Obama’s GM ‘Success Story’ Headed for Bankruptcy

By Arnold Ahlert · August 18, 2012
http://patriotpost.us/

On the campaign trail, Barack Obama’s signature definition of “success” is the government bailout of General Motors. “I said I believe in American workers, I believe in this American industry, and now the American auto industry has come roaring back,” he told an audience in Pueblo, CO last week. “Now I want to do the same thing with manufacturing jobs, not just in the auto industry, but in every industry.” That pronouncement should send a shiver up the spine of every American, due to an inconvenient reality: according to Forbes Magazine, GM is likely headed for bankruptcy all over again.

The numbers are stark. The 500,000 shares of GM stock, comprising 26 percent of the company owned by the government — or more accurately the American taxpayer — sold for $20.21 on Tuesday. This left the government holding $10.1 billion worth of stock representing an unrealized loss of $16.4 billion. Even worse, in order to reach the break-even point, the stock would have to sell for around $53 per share.

The numbers remain in flux. As Investors Business Daily reveals, the Treasury Department continues “to revise upward the staggering losses inflicted on U.S. taxpayers.” They further note that the same day GM announced it was recalling 38,000 Impalas used by police in both America and Canada, due to a possible crash risk, a new Treasury report forecast that losses for GM were expected to reach $25 billion, which is $3.3 billion more than predicted earlier. Furthermore, since that report was based on GM’s stock price at the time of the report — 15 percent higher than it is currently — those losses are likely understated.

And even those numbers are somewhat misleading. In June, while the media was busy touting GM’s “success,” government purchases of GM vehicles rose a staggering 79 percent. And no doubt by sheer coincidence the purchase occurred only weeks before GM was to announce its 2nd Quarter earnings. GM also got an additional $2.7 billion from the Department of Energy (DOE) to reduce energy consumption in its door-making process. Still more? In a move reminiscent of that which precipitated the housing meltdown, GM has ramped up its uses of risky sub-prime loans to drive vehicle purchases. “The subprime market grew as a result of the recession,” said GM spokesman Jim Cain. “Our experience, however, is that with proper management they are very good risks.” That’s what Democrats like Barney Frank (D-MA) said about the housing market — just before it tanked and took the rest of the economy with it.

A report by the Heritage Foundation paints a devastating picture of how politicized the bailout of GM truly was. Heritage notes that even if one accepts president Obama’s premise that the bailout out GM was necessary to prevent massive job losses, “the government could have executed the bailout with no net cost to taxpayers. It could have — had the Administration required the United Auto Workers (UAW) to accept standard bankruptcy concessions instead of granting the union preferential treatment. The extra UAW subsidies cost $26.5 billion — more than the entire foreign aid budget in 2011. The Administration did not need to lose money to keep GM and Chrysler operating. The Detroit auto bailout was, in fact, a UAW bailout.” (Note that the subsidies are higher than the total loss currently attributed to the auto-maker.)

The preferential treatment had two primary components. Despite the fact that the UAW had the same legal status as other unsecured creditors, they recovered a much greater proportion of the debts GM and Chrysler owed the union. And even though bankruptcy typically brings uncompetitive wages down to market levels, UAW members took no pay cuts.

In short, the UAW an Obama administration picked both the “winner” in the deal — the UAW — and the “loser,” aka the American taxpayer.

Yet it gets even worse. Neil Barofsky, special inspector general for the $787 billion Troubled Asset Relief Program (TARP), reported to Congress that the forced closure of auto dealers was both unnecessary and politically motivated. “Treasury made a series of decisions that may have substantially contributed to the accelerated shuttering of thousands of small businesses and thereby potentially adding tens of thousands of workers to the already lengthy unemployment rolls,” Barofsky wrote, further emphasizing that “dealerships were retained because they were recently appointed, were key wholesale parts dealers or were minority- or woman-owned dealerships.”

