GM Gets Bailed Out Again, Then Bails Out.

I can’t say that I didn’t see this coming.  In fact, I believe that I stated it would happen.  The auto bailout saga continues with another $5.5 billion in tax payer money being made available to GM and Chrysler, as a loan of course.  According to an AP story published by the Washington Times the money will be marked for working capital.

DETROIT (AP) — General Motors Corp. could get as much as $5 billion more in federal loans, while Chrysler LLC could get $500 million as they race against government-imposed deadlines to restructure, according to a government report filed Tuesday.

The quarterly report by a special inspector general on the auto industry and bank bailout programs says the money will be made available for working capital. GM has until June 1 to complete restructuring plans that satisfy the government’s auto task force, while Chrysler has until April 30.

This is on top of the $13.4 billion that GM received, while Chrysler took home $4 billion in the initial bail outs.  GM CEO Fritz Henderson stated last February that GM would need at least $4.6 billion for the second quarter.  It looks like he’s getting too.  Making a whopping $18.4 billion in tax payer money “loaned” to GM and 4.5 billion to Chrysler.

This comes after Henderson stated in his first press conference after being crowned CEO of GM, that GM was looking into filing Chapter 11.  A statement that he has repeated numerous times, both during T.V. interviews and conference calls with press.

“We will get the job done. We will either do it out of court or we will do it in court,” he said. “But we will get the job done in terms of recreating and reinventing General Motors as a competitive enterprise – one that wins in the market place.” — Mar ’09

“I felt several weeks ago that it would be more probable that we would need to go through a bankruptcy process,” he said. “That continues today. But I wouldn’t be able to hazard a guess as to what the probabilities would be.” –Apr ’09

If GM plans to file Chapter 11, as they should have last year when the bottom fell out, then why are we going to write the failed company a check for $5 billion dollars?  The short and skinny of it can be boiled down to three letters U.A.W.  The UAW are the only ones to benefit from all of this tax payer money.  It buys them time and a quick pay out.  Not to mention the negotiations to purchase $20 billion in GM stock.  Which would likely make the UAW the largest shareholder in the company.  Smell anything fishy?

I do.  As I stated from the very beginning, GM should have never received tax payer money; they should have filed for a controlled bankruptcy.  However, the UAW doesn’t benefit from that, in fact, it probably would have been painful for them.  So, the UAW and their political allies forced GM’s hand.  $18 billion in tax payer money later… Chapter 11.  As usual, the American tax payer is left holding the bag.

Oh That Joe!

Our man Joe “Lunchbox” Biden was in Jefferson City, Missouri giving a speech to the local union at the ABB Transformer Factory on April 16th about the “New Economy” that he and Obama are building.  The following are a direct quotes from his speech and my rebuttals and/or snarks.  It’s Joe, so you know there is much much more gas-baggery than what follows, but these are the sections that somewhat made sense. 

Folks, before I begin my formal remarks, since I have that bad reputation of telling it straight, I want to tell you something. I always feel good when I got the UAW behind me, in front of me, to my right and to my left. I wouldn’t be in office without you all. (Applause.)

What you mean to say, Joe — may I call you Joe? Is that you have a reputation for flights of fancy befitting a senile old man and the imagination of an eight year old with ADD.  I am certain that you do feel right at home with your union pals, who, as you truthfully said, put you in office.  What does that tell us, Joe?  The negotiations with GM, the bailouts and the Congressional probes all have one thing in common, and one primary beneficiary.  Political reparations?  Say it ain’t so, Joe. Say it ain’t so!

We started in what they call the Executive Office Building, making an announcement for what will amount to more than a $15 billion investment in — what, $13 billion investment in high-speed rail — good jobs, an economic future that understands our energy needs and how to save it and how to connect this country in a way.

First, everyone calls it the Executive Office Building.  That’s its name, Joe.  No need to pomp yourself up by announcing to your union friends that you were actually IN the Executive Office Building, as if it is impressive.  It’s kind of like a middle aged man trying to pick up women at a bar by skillfully employing the “I’m important, and know important people” tact with lines like: “So there I was, in the White House…”  Or do you just like the way the words roll off of your tongue?

As for the $13 billion dollar high-speed union pay off, er… um high-speed rail system.  This wouldn’t happen to be anything like the high-speed train that connects Las Vegas and Disneyland would it?  Secondly, railway transportation hasn’t been economically viable for the majority of people and companies for a long time in this country.  We have cars.  They’re cheap, efficient and on demand.  Why would we trouble ourselves by using your high-speed rail system?  Are you honestly expecting us to pick up the tab for a railway system that we will inevitably subsidize when it fails to turn a profit, like say, Amtrak?  You know about Amtrak, don’t ya, Joe?

