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Tuesday, June 16, 2009
Ed Feulner :: Townhall.com Columnist
Government Motors: A Dead-End Deal
by Ed Feulner
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As a rock-ribbed conservative, I seldom agree with the socialist president of Venezuela. But it happened last week.

“Hey, Obama has just nationalized nothing more and nothing less than General Motors. Comrade Obama!” Hugo Chavez declared during one of his customary rants on state TV. He added that if he and Cuba’s Fidel Castro weren’t “careful,” they might “end up to [Obama’s] right.”

Chavez has nationalized most of his country’s economy. That’s helped turn the country into a “Repressed” economy in Heritage’s annual Index of Economic Freedom. Crime, corruption, inflation and food scarcities prevail in Venezuela, even though the country has taken in hundreds of billions in oil revenues in recent years.

That’s because nationalization discourages private investment and innovation. So Chavez’s oil production is likely to plummet, just as Mexico’s has under a nationalist protection scheme.

*** Special Offer ***

Americans have reason to be concerned as they watch our government go down a similar road with one of our critical industries: automobile manufacturing. On June 1, the federal government announced GM would enter bankruptcy protection. But not traditional bankruptcy.

Under a plan crafted by the Obama administration, Washington will own some 70 percent of the new GM, while the United Auto Workers union will own almost 20 percent. The federal government will pour another $30 billion into GM on top of the $20 billion taxpayers have already shelled out.

Still, “What I have no interest in doing is running GM,” President Obama announced on June 1. “GM will be run by a private board of directors and management team with a track record in American manufacturing that reflects a commitment to innovation and quality.”

Sounds good. But it’s difficult to believe, especially when Obama recently fired GM’s CEO and hand-picked his successor.

Obama has also put 31-year old Brian Deese, a “a not-quite graduate of Yale Law School,” as The New York Times puts it, in charge of restructuring GM. Deese, “had never set foot in an automotive assembly plant until he took on his nearly unseen role in remaking the American automotive industry,” the newspaper says.

Meanwhile, the new mayor of Detroit recently spoke with Obama, and told reporters afterward that the president supports keeping GM headquarters in that city. If Obama insists he has “no interest” in running GM, why is he so involved in the day-to-day operations of the company?

Obama also says “The federal government will refrain from exercising its rights as a shareholder in all but the most fundamental corporate decisions.” That’s a tough sell, too. Even before the government owned most of GM and much of Chrysler (the second Big Three automaker Washington recently guided through a special bankruptcy), it was involved in designing cars.

Last month Obama declared that automakers must reach a fleet average 35.5 miles per gallon by 2016. To accomplish that would require a comprehensive makeover of the entire automotive industry -- both domestic and foreign. After all, as USA Today pointed out, only 11 cars manufactured today meet that standard.

But the federal government, as always, has a plan. EPA Administrator Lisa Jackson has declared that, “What this country needs is one single national road map that tells automakers ... what kind of car it is they need to be designing and building.”

In days gone by, that “road map” was the free market -- you and me. Automakers built cars they thought people would want to buy. If they were correct, sales were good. If they were incorrect, they had to cancel product lines and return to the drawing board. It’s why Ford has made Mustangs for decades, but mothballed the Edsel after only three years.

Government ownership has never worked overseas, and it won’t work here. Washington should get out of the automotive business as swiftly as possible.

The recent European elections show the rest of the world is edging away from statism. This is no time for America to lurch left so it can keep company with outcasts like Cuba and Venezuela.

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About The Author
Dr. Edwin Feulner is president of The Heritage Foundation, a Townhall.com Gold Partner, and co-author of Getting America Right: The True Conservative Values Our Nation Needs Today .
 
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Government Motors
You are such a stitch. Where did you get such
a clever play on GM.

Who Is Overseeing GM?

Obama has named Brian Deese, a 31 year-old Yale Law School dropout to head his Automotive Task Force. Deese has no economic, business, manufacturing, or automotive experience. In fact, the only two jobs that he held in the private sectors were with "Progressive Think Tanks". One of which was funded by George Soros.

On February 23, 2009, the Wall Street Journal announced that Obama would name Steven Rattner to the Treasury Department as auto industry adviser. The New York Times reported that he would be lead advisor and leader of the industry group for Treasury Secretary Timothy Geithner. Rattner has no manufacturing or automotive experience.

Obama named the former CEO and chairman of telecommunications giant AT&T Inc., Ed Whitacre, Jr., to lead General Motors Corp.'s board after the automaker emerges from bankruptcy protection. Whitacre has no manufacturing or automotive experience. He has admitted that he knows nothing about cars.

Whitacre is also a stooge. When at AT&T, he was asked to comply with the Patriot Act. His General Counsel told him not to do so, he did anyway. The General Counsel's opinion was supported by outside counsel.

Whitacre will comply to the demands of Government.

