President Barack Obama’s claim that he “saved” the auto industry would be laughable if not for how many people actually believe it. But, alas, as the election proved, Democrats tend to do best when they misinform already uninformed voters.
The auto industry in 2008 was healthy. GM and Chrysler were not. The same week the CEOs from the Detroit Three were telling Congress the industry was about to collapse, Honda opened a new assembly plant in Greensburg, Ind. In reality, all Obama did was insulate two companies and the United Auto Workers union from their bad decisions.
The so-called auto bailout, in addition to being an unconstitutional abuse of power, was simply downright stupid and an abysmal failure. Unless, of course, your only goal was to gain political points by temporarily saving a few union jobs at a few companies.
Beyond that, the bailout achieved nothing worth bragging about and, in fact, did more harm than good.
Obama and his supporters point to the fact that General Motors still exists today as proof that the bailouts worked. That is hogwash. No one doubted that the U.S. government, with all its resources, could muster enough money to keep a company open.
The real fear was that governmental interference would create many more costs and inflict greater damage.
That is exactly what it did.
The bailout interfered with the proper workings of a competitive market economy by denying the spoils of victory to Ford, Honda, Hyundai, and other automakers who were more efficient and more responsive to consumers than GM and Chrysler. Corporate bailouts, while unfair to taxpayers (our “investment” in GM is $27 billion, but the public’s 500 million shares of GM stock is worth only $10 billion), are also unfair to the successful companies in a given industry.
The woes of GM and Chrysler did not stem from the recession. It stemmed from deep-rooted mismanagement and poor products that did not appeal to consumers.
In a fair and efficient market economy, winners and losers are chosen by the consumers, who clearly marked Chrysler and GM for extinction or, at the very least, reduction in size. And what will happen to the workers at the other companies? Will the U.S. government bail them out during the next downturn because those companies can’t compete with the resources of the federally subsidized GM?
The reality is, the auto industry has an overcapacity. When an industry, any industry, suffers from overcapacity, the market will fix it by running less successful companies out of business. That is the nature of a free market. And GM and Chrysler, thanks to their mismanagement in labor relations, product offerings and quality management, deserved the consequences of their behavior.
Next year, auto workers in Alabama, Tennessee, South Carolina, Indiana, and even Michigan and Ohio may lose their jobs because GM and Chrysler workers’ jobs were spared in 2009.
There are even deeper concerns and costs. The bailout ignored the rule of law. We have a nonpolitical process for failing companies to restructure themselves and it is called bankruptcy. Instead, Obama took money from you and me and gave it to corporate executives as a reward for their bad decisions. That was all completed without any substantive judicial oversight.
Then there are the billions of dollars in property confiscated from GM and Chrysler’s debt holders who, during a legitimate Chapter 11 reorganization, might have been protected.
We also lost any moral superiority and credibility when warning other countries, namely China, against interfering in the market. In fact, the bailout probably violated World Trade Organization rules.
In reality, the bailout was not about economics, it was about politics. The bailout was not about saving jobs, it was about saving “union” jobs.
In the end, the auto bailout was political payback and we all will suffer from it.
Or, as Daniel J. Ikenson, an economist with the Cato Institute put it: “When bad firms are rewarded and good firms penalized, the incentives soon fail to support progress. When investors can no longer be certain that property rights underpin their claims, they will take their money elsewhere. When political expedience surpasses law and justice as a guiding virtue, productive resources will be diverted to serving political, rather than economic ends. These should be the hard lessons of the auto bailouts.”
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Yeah,all the other car companies were doing just great! That’s why on December 18th,2008 I was laid-off from ATI,(they make transmission parts for Honda). There were dozens of others that joined me in the unemployment line from there as well. I had only worked there for not quite 6 months,but there were people with 2 years seniority that got the pink slip. Took me 10 months to find another job.
Obviously,you have never worked in an auto plant. I have worked in 3. All non-union. I can assure you the auto bailout not only helped GM and Chrysler,but several other companies as well. If those 2 companies would have failed,as they surely would have without government help,Honda,Toyota,and many other car makers would have lost suppliers,(parts vendors),in the fallout that make parts for several car companies.
You can claim it was a failure,a political point,all you want. I’ve worked in the field…myself and many others who have been there know you are wrong in your assertions.You are free to have your opinion,just know it is not shared by the majority of those who actually know what they are talking about….
I will attest to it being about politics. I work auto industry and several ppl I know voted for Obama ONLY because of the auto bailout. He bought votes w the bailout. Plain and simple.
He saved jobs with it. Plain and simple. If that helped him during the elction,it most surely should have. I think Romney saying let Detroit go bankrupt was more indicative of why he lost. I think his lies in Defiance were the biggest reason he lost in Ohio. Romney has no one to blame for his failure but himself! He EARNED it…
He saved union jobs, period! The UAW is the only group that didn’t give up anything. 20,000 people lost their jobs at Delphi, along with most of their pensions, health insurance, life insurance, and other benefits. GM still owes nearly $30 million that we will never see. Besides that, more than 2/3 of GM jobs are in foreign countries. Obama is all about politics, and actually helping the economy is not a priority of his. That’s why he keeps making the same “mistakes” over and over, knowing if it didn’t work the first time, it won’t work the next dozen times.
He bought votes with tax payer money. The auto industry can consider themselves part of the 47%. GM is still going to declare bankruptcy soon. Nothin was saved.
UAW workers gave up alot to save their jobs. I don’t know where you get your information,but it is seriously flawed…
The UAW did agree to some deep concessions. Most significantly, they lost the job guarantees that had kept autoworkers on nearly full pay even if they were laid off. That provision pushed automakers to keep producing cars even when there was no demand for them, which hurt sales prices and their competitiveness.
And experts agree eliminating the provision was a key to creating a much leaner and more profitable U.S. auto industry, and the kind of record profits GM reported Thursday.
There were other provisions made,but this one,in particular,helped tremendously. I do agree,however,that this provision never should have happened in the first place. It is an example of how the union overstepped it’s bounds.This should have never been agreed to in the first place.I always wondered why my uncle was always agreeing to volunteer lay-offs.He could not work and still recieve 90% of his pay and keep his benefits. That is wrong! The union was wrong in even proposing this during contract negotiations. It was also wrong of corporate to agree to them. It took both sides to create the mess they made.It should take both sides to fix it. Union members made their concessions,what did the managers and CEO’s concede to?
UAW ended up with a huge stake in GM. FIAT purchased Chrysler’s assets, and the UAW ended up with a 55% stake in Chrysler. Just what did they give up? Obama is dependent on the unions to stay in power. He rewarded them with our money.
Hard to see past the end of your nose, when your looking out for yourself and no one else.
You’e talking about Mitt,right Rick?
http://www.politifact.com/truth-o-meter/statements/2012/feb/27/mitt-romney/mitt-romney-says-obama-gave-away-car-companies-uni/
Again Roseanne,your assertions are wrong…
I don’t think so. http://online.wsj.com/article/SB10001424052702303768104577462650268680454.html
Chris, it is one thing to think it is OK for the government to take money from middle class families and give it to fat cat automakers. But at least keep your defense in reality.
My defense is reality. I don’t expect a LINO to see that….