You guys are just right here at the beginning, you’re in the ground floor — the ground floor of what could be the economic engine that not only gets us out of this doldrum we’re in, but literally, literally propels this nation to be able to lead the world in the 21st century the same way we did in the 20th century.

For starters, I wasn’t aware that we had stopped leading the world.  I also wasn’t aware that you and your buddy, Barack, wanted to see the U.S. continue to lead… Of course, I’m just basing that on the economic, social and foreign policies that you two have put forth. 

Joe, I know how much you love the unions, but do you honestly want our economic engine ran by the same people that are at the very least half responsble for the failure of GM and Chrysler?  I know that unions put you in office, but don’t you think that at some point political pay backs and senility stop being excusable excuses?

As you heard, because of the investments from the Recovery Act — and you all, we use these terms like the Recovery Act. That’s where Barack Obama went to the Congress and did something no one has ever done before. He said, I need another $787 billion now — now — to go out now and invest in this economy, save jobs, to create jobs. We’re not going to wait. We’re not going to wait. Too many of your brothers and sisters are really in hard times.

Yes, Joe.  Everyone around you is too stupid to know what the Recovery Act was.  What I find laughable, Joe, is that you continue to call it a Recovery Act.  Even with all of the evidence put forth that suggests… scratch that.. flat out states that the Recovery Act is a complete sham that does nothing but waste tax payer money.  Generation Theft Act is far more fitting.  Don’t get me wrong here, Joe, I know that your union friends are in dire straits right now.  The billions upon billions already spent to prop them up are falling short.  Fear not, union brethren, the American Tax Payer will save you!

And so we did something amidst — in the midst of an economic downturn that had never been done before. And then he made a big mistake. He said, Biden, you’re in charge. (Laughter.) And I’m proud to be in charge of how this money is going to be spent, and whether or not we spend it in an unusual way — completely transparent for all the world to see; completely accountable so we answer for what we’ve done, and efficiently.

Other than the sheer volume of money spent, Joe, there is nothing new about deficit spending during a recession.  I know, I know, you invented the idea first, Joe.  Just like Al Gore invented the internet.  Of course, the common sense adage “you can’t spend your way out of debt” isn’t new either. 

Where you will get no arguments from me is “And then he made a big mistake. He said, Biden, you’re in charge.”  How does that saying go?  Ninety percent truth is said in jest.  While I am certain that you ARE proud of being in charge of that money… I find it frightening.  I know that you’ll spend it in undoubtedly creative and unusual ways.  The transparency… not so much.  You know, kind of like the last rounds of bailouts.  Tell me, Joe do you guys have a clue where that money went yet?  The only thing transparent here is your false humility.  Oh, one pointer, if I may.  Never use the term “efficiently” in the same breath as government.  The thought is too laughable to be taken seriously…. You know about being laughable, don’t ya, Joe?

Ladies and gentlemen, we put in a tax system of financial incentive. It’s called a production tax credit.

Ladies and gentlemen, President George W. Bush put in a tax system of financial incentive. It’s called a production tax credit.  Sorry Joe, W. signed this into law, which was due to expire on Dec 31, 2008.  However, he signed an extension that extends these credits until the end of 2009. 

 So now with those efforts we’ve spurred the state’s largest wind energy development, generating roughly — electricity just in this one project. This is just one example around the nation to generate enough electricity to power at least 50,000 homes. Clean energy, clean energy. Renewable energy — not needed to be imported. No one has to do anything except the wind blow.

 WOW! A whole 50,000 homes?  Tell me, Joe, how much is this project costing?  How much would it have cost to build a Nuclear plant in its stead — which would power far more than 50,000 homes?  Of course, wind is renewable… when the wind blows.  Isn’t that the problem with these monstrously large wind farms?  The fact that they only work when there is enough wind.  Otherwise they simply occupy HUGE swaths of space that could otherwise be used to develop industry that will actually help the economy.  Or you could leave the land natural so that the “precious” animals of this planet have a place to live…  Isn’t that part of the whole Green Movement?  Seems counter-intuitive to use up five times the land mass for less than a portion of the energy that would produced by a single nuclear plant.  Of course, that is only IF the wind blows constantly, which it doesn’t.  Unless we can count on you, Joe, to hold speeches near wind farms round the clock… Heck, that may actually power a city.

How many think we’d have so many troops stationed in that area of the world if we didn’t need the oil? You know, if you add the actual price of oil, it’s probably $10 more a barrel just by the military we have to provide to be able to ensure those oil lanes stay open among other things.

