Obama’s war on IROC.
The Obama doctrine.
“I am absolutely committed to working with Congress and the auto companies to meet one goal: The United States of America will lead the world in building the next generation of clean cars,” Obama said in his first extended remarks on the industry since taking office nearly 10 weeks ago. And yet, he added, “our auto industry is not moving in the right direction fast enough to succeed.”
Now that President Obama has unilaterally decided to go war against capitalism and destroy the evil WMD’s (wicked mad debt holders) in his pre-emptive strike on the American auto industry I was wondering what is his exit strategy.
Just exactly for how long is the Obama administration going to be in the car business?
As the most visible investor in the newly formed Chrysler, Mr. Obama also donned his presidential sales cap, emphasizing that Chrysler’s warranties would now be backed by the United States government — addressing a potential concern for those in the market for a new car.
“If you are considering buying a car, I hope it will be an American car,” he said. “I want to remind you that if you decide to buy a Chrysler, your warranty will be safe.”
“Come on down to Honest Barry’s car lot cuz’ we got some great deals for ya’ here…”
The U.S. government is now the #1 stockholder in GM. That is if you can still call it GM because all the people who onced owned it got
robbed …oops I meant to say pushed out agreed to settle for pennies on the dollar for their investments.
Mr. Rattner and Mr. Bloom both have experience with corporate turnarounds and were able to wring critical concessions from the U.A.W. The union, for example, agreed to accept company stock for 50 percent of what Chrysler owes its retiree health care fund. Most of the major debtholders, led by JPMorgan Chase, agreed to write down the debt owed to them by more than two-thirds.
Taxpayers have so far put up nearly $20 billion, which was supposed to be a loan at market rates but under Treasury’s forced restructuring will mostly be converted into equity in the new GM. The feds are also putting up $30.1 billion in “debtor in possession” financing and will effectively nationalize the once-mighty auto maker by taking roughly 60% ownership. (That’s not counting $12.5 billion to save GMAC, the company’s financing arm.) The Canadian government will go along for the ride for 12% of the new GM, the UAW will get about 17.5%, and the hapless bond holders have to settle for 10%.
Oh those whacky hapless bond holders. You can almost hear a tuba playing the notes oowhaaapp whamp. Hey…better luck next time. You should have been auto workers instead. They got a real good deal.
There’s also the labor agreement that the UAW approved last week, which goes some way toward reducing costs but probably not enough to make the new, smaller GM competitive. The new agreement simplifies some work rules and job descriptions but makes no reductions in hourly pay, pensions or health care for active workers. The agreement must also be renegotiated in two years by an Obama Administration running for re-election and weighing the need to keep Big Labor happy against the risks to taxpayer-shareholders. Who do you think wins that White House debate?
Chrysler said its factories would go mostly idle starting Monday, and remain so for the bulk of the process. Auto workers will receive about 80 percent of their base pay during the shutdown. The Treasury is providing $3.3 billion in so-called debtor-in-possession financing, and administration officials said during a conference call with reporters that no jobs would be lost during the bankruptcy.
What do they have to worry about…?They are now all federal employees. They can never be fired.
Not like all those pesky dealers who actually bought GM and Chrysler dealerships and got screwed out of their businesses with no compensation. Chrysler and GM won’t even buy back the inventory. Once they lose their franchises they can no longer sell the cars they have left as new.
The way I see it Barack Obama has just federalized the auto industry and made it state property in the fashion of Hugo Chavez. The White House is calling the shots and the Treasury is putting up the dough. Barack has even fired one of the CEO’s. The President fired someone in the private sector.
This is the big picture as far as I can tell.
We now own two car companies.
The investors and dealers got screwed.
The UAW became part owners.
Canada is an owner.
Fiat is getting Chrysler.
Hummer is getting sold to China.
The federal fleet will now all be GM cars.
The White House is running the show.
And there is no plan to get out of the car business eventually.
These companies will be like the the post office or Amtrack. They will never have to worry about making a profit when the government owns them. They are going to build these crappy little green clown cars that no one will want to buy. It will be nothing but corruption and chaos and scandal. The UAW will end up as an extension of ACORN as ready made campaign workers. Mighty convenient.
They are never coming back.
How long will it be before they start using the power of the federal government to squeeze out their competitors who can make it on their own…?
It’s only a matter of time. Barack Obama will mandate their success by law.
The Administration promises to wield a light ownership hand, but it’s only a matter of time before Congress starts to micromanage GM’s business judgments. Every decision to close a plant will be second-guessed, much like a military base-closing. And what about buying parts from foreign suppliers? Will those also be banned when Mr. Gettelfinger demands it, even if the costs are lower? GM’s managers and directors will have one eye on enhancing shareholder value, but the other on pleasing their political minders in Washington.
The Obama Administration has been whispering to the press that it could start selling its stake within a year to 18 months, and that it hopes to be out of the business entirely in five years. But even assuming that the taxpayer investment stops at $50 billion, GM would have to be worth a cool $80 billion for taxpayers to break even on their 60% stake. By way of comparison, GM’s market capitalization at its recent peak in 2000 was only $56 billion.
The larger corruption will be when government tries to vindicate its ownership by favoring GM over Ford and the other auto makers that aren’t wards of the state. The TARP legislation contained one blatant example in the form of a $7,500 tax credit for consumers who buy GM’s new electric car, the Chevy Volt. Expect more such favoritism, including huge new subsidies for green cars if consumers prove resistant to their charms.
Mr. Obama likes to say he’s a pragmatist who only prefers a government solution when it will work. But in resurrecting an industrial auto policy that even the French long ago abandoned, the President has made himself GM’s de facto CEO. Our guess is that he’ll come to regret it as much as taxpayers will.
This is bullsh!t