By on June 14, 2012

Moody’s has been less than impressed with GM’s recent pension cuts/buyouts:

“GM’s plan has some constructive elements,” said Bruce Clark, senior vice president at Moody’s. “It will reduce the company’s pension assets and liabilities by $26 billion and relieve it of the obligation to make future payments to most of its salaried retirees. It will also free it from the volatility associated with pension investment returns, long-term interest rates and mortality rates.”

“These benefits come with a cost. GM will spend $3.5 billion to $4.5 billion on this undertaking, and when all is said and done, the company’s total underfunded pension liability will be reduced by only $1.0 billion. The aggregate underfunded liability will still be a very large at about $24 billion.”

There could have been a more cost-effective solution: Bankruptcy. Before you scream “unfair:” What about the nesteggs that had GM stocks and bonds in them? Why are GM pensions sacrosanct when others aren’t?

A new paper out today, by George Mason University prof/Mercatus Center scholar Todd Zywicki and Heritage Foundation scholar James Sherk, argues that the auto bailout was really just a transfer of $20+ billion from taxpayers to the UAW:

The U.S. government will lose about $23 billion on the 2008-2009 bailout of General Motors and Chrysler. President Obama emphatically defends his decision to subsidize the automakers, arguing it was necessary to prevent massive job losses. But, even accepting this premise, the government could have executed the bailout with no net cost to taxpayers. It could have—had the Administration required the United Auto Workers (UAW) to accept standard bankruptcy concessions instead of granting the union preferential treatment. The extra UAW subsidies cost $26.5 billion—more than the entire foreign aid budget in 2011. The Administration did not need to lose money to keep GM and Chrysler operating. The Detroit auto bailout was, in fact, a UAW bailout.”

Another summary in a Heritage blog post on the paper:

“We estimate that the Administration redistributed $26.5 billion more to the UAW than it would have received had it been treated as it usually would in bankruptcy proceedings. Taxpayers lost between $20 billion and $23 billion on the auto programs. Thus, the entire loss to the taxpayers from the auto bailout comes from the funds diverted to the UAW.”

Zywicki, argued in RealClearPolitics last year that GM could’ve been in a better competitive position had it gone through a normal bankruptcy:

“But perhaps most misleading about the myth of the auto bailout success is that by restructuring through a politicized bailout process both companies were left in a weaker competitive position than they would have been had they simply gone through a traditional chapter 11 process. Rather than a restructuring process focused on maximizing the economic value and viability of the firms, they were saddled with 535 new members of their boards of directors driving decision making through the lens of politics rather than economics.”

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135 Comments on “Paper: Auto Bailout Was A UAW Bailout...”


  • avatar
    dwford

    Duh!

    • 0 avatar
      Syke

      Yeah, they’re finally admitting to it now? Check today’s Wall Street Journal editorial page for an excellent commentary on top of what Bertel did here.

      • 0 avatar
        highdesertcat

        Yeah, and now it is up to the buyers of new cars to vote whether they support Obama’s bailout policies and buy GM cars, or not, and buy something else.

      • 0 avatar
        amca

        The final line of the WSJ piece says it all: “Obama didn’t bail out the auto industry. He bailed out the UAW.”

        The article shows in detail the cost of the auto bailouts can easily be explained by looking at the financial advantages to the UAW over and above what normal bankruptcy would have given them. Count it up, and the cost to the government was pretty much identical to the advantages given the UAW. (And not to mention the sums taken away from other creditors . . . the loss of overall social welfare was enormous.)

      • 0 avatar
        tonycd

        Yes, Rupert Murdoch’s newspaper should give you just the objective perspective you’re looking for.

        For the 17 millionth time: No, the bailout wasn’t about saving General Motors. The bailout was about preventing the abrupt loss of millions of autoworker, supplier and downstream jobs at the very moment the entire national economy was about to collapse into full-blown, 1929-level Great Depression.

        Bankruptcy was not an option for saving those jobs, because the banks themselves were in chaos and weren’t about to put forward a dime to finance anything. Government was the only place the funds were going to come from, and disaster would have followed immediately for millions of individual Americans and the economy as a whole if government didn’t act RIGHT THEN.

        The bailout was a complete success for that reason alone. Any subsequent benefits provided to the nation by the continued functioning of General Motors — and there have been some, though anyone can argue there theoretically could have been more in some other unattainable scenario — are just gravy.

  • avatar
    PJ McCombs

    Sigh. The article makes it sound like an academic research piece, but the Heritage Foundation is a political activist group.

    From their site: “Heritage Action is a grassroots organization that promotes conservative policies in Congress. Our DC-based staff amplifies local activists’ voices, allowing Americans to break through the establishment in Washington.”

    The UC Berkeley Campus Marxist Club will surely publish a very different take on this issue, but neither group’s ramblings belong on a car site.

    • 0 avatar
      gforce2002

      Exactly. The Heritage Foundation has a very specific and well known political agenda. Any pretensions of objectivity on their part can be completely dismissed.

    • 0 avatar
      VA Terrapin

      Just because the Heritage Foundation is conservative doesn’t mean it’s wrong. What you’re doing is an ad hominem, where instead of attacking the actual findings of the Heritage Foundation’s report, you attack the Heritage Foundation itself.

      When UAW’s VEBA got more equity than secured creditors from the GM and Chrysler bailouts, it was obvious that the bailouts had a heavy emphasis on helping out the UAW.

      • 0 avatar
        PJ McCombs

        Don’t care who’s ‘wrong’ and who’s ‘right’… just that there’s plenty of other places to squawk about election-year politics, and a site about cars ought to be a refuge from it.

      • 0 avatar
        VA Terrapin

        PJ McCombs wrote:
        Don’t care who’s ‘wrong’ and who’s ‘right’… just that there’s plenty of other places to squawk about election-year politics, and a site about cars ought to be a refuge from it.