Ahhhh, there it is.  The obligatory anti-military and anti-Iraq War invective.  Good Ol’ Joe, you just couldn’t resist an opportunity to take a stab at Bush and the Iraq War at the same time.  It was simply too easy, right?  You know, Joe, if we rid that area of tyrannical regimes and terrorist groups that would hold the entirety of the West hostage through energy we wouldn’t NEED to provide military security FOR those shipping lanes.  Not to point out the hypocrisy here, but this coming from the same guy who repeatedly called oil and energy a matter of national security during the campaign.  The last time I checked, Joe, national security in foreign countries is handled by the military.  Not to mention the fact that several of those countries have ASKED for help in securing their shipping lanes.   So until we are free from foreign oil… we HAVE to secure it.  We aren’t going to get there by setting up windmills.  We’ll get there much quicker and more efficiently through nuclear energy and domestic drilling.  Of course, we can’t do that, can we, Joe?  It makes far too much sense.

Hard workers like you are the core — the core — literally the core of that glorious heritage. And together we’re going to once again lead the world in peace and prosperity. And it starts by building a foundation, a foundation for a new economy. And it’s going to be built on your shoulders, on your ingenuity, and your hard work. I promise you that. I promise you that.

There is no doubt that the American worker is the core of our glorious heritage.  Unions? Not so much.  Where I draw blanks here is “…a foundation for a new economy.”  Who says that we need or want a “new” economy?  I think that history shows quite sufficiently that Capitalism is the best economic system.  The U.S. didn’t grow to be the world’s strongest and wealthiest nation through facism, Joe.  We got here through Capitalism.  We don’t need a new system, nor do we want one.  The one we have now has worked just fine, and will work just fine if you and your ilk would simply leave it alone! 

There is no doubt that your vision of a “new economy” would be built on the backs of hard workers and American ingenuity.  With proper regulation, beauracracy and “fairness”, of course. 

In effect, what Joe is saying is that he and Barack want to spend another $37 billion on political payments and hot air.  Don’t you worry, America, we’ll be footing the bill… AGAIN. 

Joe, I know that all of  this may have come off as harsh, condescending and sarcastic; not too unlike yourself.  But we can still be friends, right?  I mean, can I still call you Joe, Joe?

 

For a full transcript of the speech click here — courtesy of Fox News.

Roots of Auto Makers’ failure..

With the beggary of the auto makers and subsequent bailout using TARP funds, courtesy of Pres. Bush, the auto makers have drawn a considerable amount of public attention.  With that a lot of public ire as well.  The question is, is that ire pointed in the right direction?  I have heard a lot of belly-aching over the mismanagement of the companies by the the executives.  Are they to blame?  They certainly played a roll.  Though I am of the opinion that they may have been able to fix their own mistakes if there were no other factors involved.  I’ve seen many in the pundit circles heave the lion’s share of blame on the UAW.  I can’t say that I totally disagree there.  However, the UAW with all of its faults, is not the root cause.  I am the type of person that always looks for the underlying root cause of things.  You can treat symptoms until your blue in the face and they’ll keep coming back.  If you find the illness and treat it… the symptoms go away by proxy.  The same thing applies here with the auto industry.  The root cause needs to be identified and fixed.  Or no amount of bailouts or concessions will return these companies to full viability.  So, what is the root cause, you ask?

Like almost everything else that goes awry in the free market world… The Government!  That’s right, the U.S. Government is the underlying illness of the auto industry.  While this particular side of the Auto Maker’s problem has been spoken of, it hasn’t gotten nearly enough attention.  Ironically, those that have given it the publicity it deserves have been in favor of bailing them out.  Citing that since the government caused the problem they should pony up the dough. (The inherent barrier to this particular argument is that the government has NO money.  They use our money.  We didn’t cause the problem, why should WE pay for it?).  I know, I know, but but but the evil UAW!!  While they certainly are to blame for their fair (and rather large share) of the problem, again, they are not the root cause.  They could not have inflicted the damage that they have, through their own greed, if they didn’t have the backing of members in Congress.  I won’t be going into too much detail regarding the relationship between UAW and Congress.  As I will be covering the relationship between Congress and unions in another post.

Instead I will be focusing the majority of my attention, in this post, on the stifling mandates that were crammed down our auto industry’s throat.  There are so many convoluted and ridiculous mandates that it would take forever and 20 pages to go through them all.  So instead, I will talk about the most inflammatory, ridiculous, obnoxious, fool-hearty, anti-free market mandate of them all.  CAFE standards.  The standards celebrated by our tree-hugging global warming fanatics.  The standards lumped onto the camel’s back with no care for the fact that it left but a straw’s worth of weight in the camel’s carrying capacity.  Now I know the arguments in favor of CAFE.  I know that people think it reduces the amount of pollution we expel into our environment.  It helps save us from ourselves.  If you want to know what I think about that, read here.  But before I move on allow me to dispel a myth here.  CAFE reduces nothing in the way of pollution.  I know, I know, “those standards increase fuel economy and therefore we use less fuel and pollute less”.  While CAFE may FORCE companies to increase fuel economy it does not actually reduce the amount of fuel consumed or pollution expelled from vehicles.  Studies have shown that since our vehicles get better mileage… we simply drive more and drive them further than before.  Thus using MORE fuel and pushing more pollution out of our exhaust pipes.  Essentially CAFE does more harm than good for the environment.

