It is with increasing disgust and even outright anger that I watch the guy in the WH travel about and tout the “rescue” of GM and Chrysler. To hear that version millions of jobs would have been lost but for the government intervention and that only government could ride to the rescue. It is held up as an example of benefits of a large and domineering government presence in the market place. The money poured into those companies is claimed to be a tremendous success and those who disagreed are supposed to humbly bow their heads in awe and seek forgiveness for their shortsightedness. So often in the arguments about the economy I can only use my common sense and do some math and try to ascertain the truth about what is occurring because some specialist or economists is spouting facts and figures that come from a computer model and we don’t really know what the situation is and the facts are for ourselves. The GM/Chrysler case is something I do know something about at least and can speak with some confident authority, it feels good on that score at least but it doesn’t take away the agony of seeing the government continue to ever expand its scope and power over us and our livelihoods.
I have spent over 40 years specializing in Chapter 11’s and workouts. I have been involved in a number of large cases during that time. I know how bankruptcy works and rights of creditors and shareholders in those proceedings. The WH in early ’09 constantly made the claim that this was an all or nothing situation. That either the government bailed out GM/Chrysler or they would both be liquidated and all supporting parts manufacturers and dealerships would likewise go under. They claimed it was about saving US jobs. That whole scenario is a lie and was from the beginning. It was a lie from not taking the time and effort to find out how these situations play out in bankruptcy or knowing the truth and deliberately ignoring it.
Assume the government had not done a thing, not advanced one thin dime to GM or Chrysler. What would have been the outcome. First of all the rule of law would have been followed and more importantly respected and held up to the public as a good thing. Not something to be tossed aside when it was inconvenient. GM and Chrysler would have filed for Chapter 11. Those proceedings would have been successful. You can rewrite history but it doesn’t take any stretch of informed thinking to postulate the most likely outcome. The two companies do make products that some Americans want and will pay for at competitive prices. For sure their truck divisions, pick ups and SUV’s would have continued to have a viable market. No doubt at least a few of their standard vehicles would still have had a market also. The companies would have ended up being owned by their creditors. The shareholders would have been mostly wiped out. They may have retained a very small piece of the company so a public market would still be extant. They would have downsized for sure and that was probably something that needed to happen anyway. And the unions would have been given a real haircut on wages and benefits. The companies would have emerged with new debt that was sustainable and competitive pricing. Yes, there would have been some loss of jobs. But at least the jobs remaining would have been real jobs that the market place could and would sustain rather than jobs that are totally dependent on subsidies from Government, Inc. as far as the eye can see. Maybe 10 thousand jobs lost, maybe 20 thousand, and real pain for some. But we have had pain anyway and we the taxpayers would not have been out 70 billion!–and counting.
Now we have a GM/Chrysler that it on the public dole for Lord only knows how long. Don’t forget that the $7500 subsidy for those Volts is coming out of your pocket and mine and we haven’t even discussed the pension obligation that the US stepped up to take own along with the health care benefits for people who could retire in their early 50’s for heaven’s sake. Don’t you wish you could retire with those pension payments at age 52?
We all know the real reason the WH took the action it did in ’09. It was politics pure and simple. It was a giant payoff for the UAW and labor unions generally. The Democrats in control took 70 billion of our dollars and bought votes with it. That is the truth. If GM/Chrysler had gone through a legitimate and legal Chapter 11 proceeding they would be building cars today but there would have been a political price to pay for the Democrats and they weren’t willing to do the right thing for the country. It is especially galling since they didn’t even have to do any fund-raising for all those votes they just used our money. The WH didn’t save jobs, it saved the UAW and its political power structure.
We haven’t even discussed here the appalling lack of respect for the law that the Administration showed when it did the Chapter 11 and rammed this matter through with thuggery and threats to anyone who dared to oppose their view. If an attorney in a real case had had such conflicts of interest and had engaged in such fraudulent claim buying and manipulation he would have been turned into the Justice Department and the local grievance committee.
If you are thinking of buying a GM or Chrysler I urge you to think again. Think about exactly what type of crony socialism and outright Chicago thuggery you are supporting with that buy. It is a Faustian bargain.
The Sun shines bright and is warm but there is nothing brighter or warmer than the smile of a child. http://www.olcranky.wordpress.com