And then there’s GM’s inherent design flaws. The highest sales volume in a vehicle class is for “D-Segment” cars, which are mid-sized, mid-priced, family sedans, that accounted for 14.7 percent of the total U.S. vehicle market in 2011, and 21.3 percent during the first 7 months of 2012. GM’s D-Segment car is the Chevy Malibu, and it must compete for sales with cars such as the Ford Fusion, Honda Accord, Hyundai Sonata, Nissan Altima, Toyota Camry and the Volkswagen Passat. Forbes columnist Louis Woodhill reveals that, due to the speed of auto technology, “the best vehicle in a given segment is usually just the newest design in that segment” and that a newly-designed vehicle had better be superior to its older competitors or the company “will spend the next five years (the usual time between major redesigns in this segment) losing market share and/or offering costly ‘incentives’ to ‘move the metal.'” To make a long story short, the 2013 Malibu is not only inferior to its competitors, it’s not even as good as the 2012 Malibu.

In June, GM CEO Dan Akerson weighed in with an administration-like solution for GM’s sales woes. In an interview published in the Detroit News, Akerson talked about enacting a $1-per-gallon increase in the gas tax on top of the current federal gas tax in order to “encourage” buyers to opt for smaller, more fuel efficient cars. That’s not encouragement. That’s blackmail.

During that same speech in Colorado the president also insisted that “I don’t want those jobs taking root in places like China, I want those jobs taking root in places like Pueblo.” Yet as political consultant Karl Rove has revealed, GM employed roughly 252,000 workers in 2008. The “new” GM currently employs 45,000 fewer workers — 131,000 of whom are currently “outsourced” in foreign plants.

As noted in the opening paragraph, the president sees GM as a template for every industry in America. Human Events’s John Hayward illuminates exactly what that means. “Taxpayers were compelled to rescue the company from bankruptcy, then they were compelled to buy its products, and Obama tells them it’s all a smashing ‘success’ that should be duplicated throughout the private sector,” Hayward writes, “Taken literally, as the President prefers his words not to be taken, this would mean the end of the private sector.”

Hayward may be too generous in his assessment. In this particular case, it is quite likely the president is saying exactly where he intends to take America in the next four years should he be re-elected.

Mac in Arizona
Saturday, August 18, 2012

The bigger picture here is Obama’s assertion that he’ll do this to other private sector industries.

With Dodd-Frank, he’s already doing it to the banks.

What person, in their right mind, would now invest in ANY company? Especially any company with a union presence?

The shareholders of GM and Chrysler who were screwed so badly by this Marxist traitor have been silenced by the MSM and the government.

Private property? “You don’t have that…. you didn’t build that…” “…. FORWARD, COMRADES…!!!”

Gregory in Yakima Wa.
Saturday, August 18, 2012

George W. Bush YouTube explaining why he is signing the auto bailout: http://www.youtube.com/watch?v=1N5kRVfmMoE
George W. Bush explaining why he is signing the Wall Street bailout: http://www.youtube.com/watch?v=t-fFj-ujuB4

From Wikinvest “In 2008, a series of bank and insurance company failures triggered a financial crisis that effectively halted global credit markets and required unprecedented government intervention. Fannie Mae (FNM) and Freddie Mac (FRE) were both taken over by the government. Lehman Brothers declared bankruptcy on September 14th after failing to find a buyer. Bank of America agreed to purchase Merrill Lynch (MER), and American International Group (AIG) was saved by an $85 billion capital injection by the federal government.[1] Shortly after, on September 25th, J P Morgan Chase (JPM) agreed to purchase the assets of Washington Mutual (WM) in what was the biggest bank failure in history.[2] In fact, by September 17, 2008, more public corporations had filed for bankruptcy in the U.S. than in all of 2007.[3] These failures caused a crisis of confidence that made banks reluctant to lend money amongst themselves, or for that matter, to anyone”

All this of course before President Obama took office. Funny these facts are totally missing from the blame Obama screed.

Mac in Arizona
Saturday, August 18, 2012

Started by the insane lending of Fannie/Freddie a la Barney Frank and Chris Dodd – and yes – a failure of any government intervention PRIOR to the collapse.

But what Obama did to the shareholders was unconstitutional. They should have been the first to be paid off -in a bankruptcy they would have been – NOT THE UNIONS THAT WERE THE MAIN REASON FOR THE FAILURE IN THE FIRST PLACE.

