The Obama campaign raves about how it “saved the auto industry” — that is, the government’s bailout mainly of General Motors — and so preserved millions of jobs.
But if it was such a success, why is the bailout losing so much money — and why do current GM managers want nothing to do with Washington as they try to save the company?
The answer: They know that with the lefties in the Obama administration breathing down their necks, their chances of ever restoring GM to its past glory are anywhere from slim to none.
Of course, it’s hard to feel sorry for GM’s management, which news reports and my own sources say has been prodding the administration to sell off its remaining 26.5 percent stake in the company. GM’s bosses invited Uncle Sam in — tough luck for them that he doesn’t want to leave.
For way too long, the Big Three — GM, Ford and Chrysler — kept on cutting generous wage and benefit deals with their unionized workforce as if it was still the 1950s and ’60s, when foreign competition didn’t exist. By 2009, that heyday was long, long past — and the Great Recession brought their highly flawed business model crashing down.
The $17 billion in loans from the Bush administration in its waning days wasn’t enough. GM and Chrysler came hat in hand to the President Obama for a little more hope and change.
An easy solution would have been to let the companies reorganize under Chapter 11 of the bankruptcy code. They’d have had a good chance to survive; plenty of other companies have restructured under bankruptcy protection and emerged later as viable businesses. American Airlines is doing it right now, and without major disruptions in service, or mass layoffs.
As it turned out, Chrysler and then GM did declare banktuptcy — but the resolution wasn’t the normal court-overseen reorganization. Under Obama, the feds dumped in tens of billions more into the companies and took controlling stakes in an industry that was once a bedrock of free-market capitalism.
In the administration-overseen restructuring, bondholders got hit hard in what many legal experts say was a violation of bankruptcy laws, and dealerships around the nation got slammed.
But the president’s buddies in the United Auto Workers largely feasted. Sure, the absurd “jobs bank” — Detroit’s version of a “no show job,” where the auto companies basically handed fired workers free money — got shut down. And new hires lost out on the old guaranteed pensions for the market-driven 401-k plan that most of the rest of us rely on for retirement.
But the old workforce hung on to most of its privileges, and the unions took a far smaller haircut than the boldholders.
And GM still owes the feds tens of billions. And if the administration were to sell its stake in GM now, more than three years after the bailout, taxpayers would be out around $15 billion on the deal.
At around $25, shares of GM trade well below the government’s break-even price, and headwinds are everywhere: Foreign competition isn’t going away, and the global economy is in turmoil, which could depress foreign sales.
And there’s little reason to bank on the US economy reviving significantly anytime soon, particularly if President Obama wins another term and imposes the job-killing new taxes he wants to levy in the name of economic fairness.
Apparently, investors know something the administration doesn’t care to admit in this election year: That with the president in charge, the auto investment is a sure loser. It doesn’t help that Team Obama insists on forcing GM to produce all those “green cars” that barely work and no one wants to buy.
Now you know why GM’s management wants the government out, and why the administration won’t do the economically smart thing and cut its losses — and the losses to the American taxpayer — while it still can.
Good luck, GM — you made your deal with the devil of big government, and you’re getting what you paid for.
Charles Gasparino is a Fox Business Network senior correspondent.