        Like it or not, you can’t escape politics when talking about cars, not even in a “non-election” year. It’s not just about the bailouts, which were obviously done for ideological/political reasons, but its also about regulations, traffic enforcement and even the price of oil.

      • 0 avatar
        PJ McCombs

        Sure you can. Cars are machines. There’s nothing inherently political about enjoying them. Depending on your appetite for partisan debate, they can be either a respite from or a facilitator for argument over the circumstances of their production, sale, and regulation. I’m in the former camp and hate seeing TTAC go the other way.

      • 0 avatar
        TEXN3

        PJ, you haven’t been at TTAC since its inception if you think these types of articles represent a new direction of the site. TTAC. Is not just about cars but about the industry.

      • 0 avatar
        NormSV650

        “Duh!” Well exactly. “Government Motors” tagline didn’t spur sales at all. What makes union teachers continue to buy non-union made Toyota/Honda/Korean?

        Real Clear Politics hits the nail on the head as even GM’s CEO at the time, Ed Welburn(?), mentioned the “Government Motors” tagline will hurt sales. I think he was replaced with Fritz within days.

        A good article using more than one source to make a point.

      • 0 avatar
        siuol11.2

        Oh the internet and its colossal misunderstanding of the ad hominim.
        Look, it’s great that at some point long past in your academic career you mastered rhetoric 101, but you still don’t know shit.
        Ad hominim does not apply if you are genuinely questioning the legitimacy of a source. An ad hominim attack is when you attack a PERSON.

      • 0 avatar
        tonycd

        No, the fact that the Heritage Foundation is conservative doesn’t mean it’s wrong.

        The decades-long history of the Heritage Foundation as a right-wing propaganda arm means its pronouncements are not objective, and have never tried to be.

    • 0 avatar
      PaulVincent

      Says you, PJ McCombs. I appreciate that The Truth About Cars isn’t restricted merely to discussion of the products of the industry but also includes analysis of how the business operates (and in this case how the federal government used its power to purchase political loyalty at taxpayer expense).

    • 0 avatar
      darkwing

      Old and busted: “Even people who disagree with me can have important things to say.”

      New hotness: “Koch brothers!”

    • 0 avatar
      PJ McCombs

      Sounds like not discussing politics has become an affront to people’s politics. We’ve all gotten rather precious about ourselves, haven’t we?

      • 0 avatar
        highdesertcat

        That’s because it’s all about what they believe in. If they believe in bailouts, handouts and nationalization of the GM and UAW financial burdens, then, yeah, no surprise they take the stand and position that they do.

        But it is up to the every day American who buys new cars to vote whether THEY also support these bailouts, handouts and nationalization that we, the people, are paying for, by buying GM cars. Or not.

    • 0 avatar
      effinayright

      Sigh…you engage in the intellectual laziness and logical fallacy known as “argument ad hominem”. Essentially you are saying that BECAUSE Heritage has X characteristics, THEREFORE its positions are wrong and false on their face.

      BZZZZZTTTT!!!!

      Care to tell us WHY Heritage and Bertel are wrong?

    • 0 avatar
      chuckrs

      Whenever the government meddles so overtly, so specifically and so politically in an industry, it is fair game for industry commentators, like TTAC.

  • avatar

    THE UNIONS BUILT AMERICA’S MIDDLE CLASS.

    Let’s take a look at unionized work Detroit and post-unionized work Detroit. Detroit used to have a strong middle class, less crime and PEOPLE WHO PAID THEIR MORTGAGES. Now look.

    The real deal is that America doesn’t have enough factory jobs to keep the lower class and the middle class working. We’ve let them all go to China. WE ARE BUILDING CHINA’S MIDDLE CLASS while we are SACRIFICING OUR OWN. That’s the story no one talks about because Americans are so ignorant we don’t travel to the places we despise. I live in Asia periodically. In 2001-2003, that place was dirt poor. Fast forward to now and they have 300 Million living on our money and able to afford the things we used to afford. The rest of the population lives in poverty but we are gonna end up financing their come up too.

    It isn’t just China…America’s corporate raiders (like Romney) don’t care about transferring work to Mexico and Southeast Asia if they can suck the money out of the company and leave it lifeless.

    On the other hand, the government can’t simply print money to bail out failing companies. Thing is, the way these companies are being mismanaged they’d almost have no choice at all.

    • 0 avatar
      geeber

      The unions didn’t build the middle class. They successfully transferred a larger portion of buyers’ wealth to their members. That works when unionized companies control about 85-90 percent of the total market, as the Big Three and AMC did until the early 1970s. But when buyers decide to go elsewhere, both the company and unions have to adapt. It should be painfully apparent to everyone by now that most people aren’t going to buy a Malibu instead of an Accord so that no UAW member ever loses a job or has a greater co-payment for medical services.

      And the last time I checked, there are lots of people working for the transplant factories in Alabama, Kentucky, Mississippi, Ohio, Tennessee and Texas who are making good money building vehicles.

      When looking at Detroit, you need to look at the policies that city government has followed for the past 40 years, and their effect on city finances and the business climate. Maybe if the city had been competently run, more companies would want to locate within its borders. Tying a city’s fortune to a single industry is also a recipe for long-term failure.

      The once-great steel industry is a shadow of itself in Pittsburgh, but the place is hardly a ghost town. In many ways, it’s nicer than ever. (For that matter, the nation’s steel industry is still here. The U.S. is one of the world’s top three steel producers. What collapsed were the old unionized “dinosaur” mills.)

    • 0 avatar
      tresmonos

      bigtrucksreview,
      That is a bit of a short sighted rant. Globalization is a bitch, but your grandparents, parents and anyone else with a 401(k) profitted just the same during the 1990’s ‘boom.’