And now, with the unions still hanging themselves – it’s actually poetic justice that these “new owners” are going to kill their golden goose.  Comrade – did you even read the article?  This is an assault on the the private sector.

JJStryder in Realville
Saturday, August 18, 2012

You don’t go back far enough Greg. Google the Community Reinvestment Act brought on by Jimmy Carter and put on steroids by Bill Clinton and Janet Reno.That is what led to everything you write. Do I agree with GW”s response…..hell no…but he certainly didn’t create the problem which Obama has made worse. These facts are anything but funny.

Gregory in Yakima Wa.
Saturday, August 18, 2012

“The Financial Institutions Reform, Recovery and Enforcement Act of 1989 (FIRREA) was enacted by the 101st Congress and signed into law by President George H. W. Bush in the wake of the savings and loan crisis of the 1980s. As part of the subsequent general reform of the banking industry, FIRREA added section 807 (12. U.S.C. § 2906) to the existing CRA statutes in an effort to improve the area concerning insured depository institution examinations.”

Then GWB said this (many, many times) “WASHINGTON — “We can put light where there’s darkness, and hope where there’s despondency in this country. And part of it is working together as a nation to encourage folks to own their own home.”

Patrick Jones in Siler City, NC
Saturday, August 18, 2012

It’s amazing how GM parallels the path of the Twentieth Century Motor Company from Atlas Shrugged.
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Gregory in Yakima Wa.
Saturday, August 18, 2012

President George W. Bush, Oct. 15, 2002

The global financial system was teetering on the edge of collapse when Bush and his economics team huddled in the Roosevelt Room of the White House for a briefing that, in the words of one participant, “scared the hell out of everybody.”

It was Sept. 18. Lehman Brothers had just gone belly-up, overwhelmed by toxic mortgages. Bank of America had swallowed Merrill Lynch in a hastily arranged sale. Two days earlier, Bush had agreed to pump $85 billion into the failing insurance giant American International Group.

The president listened as Ben Bernanke, chairman of the Federal Reserve, laid out the latest terrifying news: The credit markets, gripped by panic, had frozen overnight, and banks were refusing to lend money.

Then his Treasury secretary, Henry Paulson Jr., told him that to stave off disaster, he would have to sign off on the biggest government bailout in history. Bush, according to several people in the room, paused for a single, stunned moment to take it all in.

“How,” he wondered aloud, “did we get here?”

Eight years after arriving in Washington vowing to spread the dream of home ownership, Bush is leaving office, as he himself said recently, “faced with the prospect of a global meltdown” with roots in the housing sector he so ardently championed.

There are plenty of culprits, like lenders who peddled easy credit, consumers who took on mortgages they could not afford and Wall Street chieftains who loaded up on mortgage-backed securities without regard to the risk.

But the story of how the United States got here is partly one of Bush’s own making, according to a review of his tenure that included interviews with dozens of current and former administration officials.

From his earliest days in office, Bush paired his belief that Americans do best when they own their own homes with his conviction that markets do best when left alone. Bush pushed hard to expand home ownership, especially among minority groups, an initiative that dovetailed with both his ambition to expand Republican appeal and the business interests of some of his biggest donors. But his housing policies and hands-off approach to regulation encouraged lax lending standards.

Gregory in Yakima Wa.
Saturday, August 18, 2012

There’s a phrase that goes like this: Success has many father’s but failure is an orphan.

the gist of the article above is that it’s all President Obama’s fault. That is obviously not true. Bush left an economy in free fall for the new President. It’s hard to imagine anyone doing things significantly different than Obama regardless of party.

Bush took a budget deficit and turned it into a huge deficit. Bush with Paul Ryan’s approval started two wars, ran them poorly and put the cost onto borrowed money to the current estimate of 3.5 plus trillion dollars. More than 7 trillion in borrowed money for Bush Medicare expansion plus the Tarp bailouts.

