To continue on with the theme from the conservative bloggers uniting post, let’s look at a favorite claim of the Obama administration, the success of the auto bailouts. As the walking gaffe machine, Joe Biden, likes to claim, “Bin Laden is dead and GM is alive”. In fact, Obama is just the tip of the iceberg. Many others side with the President on this issue. The general premise is that the auto industry would have failed without government intervention including the supply chain and various other support industries. Of course, we’ll never know now if that claim was true but we can examine the contentions and the results.
The assertion of rescuing an industry is to preserve jobs. American jobs. Obama, amongst others, claim the bailout saved over a million jobs. He also made this statement.
“I am convinced that we’re going to rebuild not only the auto industry but the economy better and stronger before,” Obama said. “And at it’s heart is going to be three powerful words: Made in America.”
Made in America. How did he fare? Did the American taxpayer get a good return on its investment? This video from GM CEO Dan Akerson is very telling.
70% of GM cars are made outside the United States. Those three powerful words Obama referenced seem hollow.
Let’s take a look at Chrysler. The Chrysler bailout cost taxpayers $1.3 billion dollars. Did we save an American icon? Depends upon your point of view. If you’re satisfied with your tax dollars going toward rescuing a foreign automaker, then call it a success. That’s right, Chrysler is now majority owned by Italian automaker Fiat. Of course, the intent wasn’t to save money but to save jobs.
We didn’t do this to maximize return. We did it to save jobs, Treasury Secretary Timothy Geithner said during a trip to Detroit in April
If Chrysler being foreign-owned doesn’t rankle you, perhaps the notion of Fiat building Chrsyler’s overseas and then exporting them to America will as reported by Bloomberg –http://www.businessweek.com/news/2012-10-28/marchionne-seen-missing-fiat-sales-target-by-19-billion#p1 . Fiat announced today that the iconic Jeep will see production in Europe – http://www.huffingtonpost.com/huff-wires/20121030/eu-italy-earns-fiat/. Fiat also lowered production forecasts from a lofty 6 million annually to the low-to-mid 4 million range.
So GM makes 7 out of 10 cars overseas and Chrysler is now owned by a foreign company, is lowering production goals and moving assembly overseas. Hardly a smashing success. Let’s look at another viewpoint as to whether or not our taxpayer dollars went toward saving American jobs and not just industry jobs as the above examples illustrate.
There is no definitive evidence showing that American jobs were saved. Nor that the entire industry would have simply liquidated. Take a look at this list compiled to show the 22 largest bankruptcies worldwide .What do they have in common? Generally, they are financial, automotive or airline industry companies. History shows that the financial and airline industries continued to exist despite major member bankruptcies.
Another claim is that liquidation was imminent because private capital was unavailable due to the seizing of the credit markets brought about by the global recession. You’ll note that number 18 on this list was LyondellBasell Industries. During the very same time frame as the GM and Chrysler bankruptcies, they secured over $8 billion in debtor-in-possession financing . This was the largest amount ever by nearly a factor of two and again, it occurred during the same time frame as GM and Chrysler.
Furthermore, as Mitt Romney pointed out, an auto industry managed bankruptcy would have had government backing. Meaning any risk would have been absorbed by the U.S. taxpayer and not the consortium of lenders that would have supplied the $85 billion dollar lifeline.
The debate as to whether there were really no other options other than government intervention will go on indefinitely. The results of the bailouts can be measured in many ways. The precedent has now been set and the auto industry is well aware it has carte blanche to continue on with risky investments as well as other unsound business practices with the implicit guarantee of a taxpayer rescue lifeline always at hand.
Case in point is the Chevy Volt. Every car that rolls off the lot is a loser, yet there is no accountability as to a return on investment as it falls under the Obama green energy initiative. It also provides an interesting quandary for the American taxpayer. Public sentiment runs high for punishing corporate welfare, excessive CEO salaries and bonuses and the like. Yet the Chevy Volt is purchased by an individual with an average annual income of around $170,000 dollars. We the taxpayer provide that well-to-do individual with a tax credit of $7,500 for purchasing a Volt. One would think an average Joe bringing home his $30K salary would not support their tax money going to subsidize a Volt buyer making much more money.
I never even mentioned the travesty of the bankruptcy process the Obama administration engaged in. Or the crony capitalism they promoted in doing so. Stakeholder relationships have been forever altered in knowing that standard bankruptcy practices can be so easily discarded.
Early repayment of the TARP loans was highly publicized, yet was just an accounting gimmick utilizing one capital credit line to pay off another. Even individuals who play that game at home by using one credit card to pay the minimum payment on another realize that eventually the clock runs out on that as well.
You simply can’t find a true positive outcome on the auto bailouts. The iconic American companies are gone. The billions in taxpayer revenue is forever lost. The claim of an entire industry simply liquidating just doesn’t pass the smell test.
The bottom line is that American taxpayer dollars were used to save American jobs. You failed, President Obama.