      The south was pillaged because of free trade. Textiles was the first industry to get distributed abroad. It was just a matter of time before the political-football-auto-industry got global. So it isn’t just a Union problem. Look at the UK, you can’t stay on top forever. China will become an economic powerhouse just from it’s sheer consumption. Population yields power.

      • 0 avatar
        chuckrs

        “The south was pillaged because of free trade. Textiles was the first industry to get distributed abroad.”

        The South pillaged the New England Blackstone Valley region for textiles first. It was just a matter of time in the South until an even lower cost source was found.

        We’ll need to find more niches like the successful Euros -the Germans and the Scandinavians.

    • 0 avatar
      darkwing

      Those postwar glory days are gone, my friend; the world has fundamentally changed, and no amount of all-caps shouting is going to bring them back.

      Adapt or die. Detroit chose the latter.

    • 0 avatar
      gslippy

      Transferring production offshore saves American jobs, while producing jobs over there.

      Show me a consumer who wants to pay more for any product, and I’ll show you a company that needs taxpayer assistance to survive.

      Today, unions merely raise the cost of production. The unions’ greatest threat is freedom of information (the internet). Poor working conditions and poor pay can be easily reported to the whole world, and workers are free to move between jobs and cities. The silence about the terrible conditions at transplant factories tells me that those workers are doing pretty well.

      And by the way, why do you think so many foreign mfrs want to have factories in the US?

      • 0 avatar
        siuol11.2

        “Poor working conditions and poor pay can be easily reported to the whole world, and workers are free to move between jobs and cities.”
        Pfft. Define “easily”. No one I know moves around the country to chase jobs that may or may not be there when you get to where ever the new hotness is, and you must be smoking something if you think putting corporate malfeasance out on the web is going to do anything but get you fired and unable to find a new job.

      • 0 avatar
        benzaholic

        We keep discussing “the union” or “the UAW” as if it were not made up of tens of thousands of roughly middle class people just trying to make a living.

        “Oh, the Evil UAW got special treatment.”
        How about, “The employees were valued more than other participants.” Still clearly not strict laissez-faire, but doesn’t it now sound more humane, compassionate, and with the American economic system designed around a working class with disposable income, perhaps like a wise compromise?

        I am willing to pay different prices for products that are not the same. I try to look at Country of Origin information, even on things like underwear and alarm clocks. At that level, it only costs me a buck or so extra to support my preferences.

        Plenty of people pay extra for “organic” food. It just means that some consumers perceive more value than other consumers in some characteristics of products/services.

        Heck, I get my coffee at Starbucks for two bucks instead of at the corner gas station for a buck or buck and a half because I prefer the taste, it’s usually got enough coffee in it to actually taste it, and I think their efforts to improve conditions for foreign coffee farmers are a worthwhile effort.

        Consumers who refuse to look further than the immediate purchase price are part of the reason that the system has been able to make the changes we claim to dislike.

        Some times it’s not All About The Money.

      • 0 avatar
        geeber

        It’s true – sometimes it’s not all about the money.

        Which is why many people were willing to pay MORE for an Accord or Camry than a Malibu.

        Whether people paid LESS for the Camry than the Malibu, or MORE, the bottom line is that the decision resulted in one less sale for GM. When about 400,000 people each year make that same decision, the UAW and GM have a problem.

        The simple fact is that lots of people preferred Accords and Camrys to Malibus, Sebrings and Tauruses, and no amount of jawboning or wailing about the fate of UAW members was going to change that.

        And if your name – benzaholic – reflects what you drive, it’s apparent that you exercised your freedom of choice NOT to buy a Cadillac or a Lincoln made by the UAW.

        It’s no different when people of lesser means choose to do the same thing when comparing a Honda or a Toyota to a Chevrolet, Ford or Dodge.

      • 0 avatar
        kenzter

        “Show me a consumer who wants to pay more for any product, and I’ll show you a company that needs taxpayer assistance to survive.”

        Anyone who goes to Starbucks.

      • 0 avatar
        28-cars-later

        “Which is why many people were willing to pay MORE for an Accord or Camry than a Malibu.”

        Both the Accord and Camry are larger more spacious models unless there were some drastic changes made in newer models I’m just unaware of… the Japanese ‘fullsize’ does not equate to an American ‘midsize’, pound for pound they go up against the Impala/Taurus/300, all of which are a standard V6 IIRC. Personally I have no specific beef with either the Accord or Camry but I don’t see the point of either, bland four banger FWD for too much money doesn’t sound too attractive to me. To each his own.

      • 0 avatar
        geeber

        28-cars-later,

        When the first-generation of the current Malibu debuted for 1997, it was aimed at the Accord and Camry, if I recall correctly. Yet more people wanted the Accord and Camry.

        At any rate, in 2012, substitute “Impala” for “Malibu,” and you still have the same phenomenon – people are willing to pay more for the comparable Accord or Camry.

    • 0 avatar
      CJinSD

      “THE UNIONS BUILT AMERICA’S MIDDLE CLASS.

      Let’s take a look at unionized work Detroit and post-unionized work Detroit. Detroit used to have a strong middle class, less crime and PEOPLE WHO PAID THEIR MORTGAGES. Now look.”

      I was sure you were being sarcastic and were about to reveal the absurdity of union apologists’ lies. Unions turned Detroit into Beirut.

    • 0 avatar

      “America’s corporate raiders (like Romney) don’t care about transferring work to Mexico and Southeast Asia”

      Dam* that President Romney for passing NAFTA and granting China MFN trading status.

  • avatar
    Type57SC

    The republicans really need to leave the auto bailout alone. they look silly when they attack it. there are so many other moves the democrats made that are ripe for attack. On balance, considering the bullets flying around at the time, it’s a clear success.