Mittens, your new hero said ““ My own view, by the way, was that the auto companies needed to go through bankruptcy before government help. And frankly, that’s finally what the president did. He finally took them through bankruptcy. That was the right course I argued for from the very beginning. It was the UAW and the president that delayed the idea of bankruptcy. I pushed the idea of a managed bankruptcy and finally when that was done, and help was given, the companies got back on their feet. So I’ll take a lot of credit for the fact that this industry’s come back.”

Old Sarge in Hinesville, GA
Saturday, August 18, 2012

Obama may have taught constitutiional law but he certainly doesn’t mind going around it when it suits him . By the way, the housing market bust was caused by Carter, Clinton, Dodd, and Franks. Selling someone a house you know they can’t pay for is bad business. Crater telling banks that 15% of all home loans had to be subprime and then Clinton increasing it to 25%. This ws nothing more than government interference in the private sector. In our history never before has government been more intrusive in our private lives and businesses than it is today.

Gregory in Yakima Wa.
Saturday, August 18, 2012

On the March 30, 2009 deadline President Barack Obama declined to provide financial aid to General Motors, and requested that General Motors produce credible plans, saying that the company’s proposals had avoided tough decisions, and that Chapter 11 bankruptcy appeared the most promising way to reduce its debts, by allowing the courts to compel bondholders and trade unions into settlements.[23] GM Chairman and CEO Rick Wagoner was also forced to resign.[24] GM bondholders rejected the government’s first offer, but the unions agreed to the preferential terms.[25] A bondholder debt to equity counteroffer was ignored.[26]

Gregory in Yakima Wa.
Saturday, August 18, 2012

On Chrysler: The dissident Indiana pension plan bondholders appealed again to the U.S. Supreme Court to block the sale. The U.S. 2nd circuit appeals court stayed its decision, pending a response from the Supreme Court, until 4PM, June 8, 2009.[4][5]

On June 8, 2009, Supreme Court Associate Justice Ruth Bader Ginsburg, who handles emergency motions arising from the United States Appeals Court for the Second Circuit, in a one-sentence order, temporarily stayed the orders of the bankruptcy judge allowing the sale, pending further order by Justice Ginsburg or the Supreme Court.[6]

On June 9, 2009, the Supreme Court published its denial of the applications for a stay of the sale from the three Indiana funds, allowing the sale of assets to “New Chrysler” to proceed.[7][8]

According to the two-page decision and order, the Indiana funds “have not carried the burden” of demonstrating that the Supreme Court needed to intervene.[7] The U.S. Department of the Treasury issued a statement saying: “We are gratified that not a single court that reviewed this matter, including the U.S. Supreme, found any fault whatsoever with the handling of this matter by either Chrysler or the U.S. government.”[7]
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Mac in Arizona
Saturday, August 18, 2012 at 11:47 PM

So sayeth Ruth Ginsberg-traitor bitch.

Mac in Arizona
Sunday, August 19, 2012

BTW- Where in the Constitution gives the President authority to fire a CEO of a private firm?

You liberals all have a rectal/cranial conundrum.

M Rick Timms, MD in Georgia
Sunday, August 19, 2012
Mac,

The leftist Fascists think it if just fine to take over a privately owned /publically traded company and use “government” officials and judges to deem it all OK. The Bond holders should have been treated as primary creditors in a legal bankruptcy proceeding. They were robbed, and thier stuff was given to Obamas union buddies with the approval of a leftist judge. It is lawlessness. Locally, dealerships owned by Republicans were simply closed – taken away, only later to be awarded to the highest bidder.

If the bankruptcy had been allowed to occur the companies would have been sold, made profitable and rebuilt for success with a rational business plan and non-union workforce of Americans willing to work for reasonable wages and benifits.

But when you are a leftsit fascist, like Greg, it is perfectly fine to allow the government to take over the private sector.

Abu Nudnik in Toronto
Monday, August 20, 2012

“GM has ramped up its uses of risky sub-prime loans to drive vehicle purchases.”
ENRON. Government sponsored con game. When the government runs a company it can invent sales, harass its competition, change law to advantage it. There should be a constitutional amendment forbidding government from engaging in the creation of any good or service for sale.

28th amendment: The Federal Government shall not engage in commerce, neither buying nor selling any product, good or service.

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