Never you mind, I will continue to buy foreign cars and the Fwank-Waxman mobile can sit in the lot until rust causes it to fall apart for all that I care.

Opium For Opportunists
Opium For Opportunists
Who helped draft the AIG bailout? Geithner.

Who was Fat Al Gore's partner in the carbon credit crap scam? The Naked Emperor Hank Paulson.

Where was Paulson before he became Treasury Secretary? He was the Chairman of Goldman-Sachs.

Who was the only non-governmental individual that sat in on the TARP meetings? Paulson's successor at G-S.

Did G-S take TARP money? No. It just took $8bn from AIG, instead.

Who is continuing to support the financial institutions? Geithner.

The bottomline is that they are Opportunists without party affiliation.

Read "Opium for Opportunists" and you will understand how Opportunists always prevail. Just like George Soros, who made $1.2bn dollars last year by shorting the US dollar.

A convenient marriage of Fraud and Greed
We've seen both Democrats and Republicans bail out these massive failing industries and banks from GM to Wall Street Hedge Fund thieves to AIG for cooking their books. We've subsequently seen the incompetent CEO's ruin these companies and then receive golden parachutes once they retire or are fired.

The public is fed up and sometimes furious that their pockets are being raided and tax dollars stolen and we should be.Why should elites and corporations live above the law and ride for free on everyone else's tax dollars?

Capitalism itself is a massive fraud and a failed system. It cannot function with accountability or integrity and uses massive disinformation campaigns to maintain its illegitemacy as it routinely cheats the public.

Without bailouts, tax breaks, offshoring workers, insourcing illegals, and government rescue packages to reward corruption and save the unworthy from the fate they earned, Capitalism would fall on its face and be scrapped to the dust bin of history for its failure to work. It does not and cannot work in 21st century modern nations.

Socialism has none of those problems and practiced in Europe gives citizens higher wages, more vacations, universal healthcare, better job stability with less unemployment, nearly free college tuition, more government transparency, more responsive democracies, and a better overall value for the tax dollar.

Much more efficient than the Crony Capitalism that plagues the U.S. system to reward the rich and punish the poor. Capitalism perpetuates gold plated obsolete Cold War weaponry and then creates wars to the tune of trillions in wasted revenue for the entertainment and further profiteering of the wealthy elites.

First - I
"Socialism has none of those problems and practiced in Europe gives citizens higher wages"

Actually, not really. Plus, all citizens or subjects pay the VAT. In France, this equates to 19.6% of all purchases.

"more vacations"

True and only a 36 hour work week in France; however, if you lose your job in Germany, you will be given one year's pay. After that you are on your own. Nothing more from government.

"universal healthcare"

I lived in the UK and in France. My sister and her family still live in the latter. Anyone with any money will dig deep into their pockets to pay for private doctors and clinics.

I suggest that you familiarize yourself with the NHS's criticisms of the its own system and the nightmare of the NICE board. In essence, both are part of the Kennedy-Dodd proposal. Under the NHS, the waiting period for surgery is, at least, 15 weeks and that is if the bureaucrats approve. Expensive drugs for breast and stomach cancers are denied and "feel good until you die" meds are disseminated. Under the NICE Board's ruling, your parents will be required to lose the sight in one eye before they can receive drugs to save the other.
Antibiotics are restricted. Back surgery is usualy denied. Rationing rules.


First - II
In Canada, the waiting period for heart surgery is 3 years and is only slightly less than that for brain surgery. If you want a MRI in a timely fashion, go to a veterinary clinic.

"better job stability with less unemployment"

BS. The unemployment rate is much higher in the EU. In fact in countries such as Spain, it is over 20%.

"nearly free college tuition"

True to a degree. Yes, there is nearly free tuition, but not everyone is allowed to attend the university. You must score in a certain percentile on, at least, 2 tests before you can seek to attend the university.

"more government transparency"

Not even close. Gordon Brown just lost something like 7 Secretaries because of the expense fund scandal. Italy is notorious for corruption.

"more responsive democracies"

Please. You are not even guaranteed free speech.

"and a better overall value for the tax dollar."

Sure. A tiny coke cost about $8. Petrol is $6-$8 a litre.

The UK has emptied its Treasury, lost its AAA credit rating, and is printing money. Housing is very expensive. People die from heat waves (18,000 in France in 2003) because they do not have widespread airconditioning.

The avg. growth in GDP (in a good year) is an anemic 1.9%.

Now, do you want to claim that European socialism is best for America?

First

"Socialism has none of those problems and practiced in Europe gives citizens higher wages, more vacations, universal healthcare, better job stability with less unemployment, nearly free college tuition, more government transparency, more responsive democracies, and a better overall value for the tax dollar."

Can you please show me the country where your utopian fantasy is taking place?