    • 0 avatar

      The Republicans want Obama to fail and they really don’t have enough to hang him on considering the economy FELL APART during the Bush administration. Bush did Bailout 1 and Obama had to finish it. They can blame Obama all they want, but, they were pretty much behind it. In fact, if not for 8 years of George Bush, Obama wouldn’t be president now.

      Imagine if the Republican’s 8 years had been good – you think any Democrat would have stood a chance in 2008?

      • 0 avatar
        Type57SC

        You’re welcome to an opinion on non-auto stuff. i don’t really have one and am not really political. I’m just saying the auto bailout seems like a bad choice of target for a shot.

      • 0 avatar
        geeber

        The forces that led to the financial crisis were in place long before George W. Bush took office on January 20, 2001, and they were not the result of policies favored exclusively by Republicans.

        Nor was the financial crisis the result of “deregulation” or the Gramm-Leach-Bliley Act, so we can put those two strawmen out in the cornfield where they belong.

      • 0 avatar
        highdesertcat

        You don’t have to be a Republican to abhor bailouts of any kind to anyone, anywhere.

        I’m an Independent, and I am against bailouts, handouts, and nationalization of any kind to anyone, anywhere, anytime.

        Businesses, large and small, should succeed or fail on their own merits. GM and Chrysler couldn’t hack it. They died.

        Chrysler is no longer our problem. GM still is.

  • avatar
    Sundowner

    QUESTION:

    The paper suggests that we would have been better off letting the auto makers go chapter 11, restructure, and then pay-out the unions based on a partial return, similar to an investor who bought into a failed company, which is pretty much what happens in all banruptcies. So instead of all the heath and pension benefits that GM/UAW would have provided, this Heritage Foundation wants to push all of those people onto medicare and social security burdens? Seems like the frying pan or the fire to me.

    • 0 avatar
      VA Terrapin

      All these UAW employees would still be eligible for Social Security and Medicare regardless of what happened to their pensions and healthcare plans, so this is pretty much a non-issue.

      • 0 avatar
        Robert.Walter

        Actually the pension issue would have likely bankrupted the PBGC.

      • 0 avatar
        kenzter

        “All these UAW employees would still be eligible for Social Security and Medicare regardless of what happened to their pensions and healthcare plans, so this is pretty much a non-issue.”

        False.

        Medicare is supplemental for these retirees. No VEBA = increased medicare costs.

    • 0 avatar
      jpcavanaugh

      I think that all the paper says is that in bankruptcy, all creditors of a given class (secured or unsecured) get treated equally. When you have two credit card accounts, you don’t get to pay one 80% and the other 30%. Both get treated the same.

      The auto bankruptcies were done in a fundamentally different way. Certain unsecured creditors (like the UAW’s VEBA) were treated better than other unsecured creditors. There were a lot of issues floating around, including poliitics, fairness, and the health of other industries. But don’t think that you or I would ever get this kind of treatment in bankruptcy court. This bankruptcy did not get done in a way that followed bankruptcy law. But for lots of reasons, the thing flew through.

      • 0 avatar
        Conslaw

        I don’t do Chapter 11 bankruptcies, but as I understand it, the test isn’t that all unsecured and secured creditors get treated the same, the test is whether all secured creditors get treated the same, and all unsecured creditors do at least as well as they would have done with a liquidation. That test was met. It’s not uncommon for Chapter 11 plans to be approved with differential treatment of unsecured creditors. For example Chapter 11 plans that provide for continued honoring of warranties result in preferential treatment of past customers over other unsecured customers, but the goodwill is valuable to the company. Similarly, in the GM bailout, it was essential to have the workers behind the plan. Nobody said this wasn’t a political deal. It was put together to further policy objectives. One of those policy objectives was not to dump all the pensions into the PBGC. Another policy objective was to keep retiree driven communities from turning into wastelands. Anderson, Indiana used to have 25,000 autoworkers. Now they have almost no active workers but 25,000 retirees.

        The right wing talks about the tens of billions of dollars that went into subsidizing the auto companies, but you don’t hear about the trillions of dollars that have gone into subsidizing the financial industry. All of these banks would be insolvent if it weren’t for the open window at the Fed, and they still can’t underwrite or service mortgages worth a damn.

      • 0 avatar
        jpcavanaugh

        It’s coming back to me. The other big problem was that this wasn’t a reorganization of GM or of Chrysler. New companies were created that were allowed to cherry pick assets without the normal sale procedures, while screwing secured creditors of the old companies. GM and Chrysler did not reorganize. GM and Chrysler went down in flames, with their best assets stripped out and with all of the unwanted assets far outstripped by debt (some of which should have followed assets to the new companies but did not).
        New companies (coincidentally also called GM and Chrysler) were formed with assets picked out of the wreckage of the old companies. These new companies and the interest groups that were benefitted by them got a lot of breaks that they would not have been entitled to in a real Chapter 11.

      • 0 avatar
        28-cars-later

        Spot on JP, IIRC there was alot of creative techniques put into those ‘bankruptcies’ which many firms would have killed for in their own bankruptcies. Bear Sterns was given away for what, $10/share? (up from an initial offer of $2)

        Funny business those bailouts.

  • avatar
    KayakerNC

    So Bertel hates unions as well as women.
    I think I’ll be skipping his articles for a while.

  • avatar
    DownEaster

    If we didn’t have the auto bailout, then we in the US would have lost a great deal of our manufacturing base. I agree with the auto bailout and am happy for the American jobs it protected. Other countries such as Japan have a Ministry that works with industries and pushes exports. We instead pass laws that send our jobs overseas through tax breaks. Also if Chrysler and GM, went through a regular bankruptcy and didn’t have the government’s backing then nobody would have bought their cars while they were in bankruptcy. Lee Iacocca said when the government bailed out Chrysler in 1979-1980 that no one would by the cars of a company in bankruptcy. Who wants to by an orphan car? Like all the Saabs that go unsold, today. The government did right in the bankruptcy. The only change I would have liked would have Chrysler to remain an American company and not given to Fiat. I will say that Fiat has done wonders with Chrysler and Chrysler is now helping keep Fiat afloat. Lee Iacocca said and Chrysler’s 1980 bailout that the government could either loan them $1 billion with a good chance of it getting paid back or bailing billions in unemployment and other social programs. So I am glad for the proactive government and how it handled the auto bailout.

