Here’s a video just released by those wonderful folks at the Democratic National Committee. It claims that the bad Republicans were wrong about the auto bailout because the companies are still in business and have paid back the money they confiscated from taxpayers.
This partisan video may be effective, but it’s wrong in very important ways. I’ve already explained in a previous blog post why the General Motors bailout was not a success.
The Chrysler bailout also is a failure. Here’s what Conn Carroll wrote for today’s Washington Examiner.
American taxpayers have already spent more than $13 billion bailing out Chrysler. The Obama administration already forgave more than $4 billion of that debt when the company filed for bankruptcy in 2009. Taxpayers are never getting that money back. But how is Chrysler now paying off the rest of the $7.6 billion they owe the Treasury Department? The Obama administration’s bailout agreement with Fiat gave the Italian car company a “Incremental Call Option” that allows it to buy up to 16% of Chrysler stock at a reduced price. But in order to exercise the option, Fiat had to first pay back at least $3.5 billion of its loan to the Treasury Department. But Fiat was having trouble getting private banks to lend it the money. Enter Obama Energy Secretary Steven Chu who has signaled that he will approve a fuel-efficient vehicle loan to Chrysler for … wait for it … $3.5 billion. …to recap, the Obama Energy Department is loaning a foreign car company $3.5 billion so that it can pay the Treasury Department $7.6 billion even though American taxpayers spent $13 billion to save an American car company that is currently only worth $5 billion.
As a train enthusiast, I’ve never liked GM. Starting in the 1930s, they conspired to put America’s electric trolley systems and interurban railroads out of business to be replaced by smelly, noisy diesel buses and their ElectroMotive Division built diesel locomotives that put the great steam locomotive builders ALCO, Baldwin and Lima out of business. They built big ugly clunkers and acceded to every outrageous demand of the UAW bosses. They were “too big for their britches.” But should they along with Chrysler have been allowed to fail taking their current employees, retirees, suppliers and associated communities along with them? Or would a thorough restructuring (with government help) making them leaner and more competitive not be better for the US economy?
For economists like Daniel and Republican laissize faire types like Jim DeMint, Schumpeter’s “creative destruction” mandates that these companies bite the dust. But there is a general consensus building that we have had too many industrial companies either cease operations or “outsource” their manufacturing. ABC Evening News has a continuing series devoted to finding companies that still manufacture here.
The “Let Detroit Go Bankrupt” ad is a real winner for the democrats. The Republican candidates for president would be wise to adopt an economic nationalist agenda and quit being poster boys for globalization.
General Motors and Chrysler have become the AMTRAK of the automotive industry. Both will remain the sick sisters, plagued with the same problems that caused their illness initially.
The legal bankruptcy process was circumvented for political gain to benefit the auto unions and protect Democrat Party contributions from them. The party is bought and paid for by what appears more and more to be a union subverted by socialists/communists movement on an international scale.
To mention this publicly is of course to draw ridicule from media, political and academic sources throughout the country, but Americans are not fooled by the public face put on this corruption. It remains to be seen whether sufficient numbers of voters are savy enough to push back against the DNC/Labor cabal at the polls, which is the only way to end the wholesale dishonesty that characterizes 21st century federal government.
To Aged Cheddar: The bankruptcy process would have resulted in a Chapter 7 total liquidation for both GM and Chrysler. The big U.S. banks were teetering on the edge of bankruptcy themselves and could not supply the companies with “debtor in possession” financing for a Chapter 11 restructuring.
No doubt, the only bidders for GM and Chrysler assets would have been foreign companies, mainly Chinese. They would only be interested in the designs, patents, tooling and production machinery to take back to Asia with them. I don’t think that the elements of the hedge fund “industry” would make a bid.
The bottom line would be that Japan, Inc. would wind up supplying the U.S. with autos and trucks, taking over another formerly domestic industry.