Moving on.  What happened here is once again Congress, in their infinite ignorance, dipped their hands into the free market and muddled things up.  How are CAFE standards and mandates tinkering with the free market?  Simple.  In a free market the consumer decides the fate of a company.  We do this with our purchasing power by purchasing the items that we want or need.  If enough people purchase an item from a company… that company’s competitors will most likely begin producing that product (or they likely will fail).  Other companies will begin trying to improve upon the products that their competitors are producing in order to gain market share.  That is how free market works (yes I am over simplifying it a bit).  You and I, the consumer, control what products and companies succeed or fail.  What Congress did, in essence, was decide by mandate what you and I get to buy.  They did this by forcing our auto manufacturers to change not just their product lines, but also the way that they are produced.  Aside from the initial cost of retooling all of their plants they also had the added cost of redesigning their fleets.  In order to keep the already rising cost (thanks, UAW) to purchase their products down they had to start skimping on the quality materials.  They had to make vehicles lighter or heavier to meet the fuel efficiency marks set by CAFE.  The extra costs from this are also rolled into the price.  (Keep in mind that none of this was due to consumer demand.  We were still demanding what they already made.)

Price is tertiary to my main point though.  To illustrate my main point let’s look at GM.  When you think GM, what do you (or did you – pre-bailout) think of?  TRUCKS, big-freakin’-trucks & SUVs.  That is what they are known for because that is what they do best.  What’s the number one stolen vehicle in the US? The Hummer and the Escalade.  Both GM SUVs.  Their failure has nothing to do with people not wanting their products.  Clearly they do.  While GM makes a few good cars (most notably the Corvette and Impala) that isn’t their strong suit. People don’t want GM cars.  People want GM trucks… but they want them to be GM trucks.  Not Tonka toys.  They want that quality steel-frame, the metal paneling, the high-torque engine.  People want big safe SUVs and trucks.  GM can’t make those anymore.  They’ve had to trim that out to meet government mandates.  No more fully metal body on that pickup.  No more overhaul engines.  GM is being forced to make crap that we don’t actually want.  Why would I buy a GM truck that looks and feels like a Honda, when I can buy the Honda truck for less?

Many people are also not aware that cars cost about as much as a truck to make.  However, people expect cars to cheap.  Trucks have the luxury of having a much higher purchase price ceiling than the econoboxes. Anyone who has ever traded in upside down before knows that the higher the price of the car being traded on, the more wiggle room you have to hide the negative balance of your trade-in.  The same rule holds true for production costs.  GM can hide a lot more of the production costs in a truck than it can in a car.  Due to the higher cost of production for GM (versus, say, Honda) they have to essentially sell their cars at a loss.  So GM rolls that cost into their trucks.  So the trucks and SUVs get the roll-up from higher production costs and the negative selling of their cars.  On top of the fact that in order to cut production costs they have had trim back on the features in their vehicles. Don’t get me wrong.  GM has done some great things with their features considering the little room that they have to play.

Couple this with the political pressure to cut out GM’s bread and butter products (trucks and SUVs) and the exorbitant gas prices for the last few years and you have a failure stew simmering.  The last few years of extremely high gas prices have sent would be buyers of trucks over to the Prius.  It was the final straw.  However, I maintain that this would not have been a problem if the government had stayed out of the mix.  You see, if people wanted nothing but cheap and fuel efficient cars, GM & Chrysler would have killed off their other programs and gone over to cars on their own… or have simply perished.  The companies follow our demands as long as the government isn’t forcing them down a different path.  We demand big, safe, quality trucks and SUVs.  Let the company meet the laws of supply and demand… instead of perverting the supply in order to shift demand.  The political powers that be want us all driving econoboxes so that they can feel better about themselves.  So they force companies like GM to only make the junk that we don’t want (little POS econoboxes).  This in turn kills off viable supply of what we want, therefore; demand shifts to other products.  The trouble is that there are no products that we demand.  We are forced to purchase what we don’t “want”.  If I have to buy an econobox, chances are high that I will go with a company that makes them better than the others at a price that I like.  None of the Big 3 are on that list and due to mandates and the UAW simply they can’t be.

So there you have it.  If you want to point fingers… make sure they are aimed at Capitol Hill.  While there may be many factors that have contributed to the downfall of our auto industry, the government is the source of the biggest ones.  From their undying affection for the UAW to their blitheful machinating against the free market.  From head to toe they wreak from the stench of guilt.  So bend over America.  They stuck it to the Big 3 with their screw-ups.  Now their going to stick it to us for the bill.