    • 0 avatar
      dejal1

      This is splitting hairs, but the gov. never bailed out Chrysler + Iacocca. They never received a dime of government money. If Chrysler defaulted on the loans, the government would pick up the pieces.

      Chrysler didn’t and no money changed hands. Of course using the USA as a cosigner on the loans helped them get the loans.

      • 0 avatar
        jpcavanaugh

        Thank you for stepping in. The 1979-80 Chrysler “bailout” did not cost the US government a dime. The government did, however, guarantee 1.2 billion in private loans. Chrysler made it through, repaid the loans, and the government found lots of other places to spend our money.

    • 0 avatar
      raph

      I see it as a necessary evil. Could it have been handled better? Certainly, but the banks were in trouble and had no money for the usual bankruptcy process ( this is touched on by Lutz in his book; Car Guys vs. Bean Counters). Also if Chrysler and General Motors had been allowed to fail, all of their subcontractors ( the guys that furnish things like interior panels, switches, brake lines, etc all ) would not received money and would have been in turmoil as well and they don’t just supply components exclusively to bankrupted companies but the entire industry which would have swelled the issue and possibly wiped out other automakers.

      I always get the impression that people think GM and Chrysler exist in a vacuum, that had letting them fail would have been nothing more than entertainment on the evening news with little to no repercussions when the opposite is true. I’ve read that when the auto industry downsizes you can take that number and multiply it by about 10 when it comes to the true number of jobs lost and during the auto crisis, the number of jobs evaporating in the US was pegged at 1 out of 100.

    • 0 avatar
      geeber

      The nation’s manufacturing sector is in good health. Manufacturing output has INCREASED by one-third over the past decade. What has declined by the same amount are manufacturing JOBS.

      That is because of automation and improved production processes, not because of “laws sending our jobs overseas through tax breaks.” We don’t make things the way we did in 1955 or even 1985 anymore, which has improved both product quality and productivity.

  • avatar
    paxman356

    Didn’t we do the auto bailout exactly as Romney wanted us to all along?

  • avatar
    77MGB

    In other news … water’s wet, jalapenos found spicy. Film at 11.

    • 0 avatar
      wsn

      Exactly.

      I don’t like the outcome, but this is democracy. UAW lifted Chairman Obama to his throne not without a reason. (For those about to say the bailout started in the Bush era, know that Obama had already approached Bush and stated his request at the time. We would never know what Bush would do exactly if Bush had 4 more years.)

      • 0 avatar
        highdesertcat

        And Obama will win re-election handily, because there aren’t enough voters of any persuasion that will rally behind presumptive nominee Romney to give him a majority. One is as bad as the other.

        Obama will win by default.

  • avatar
    Felix Hoenikker

    While the auto bailout was not ideal in the sense that the UAW received more than they should have, the bank bail out was just wrong. Most of the execs of the big investment banks and mortgage companies should have been procsecuted and jailed for fraud. GM was merely hapless.
    Now the banksters have gutted most of the reforms proposed after the crash and are back to their merry ways. The JP Morgan fiasco is an example of how little things have changed.
    I would take the Heritage foundation more seriously if they would invistage the banksters first and the automakers second. But maybe that tells you where they money is coming from.

  • avatar
    forraymond

    TTAC – The FOX News of Car Blogs. Farago would have NEVER allowed this type of BIASED material.

    Maybe this is what passes for truth in China or in Germany, but not here, not now.

    • 0 avatar
      star_gazer

      @forraymond:

      Politics is contentious; we need differing viewpoints to figure out which lever to pull (or, which chad to punch) this November. Since cars are subject to the winds of political forces, we need this information here and now.

      I’ve followed TTAC since 2006. Every left or right leaning viewpoint had been, in my opinion, adequately represented. TTAC has been opened to all viewpoints. I guess this rubs some people the wrong way…

      • 0 avatar
        forraymond

        TTAC has moved toward the FOX brand of news/opinion that is not based in fact, rather based misinformation slanted to mislead readers toward a specific viewpoint not based in truth.

        With all the pontificating about Christianity, it galls me that “Thou shalt not lie” is never mentioned, but often broken.

    • 0 avatar
      MeaCulpa

      Oh yes, a snide and nationalistic remark with no backing from any authoritative source, no data and not even any anecdotical evidence. But enlighten us, is German journalism more biased then american, and if so, why?

  • avatar
    DownEaster

    I stand corrected on my Chrysler bailout comment. The government guaranteed the loans. The cost of retraining the workers, unemployment costs, and other costs the government would have had to of picked up would have been great than the loans the government guaranteed for Chrysler. The 2008 bailout would have been expensive for the government if GM and Chrysler went bankrupt and the US would have a much higher unemployment rate today.

  • avatar
    getacargetacheck

    “There could have been a more cost-effective solution: Bankruptcy.”

    Hilarious. GM and Chrysler DID go through bankruptcy. But because of the credit crisis brought on by years of financial deregulation and the resultant casino-like atmosphere on Wall Street, the US Government had to fund it. THERE WERE NO OTHER SOURCES OF BANKRUPTCY FINANCING. Go ask “W” — he was there, he started the process. The alternative would have been the looooong, slowwwww liquidation of Chrysler and GM. In a market that suddenly needed 25% fewer cars. In other words, the devastation of Saab Auto times 100. Heritage, uber-conservative George Mason Univ and Willard Mitt Romney want to rewrite history for the memory-challenged among us. Shame on you Schmitt for posting this tripe!

