected the original restructuring plan" that Chrysler LLC submitted for government loans, he said April 30 in announcing his decision to force Chrysler into bankruptcy. "... And the standard I set was high -- I challenged them to design a plan ..."

That's a lot of self promotion and involvement from a guy who doesn't want to control the companies.

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To be sure, the government, with the investment of $4 billion in our tax dollars in Chrysler and $15.4 billion in General Motors Corp. needs to set guidelines and rules for repayment. If not met, call the loans and get our money back.

But forcing a private American company into bankruptcy because the president thinks it's the most prudent action. Um, no. Not by any measure.

Blaming the hedge funds
The president found a scapegoat in the hedge funds that balked at the government's "offer" to take pennies on the dollar for their secured investment

"... It was unacceptable to let a small group of speculators endanger Chrysler's future by refusing to sacrifice like everyone else," he said.

Pardon me while I puke.

Chrysler's secured lenders held about $6.9 billion in debt and a couple didn't want to take significantly less than what they were owed. The lenders that opposed hold less than 10 percent of that debt.

You mean to tell me that the president, who has authorized more than $19 billion in cash to the auto companies, with much of it likely never to be repaid, was willing to force Chrysler into bankruptcy over less than a billion bucks?

When you're doling out dump trucks full of cash, another Ram pickup full doesn't break the government's back.

Too much auto ignorance
Make no mistake: The president had this outcome in mind all along. He'll force that action on GM, too.

All the while bashing Detroit for not being Toyota.

"I don't know how to create an affordable, well-designed plug-in hybrid. But I know that, if the Japanese can design an affordable, well-designed hybrid, then, doggone it, the American people should be able to do the same," he said during his 100-days-in-office speech. "So my job is to ask the auto industry: Why is it you guys can't do this?"

Seriously? GM is building the Volt. The Ford Fusion hybrid will get top mileage numbers.It's about time Obama starts looking past the nonsense he's being fed by Californians in Congress. Certainly, the domestic industry needs to do more and it didn't adapt fast enough.

But to suggest that less than a billion bucks forced Chrysler into court or that these companies aren't in the same league as the Japanese shows that the auto ignorance in Washington rolls on.

 

 

When it comes to how well they are run (not product), that is true.

 

Strap GM or Chrysler's legacy costs on Toyota or Honda and it's a much different story. Hell Nissan does not have the legacy costs and is still struggling. The fact is, US based companies have a disadvantage making cars.

 

A couple points.
- The Government is actually eliminating "legacy costs" by getting the UAW to accept (nearly worthless) equity in return for health insurance. This alone puts GM/Chrysler almost immediately back into the black.

- The reason the transplants will never have "legacy costs" is because our own government will pick up the tab through Medicare! Health care reform to make sure all employers are paying their fair share will level the playing field, and that's a huge priority for BHO.

 

My favorite part is how he completely disregarded the bankruptcy laws that we have in this country, and have had for a long time, simply to placate to his union voting block.

Laws? What laws? We don't need no silly laws.

 

My favorite part is how we are unable to talk about Chrysler and GM's management decisions due to the rule that we can not involve politics in discussions on camaroz28.com. Sadly the line between politics and auto production have blended together. I guess we will just have to accept the current management's decisions as if they were magical and unchangeable acts of God.

 

if the government hadn't given chrysler bailout money they would've gone into bankruptcy anyway. i don't see what the problem is here. if u want my money ur gonna prove to me u'll utilize it right

 

It's simple. If you don't want the government getting involved, don't go to the government begging for a loan.

 

I dunno about all that. I mean our government is the biggest money loosing venture in the world right now. If it were a company, it would make GM look like Google.

Do we really want them making business decisions at corporations.

What has happened in the last year is that business and government have become so entangled it will be decades before it is sorted out...and it will be a handicap on our economy. In a true capitalistic economy there are spectacular successes, and spectacular failures. With the government backstopping the failures, and using over protective regulation to mute the sucesses, we will end up in a muddied middle.

 

I think you're making an argument for government not helping GM, but I'm not sure. Note that's not what GM wants...(i.e. GM wants help, which implies involvement).

 

I beleive companies should be allowed to fail under normal circumstances. I do feel the autobail out is justified however because government policies have played a role in GM going to the brink. Makings car is so highly regulated (even more so now) that it is almost capitalistic by nature. Things like a legal structure that allows foriegn companies to build factories here and make cars for less than a US automakler can. I can't think of any other US manufactuering operation that has that onstacle to overcome.

My personal opinion is that GM is as good as anyone in the world at desiging and making cars right now. This market is so brutal Toyota is loosing money..so it is to be expected GM is a disaster. I beleive GM needed a short term lifeline, and a one time chance to "right size" accumulated legacy and manufactuering costs. The government I honestly think should write the check, make sure it is used as intended and nothing fraudulent happens, but otherwise stay out of it. If GM fails, they tried. If GM succeeds they get their money back.

The problem is..they don't want their money back...they want control. That is why Chrysler no longer has to repay their loans..the government is now a major shareholder..so they have all the control they need. Forget collecting back tax payer dollars.

 

Actually, the taxpayer gets his money back by selling Chrysler stock.

As far as conditions on the loans, I don't have a problem with that. Since the loan is coming from the gov't, the gov't gets to specify the conditions.

We could debate forever the specifics of the gov't investment (I actually don't claim to know all the Right Answers), but in general, GM and Chrysler don't have other options.

 

Just like Social Security, Medicare, Welfare, and just about every other government program utilize our money right...

(Not that you don't have a point; but the idea of the government telling anyone how to manage anything is amusing / maddening to me...)

 

Haha! Good stuff. Keep it coming.