$56,500 Per Individual
$56,500 Per Individual

According to the CBO, the much bandied about Kennedy-Dodd Healthcare proposal will cover only 19mn Americans at a price tag of $1tn or $56,500 per individual. In 2019, the plan will add another 18mn individuals, which will raise the number of covered people to 37mn. The cost will go up accordingly.

Unfortunately, the plan does not address the millions of people, who will lose their health insurance when their companies discontinue its healthcare benefits.

Same problem, but with a $1tn+ price tag.

It is unfortunate that ...
I will be purchasing GM and Chrysler through my taxes. I will never buy one to drive however.

GM is Dead
My concern is the mis-allocation of capital present in the government structured bankruptcies of both GM and Chrysler. Austrian economics teaches that the market allocates capital to the 'most' effective use. Think of it as a jungle. The rule is adapt or die. In a company where the business model is capable of this, the company thrives. Stock prices go up, the balance sheet is in order, and the P&L is positive. GM, by all accounts, has been sick for quite some time; hemorrhaging both cash and market share.

The original Chrysler Corporation Loan Guarantee act of 1979 was a failure. According to a 1983 Heritage Foundation article; "Chrysler renegotiated its debts and restructured its organization in a way that greatly resembled a company going through Chapter 11 bankruptcy. Its creditors, like those of bankrupt firms, were forced to swallow sizeable losses."

All the original government intervention allowed was for a dying company (Chrysler) to limp along for another three decades. If Chrysler had been allowed to fail then; there can be no doubt that the UAW and the industry as a whole would have learned some valuable lessons 30 years ago that may have avoided all that has happened recently. Mis-allocation distorts the market.


St Denis:
RE:"Now, do you want to claim that European socialism is best for America?"

You may think you know what First will answer.

I am speculating, but here is one possibility.

First may answer:" Yes, because at least we will all be equal!"

That is the great unspoken goal of socialism/fascism/communism.

Obama talks about "sacrifices". Does that sound similar? It should.

Their goal is to make everyone equal by taking things from some and giving things to others.

But here is the distinction: THEY KNOW that all of our lives will be worse, but the greater point for socialists/fascists/communists is "equality!" Even if we all starve, it is ok because we will be "equal"!

Taken to its extreme conclusion: The Jews in Auschwitz were all "equal" Somalis in Darfur are "equal." I have no doubt that those in Hell are equal, too.

I hate to say this, St Denis, but you may be assuming too much here.


Business strategy
My plan for G.M. And Chrysler is to sell off or close down those divisions that make money and to create and expand those divisions that require government subsidies to remain afloat.

Get rid of what works and replace it with what doesn't work. This is a sound business strategy. You have the word of a community organizer.
Why do you doubt him?

Tibby

Reading Your Article
I couldn't help but think of my Insurance Company sales person that told me I had to have a "Full Coverage" policy to drive my new car off the lot. For two years I rode around thinking that I was protected, until a truck ran a red light and I had to pay for this man destroying my property because the Insurance Company would only pay for the "cash value" of my car.
GM and Chrysler is definitely a "dead end deal" and I will not be fooled again like I was by my Insurance Company. The only thing the President has run is the United States of America for six months. If his car warranty is like his health care warranty, I would rather let my car die, and wait for 2012 when America comes back.

Eddie L of TX wrote
"The only thing the President has run is the United States of America for six months".

True, when amended with "--directly into the ground".

Obama setting it up
Actually I think Obama is setting up GM so that when he next loses an election he will have a job as CEO of GM. Then he can make millions a year by simply telling the company what kind of cars they can make.

Like they once made the Edsil, named after one of their presidents, can't you just see the Obama car?

Russian Communism
When at its height, Russian Communism stated that everything was equally owned by all the people. That included such things as rare paintings, jewelry, etc.

But there were some things that weren't totally equal. These rich items were "loaned" to top Communist leaders who then either used them or sold them to some rich European. Communism is NOT about everyone being made equal - it is about everyone except the leaders being reduced to a subsistence level while every penny of wealth goes to the leaders.

So any time a liberal talks about making things equal here, they are NOT talking about taking from the rich to give the poor to make everyone middle class. They are talking about taking from everybody to give to the few rich liberals who will be the only ones allowed to be government officials - themselves.

Let's at least be honest about it.

Never again buy a GM or Chrysler product
I'm one with Cliff of NY, who said, "I may be buying GM and Chrysler, but I'll never buy one to drive."

On the other hand, I've another reason to not consider buying either a BM or Chrysler product, but rather one made by Ford.

That reason? In late 1969 when a soldier in Viet-Nam I went to the PX and paid down $500. on a new Ford that was to awaiting me at a dealer in K.C. when I rotated back to the States in March, 1970. But I was badly clobbered in a firefight on 22 January, 1970. In hospital in the U.S. in February, 1970 and thought to be wheelchair bound for life my family notified Ford for me telling it I'd not be able to pick up the car I'd ordered on schedule.