    • 0 avatar
      geeber

      The problem is that, if the market suddenly needed “25 percent less cars,” then that suggests that it also needed fewer companies to meet that lower level of demand. When the game of musical chairs ends, not everyone finds a seat. Which is pretty much what happened in 2008. As someone once said, depressions uncover what the accountants either missed or were paid to overlook. The goal is to shake out the weaklings and let the strong survive.

      Fortunately for GM and especially Chrysler, this happened during an election year when the economy as a whole was in meltdown phase.

      If GM had declared bankruptcy when it really should have – about 2005 – there would not have been a government bailout, wailing about the nation’s “industrial base” (which is actually in quite good shape) to the contrary. The company would have undergone a Delphi-like reorganization, leaving only Chevrolet and Cadillac.

      Chrysler would have been broken up and its only viable products – Jeeps, minivans and maybe the 300/Charger – sold to another manufacturer.

      There would have been much weeping and gnashing of teeth on the fanboy sites, but most buyers would have shrugged their shoulders and continued to shop for Toyotas, Hondas, Fords or Hyundais instead.

      • 0 avatar
        getacargetacheck

        Everything you write is true geeber. However, the catalyst for GM and Chrysler’s bankruptcy was the cratering of the credit markets. Greedy, ideologically-driven misgovernance which ignored 50 years of proven policy. EVENTUALLY (many years definitely), GM and Chrysler would have been successfully liquidated. In the meantime, we would have had thousands of unemployed auto workers (including thousands of non-UAW designers, engineers, accountants, finance, salespeople, dealer employees) collecting unemployment benefits. Here we would have been 4 years later (MAYBE) up to 13M sales per year but with a much hollowed out industrial base and even fewer opportunities for college engineering grads. In any case, the federal government would have been on the hook. Take your pick: increased TANF, SNAP and unemployment insurance benefits OR a much better functioning domestic auto industry that also supports other industrial sectors in countless ways. I’m glad we took the latter road. Ayn Rand is fun on paper, but it doesn’t (and never has) worked in the real world.

      • 0 avatar
        geeber

        GM would have – or, more accurately, should have – declared bankruptcy even if the credit markets had not crashed in 2008. It has been a poorly run, wealth-destroying entity for years.

        It was also apparent that Rick Wagoner simply did not have the vision or gumption to produce a true turnaround plan that addressed the root cause of GM’s problem – its arrogant and hidebound corporate worldview. Outsiders have long realized – at least since the mid-1980s – that the auto industry does not revolve around GM. GM’s executive team and board of directors didn’t get that memo.

        (One of the problems I have with the bailout, ironically, is that I don’t think that the Obama Adminstration fired ENOUGH people at GM. I’m not seeing a major culture change at GM, based on the words of the executive team or the company’s product plans. The Buick and Cadillac product lines, for example, still lack coherence and don’t support a strong brand identity for either marque.)

        Whatever one can say about the bailout, it is undeniable that Wagoner deserved to be fired by the Obama Administration’s “car czar.”

        It’s telling that the first thing Alan Mulally addressed at Ford wasn’t the UAW contract or even the vehicle development procees – he correctly attacked its rotten, divisive corporate culture.

        And the “greedy, ideologically driven” factors that led to the crash were the result, in many cases, of policies implemented by those who decried the “deregulation” of the financial sector (which never happened).

        Nor did the other favorite bogeyman, the Gramm Leach Bliley Act, have anything to do with the recent crash. The act, in fact, ameliorated it.

    • 0 avatar

      @getacargetacheck

      You can voice your opinion on TTAC, whatever it may be. You cannot forget your manners and be insulting, to whoever that may be. Last warning. If this repeats, you will be gone forever. A discussion of this warning is not desired. Backtalk = immediate ban.

  • avatar
    Pch101

    The headline would be more honest if it had read: “Conservative Organization Produces Paper That Expresses Conservative Opinion. Again. Still.”

    What would be more interesting is whether anyone can find an example of a Heritage Foundation paper that has ever contradicted the organizational party line. I’m pretty sure that the answer to that is a rather emphatic “NO.”

    • 0 avatar
      getacargetacheck

      An intelligent observation. Thank you.

    • 0 avatar
      marc

      It only took 43 comments, but yours was the last one on this page, so worth the wait. I’m glad I didnt view this article 5 minutes earlier. I would’ve missed your post (which I knew would be here eventually), and I would’ve had to come back and view this dreck once more.

      Such a shame, because I usually love reading Bertel’s stories. Such a unique international view from a long time insider. But this is a new low. Passing off as news a conservative organization’s agenda belongs on Autospies, not TTAC.

    • 0 avatar
      MeaCulpa

      Wouldn’t it be slightly more productive to actually point to errors in the data, factually untrue statements, flawed reasoning and flaky conclusions, than to point out that a conservative organisation expresses conservative opinions? It’s not impossible for an organization promoting certain ideas – who some find less then palatable – to be correct in every report they issue, they might abstain from issuing reports that doesn’t support their particular ideology or interest but that does not mean that the ones they do issue are untrue.

      • 0 avatar
        Pch101

        Personally, I think that it’s sad that diehard conservatives are so insecure about their beliefs that they insist on endlessly seeking out and quoting other conservatives. The need for emotional support from the echo chamber suggests a lack of confidence and intellectual vigor.

        Finding someone else in the world who agrees with you only proves that there are others who agree with you. It doesn’t prove that you’re right. It may be emotionally fulfilling, but it’s intellectually bankrupt.

        The Heritage Foundation doesn’t produce credible work, so spending much effort on dissecting all of its work is frankly a waste of time. But just glancing at it shows a fair amount of spin. It gripes about wages not being cut, yet neglects to mention that payrolls were cut as a result of the bankruptcy. It attributes the bailout to the current president, while implying that the last president didn’t have anything to do with it.

        The work just isn’t very good — you know what it’s going to say before you even start to read it, given the source. There is more neutral research that is available on the subject, so why cite this dreck as gospel, instead?

      • 0 avatar
        kenzter

        Well said PCH, thank you.

        I find myself visiting TTAC less and less often these days.

        BS doesn’t like GM or the UAW. Fine, I get it. But this right wing propaganda crap is getting old.

      • 0 avatar
        darkwing

        In other words: “no, because they’re meanies”.

        Yet another oversensitive lefty who can’t properly function outside of an echo chamber. Yawn.

    • 0 avatar
      philadlj

      +1

  • avatar
    siuol11.2

    Wow, gone a couple of weeks, come back and TTAC has turned in to another right-wing fear-o-matic. The Heritage Foundation? Really?
    Let me add this: In our modern world, investors are ALWAYS sacrosanct. It’s no surprise that Moodys or Heritage gets their panties in a twist when a chronically underfunded pension (which should result in jail time) doesn’t end with a bunch of people living on a fixed income suddenly find themselves homeless and broke.

    • 0 avatar
      MeaCulpa

      The solution for underfunded pensions – in the future – are quite simple at least. Either the employer does not set aside funds for pensions at all – what some are all ready doing by some number fiddling – and increases the wages, or, make the scheme defined contribution as apposed to defined benefit.

    • 0 avatar
      Volts On Fire

      Your argument fails to consider the entire concept of personal responsibility. When times were good, perhaps those union workers should have set aside some of their ridiculously high paychecks for a rainy day?

      (And if they weren’t smart enough to do so… relying instead on “the union will take care of me!” … perhaps they deserve to rot in the gutter now?)

      But no, of course not. It’s all those mean ole’ investors’ fault.

      • 0 avatar
        highdesertcat

        I’m no Republican nor am I conservative, just prudent. I don’t like bailing out any failed business or union. This isn’t about politics.

        This is much more about keeping the 6% employed by the American auto industry living the high-life at the expense of the other 94% of workers in America.

        Depending on whether you’re on the receiving end of this windfall or the one paying for it, determines your like or dislike of it.

      • 0 avatar
        siuol11.2

        So personal responsibility comes in to play NOT when management purposely shorts the retirement fund (a legally binding contract) in order to increase short-term profits, but the worker who’s depending on it? Yeah, OK.

      • 0 avatar
        Volts On Fire

        “So personal responsibility comes in to play NOT when management purposely shorts the retirement fund (a legally binding contract) in order to increase short-term profits, but the worker who’s depending on it? Yeah, OK”

        Really? You’re that naive? Of course it still comes into play for the workers. You should never rely on someone else having your best interests at heart, especially a superior. They only care about what’s best for them and their business, as they should. The UAW yokels should have had the common sense to look out for themselves as well.

        If you didn’t know that, I have some business propositions for you.

  • avatar
    Dubbed

    So the butcher had a really good selection of red meat when you visited last time.

  • avatar
    mshenzi

    Liberal or conservative, if someone’s politics are a big part of their persona, it’d be more above-board if those politics be made explicit. The Heritage Foundation makes no bones about its conservatism– why not just mention that here? Todd Zywicki is also very public about his conservatism, and has a long track record of opposing the auto industry bailout.

    Do their political credentials invalidate their findings? Not inherently, but when they’re left unstated, they look like the posting is trying to slip something by the readers, and THAT weakens the posting’s credibility.

    A bit more on Zywicki: his other main area of work is opposition to further regulation of banking and financial services. In 2005 he wrote that “the growth in subprime lending is not creating overwhelming debt burdens for low-income households,” a claim that in retrospect doesn’t look good.

    http://en.wikipedia.org/wiki/Todd_Zywicki

    • 0 avatar
      darkwing

      That seems a bit much — Heritage is quite well-known, and if not, it only takes a couple of clicks to get to their mission statement.

      It seems like the effect of this would be to require a disclaimer with all sources that are not part of the “default” — i.e. to the left of center.

  • avatar
    drivelikejehu

    Zywicki is a great guy- he was my Contracts prof in law school. He’s certainly smarter than everyone posting in this thread, myself included.

    His claim on subprime lending was basically right; if the market wasn’t a bubble, there wouldn’t have been a problem. He’s not an economist and even most of them missed the impending crash.

    Everyone with a brain knows the UAW was bailed out for political reasons. All this paper did was provide specifics. Whether or not the Heritage Foundation is conservative is irrelevant since there are no valid counter-arguments to what was presented.

    It’s not a counter-argument to say that other bailouts were worse. That’s like saying attempted murder is OK because murder is worse. Yes, the financial system is terrible- but it’s not really because of deregulation. The banks work with governments to fund excessive public debt, and in exchange are backstopped so that the banks can make risky investments without suffering the consequences of failure.

    That is fairly similar to the UAW situation. They helped drive GM to bankruptcy but did not suffer the consequences.

    • 0 avatar
      ultramatic

      It’s interesting that you say Mr. Zywicki was your contracts professor. Couldn’t it be argued that an underfunded pension is a breach of contract? This is a defined benefit obligation, after all, and if projections show it being underfunded, steps must be taken to shore it up.

      I’m genuinely interested, not just because I was one of the last hired into my company with a pension, but because my parents are both white-collar retirees from GM who are now having their pensions reduced (along with those at Ford).

      • 0 avatar
        drivelikejehu

        Well technically the employer is only obligated to pay the benefit, not to maintain a healthy pension fund. If a company can’t pay, then it is bankrupt and the benefits can be legally reduced in bankruptcy. The employment contracts could allow for other means of reduction (you mention Ford), but I don’t know the specifics of the contracts involved there.