So what'd Ford do? It sent two representatives to my bedside in hospital; one of whom presented me with a check for $500., a refund of my deposit. Then one of them said not to worry about the car, Ford'd take care of it.

Probably either GM or Chrysler would have treated a badly WIA G.I. in much the same way. But, BIG DiFFERENCE, I know Ford treated me right. So I retain a soft spot in my heart for Ford Motor Company all these years later.

45calibre wrote
"Like they once made the Edsil, named after one of their presidents, can't you just see the Obama car?"

I think I've already seen one--it was sold in the 1960's as Triumph Herald (and in India, catastrophically, as Standard Herald):
(*) top speed of original model (with 948 cc engine) was 70 mph and that of enhanced (1148 cc) was 85--described as "if you start accelerating today, you will reach top speed sometime tomorrow; and to stop from top-speed will be in middle of next week" (statement made in UK where it was designed)

Indian version's sales catastrophic (at a time when car-production/sale in India was pathetically low, significant that potential customers would actually demand to AVOID the Herald) due to:
(*) two-door (but not two seat) original design--though a short-lived attempt was made to modify it to a four-door model (but without fixing the other defects, and too late to help)
(*) low-slung (ground-clearance oft exceeded by bumps/potholes, so you could not make a trip without nasty diff/ground contact)
(*) a crude version of "independent rear suspension", a swing-arm rear axle (remember the bumps and potholes earlier? they'd chew it up and spit it out in short order)

William
So quick do we forget, Ford was in D.C. right next to Chrysler and GM begging for free money. Ford may not have taken it, but they were still there asking. That doesn't make them any better than the other two. As far as I'm concerned, I'll not be buying any motor vehicle produced by an American company, their behavior, including Ford's, is disgusting.

Government run business
SIMPLY PUT- IF YOU HAVE A HEART PROBLEM,DON'T GO TO A FOOT DOCTOR OBADMA AND ALL THE LYING LIBERALS ARE DOING JUST THAT. THEY ACTUALLY WANT THE COUNTRY TO FAIL-BELIEVING THEY WILL BE THE KINGS.. THEY BETTER REALIZE THE MUSLIMS WILL KILL ALL OF THEM, INCLUDING OBADMA

For JCarroll
Government running industries of any kind brings Mao's aphorism of "learning swimming from swimming" to mind (with that idea, Mao had actually forced farmers to set up their own small steel-mills, shoe-sellers to work as doctors, ...--well you get the general picture).

Sypallava: VA
That is absolutely correct. I haven't been on the top of my game since Nov. 4th. Sorry about the oversight. And since the election of the Liberals I have just been in a state of shock. I will get better, because unlike GM and Chrysler I will not give up, stop trying, and run to the Government for a bailout.

The end of the United States
History being made as you watch. Someday our grand children will wonder why we surrendered without a fight. Or will the children be so indoctrinated by our government controlled schools, the kids will wonder why it took so long?
As Goes General Motors, so goes the United States. As we turn over operation of our government to immigrants who want to divide us, we will be the opposite of unified Europe, we will be a bunch of non English speaking communities, at war with each other. It's a wonder this nation survived some 230 years, when the New World Planners have worked on this since 1913. Wonders of wonders were the 1950's with full employment, new home communities, new cars, new families, then the Korean War, the Vietnam war, and spread our money all over the world to try to convert Dictatorships in to Democracies, while our nation floundered, with factories closing, torn down, our children educated that private ownership of anything was immoral.
And all of you sat there watching the Ball Game, and no longer caring if we had Freedoms.
Sad indeed. I've tried to save us, but you still don't see what YOU did wrong.

Amtrak
Anyone who believes that the government does not want to run GM and Chrysler for any length of time needs to look at the history of Amtrak. It was created in the 1970s and was to be owned by the Feds for ONLY 3 years. Now 40 years later, still in the red for millions and millions of dollars per year, it is STILL owned and operated by the Feds. No one else can enter the marked because they can not compete with the government subsides used to keep the government-backed company running.

The same will happen with GM and Chrysler. The government will mandate that they build cars nobody wants. The Firms will loose millions of dollars and be continually subsidized by the government. The threat to private firms is that they will be forced into bankruptcy because they will not receive government "bailouts" every year.

Ford is doomed unless they can win an anti-trust suit against the UAW. The UAW now owns GM and Chrysler. They compete against Ford but control the workforce that makes Ford cars. What do you think will eventually happen with labor negotiations between Ford and the UAW? Will the UAW let Ford make better cars than GM and Chrysler, thus affecting the UAW cash flow? Or will they strike and shut down the competition. Human nature dictates that the later will eventually occur.

Buy Ford (or an American made Honda or Toyota for that matter.)
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