        I think your question is whether, seeing this problem ahead of time, an employee could sue to force the company’s hand in funding the pension. The answer is yes, but the company would have to be able to fund it without compromising business operations. Otherwise, the company goes bankrupt even faster. Courts generally defer to the ‘business judgment’ of managers, so it would have to be an exceptional situation (e.g., looting by management). Ordinarily shareholders (public or private) would react in that situation, and the law makes it much easier for them to intervene against management decisions.

  • avatar
    hriehl1

    Do you remember Wal-Mart’s very visible “Made in America” campaign 10 or 15 years ago? How’d that work out for ‘em?

    We’re all guilty… if the Made in China item is $1 and the Made in U.S.A. item is $1.25, the Chinese item wins.

    What we colectively fail to acknowledge is that labor is in a competitive market too… the hourly worker in Detroit competes with his counterpart in Peking. As in any competition, there are winners and losers, and no amount of tariffs, union handouts, currency manipulation or other governmental policy will negate the basic fact that the business goes to the low-cost provider…. always.

    • 0 avatar
      CJinSD

      The funny thing about the Chinafication of Wal-mart is who was on their board at the time and who her husband was in the White House when our economy was traded to China for a few campaign dollars and a tumble in the Lincoln Bedroom.

    • 0 avatar
      chuckrs

      This doesn’t explain Audi, BMW, et al. There is a place for premium priced products produced by premium paid workers, even if they aren’t more reliable than value priced alternatives.
      But, but, you must have something that distinguishes you to pull this off.
      /rant
      Nothing to do with cars, but I have been dealing with a failing appliance – fridge – for the past three weeks – three service calls so far on an 8 y.o. appliance, all repeats of a problem that first cropped up at 4 years of service. The conclusion is that this unit combines high price with unreliability. I naively expected that paying that price would result in the only thing that distinguishes an appliance – reliability. No 0-60, no infotainment systems to divert attention.
      The root of the problem according to the last serviceman – a grizzled veteran – is downsizing some power consuming components and reducing cycle times to meet government mandated Energy Star requirements. And because consumers want a relatively low price even for a higher end product, quality corners are cut also.
      On a plus note, I can replace the POS with either a 1952 or 1954 GE refrigerator for $600 or $400 respectively on e-bay. Proven performers, both. There are also a couple of GM built Fridgidaires from the same era.
      /rant

      • 0 avatar
        28-cars-later

        Chuck with regard to your appliance issue, I’m quite sympathetic. I purchased a microwave four years ago which in truth I seldom used, and the g/f explains to me last weekend its been shooting sparks when operating and is probably a fire hazard. Money isn’t my issue here its the principle of the thing, you pay X amount for a simple device and expect X years of service. If you run said device constantly it will surely wear out faster than if you seldom use it, but in my case I feel a bit cheated. It’s sad to me we have to go back to the generation of our parents/grandparents (in my case) to find a quality product.

    • 0 avatar
      siuol11.2

      Actually, aside from the Smoot-Hawley Act (the only only negative example I’ve seen from Conservatives), tariffs are tailor-made to address this problem.

      • 0 avatar
        geeber

        Tariffs protect special interests at the expense of the people who really matter – customers.

        The Hawley-Smoot Tariff was so wide-reaching, and so onerous, that it sparked retaliatory measures by other countries. These measures ended up HURTING American industry and farmers already dealing with the post-1929 downturn. This is why, in the wake of the Great Depression and World War II, there was a bipartisan consensus in this country in favor of free trade.

        You should also know that, in the late 19th and early 20th century, the fight against tariffs was led by the LIBERAL William Jennings Bryan, the “Great Commoner” who revived the Democratic party in the wake of the Civil War.

        REPUBLICANS and BIG BUSINESS loved tariffs in those days. Farmers and small-business people did not.

      • 0 avatar
        Pch101

        Tariffs were a vestige of mercantilism, which valued hoarding over trade. They were also a byproduct of the gold standard — since the value of the currency was based upon the gold held by the treasury, the way to maintain the value of the currency was to minimize trade deficits, reducing the need to export the gold.

        Today, we tax incomes become tariffs are no longer workable. When you file your 1040’s, it might help to remember that income taxes and free trade go together.

      • 0 avatar
        28-cars-later

        I agree tariffs (like taxes) are not the answer, there are always ways around them.

        With regard to income taxes though, I was under the impression this tax was necessary for our gov’t to pay the interest to the Fed on the use of *their* money.

  • avatar
    redmondjp

    It should also be mentioned that the salaried employees of GM’s former parts divisions (all grouped under Delphi now) lost benefits, while the UAW retirees didn’t. Hmmm. Why is that?

    http://www.delphisalariedretirees.org/delphi/

    Even Democratic politicians in the auto plant states are fighting this for their constituents. It’s a matter of fairness – two employees work at the same plant for their entire life, and one keeps their pension, while the other loses it.

    • 0 avatar
      bikegoesbaa

      “Why is that?”

      Because UAW workers are far better organized and more sympathetic.

    • 0 avatar
      Pch101

      “Why is that?”

      The union’s VEBA was a creditor that was owed $20 billion. Which is to say that getting support of the union was an important factor for getting the bankruptcy plan approved.

      Incidentally, it’s bizarre math that equates the unfunded liabilities to a dollar-for-dollar loss. Obviously, an unfunded liability is unfunded — nobody has paid for it. It’s fortunate that the Heritage Foundation isn’t in the consulting business.

      • 0 avatar
        chuckrs

        The union’s VEBA was a creditor that was owed $20 billion.

        And the salaried employees benefits apparently weren’t structured in a similar manner => UAW workers are far better organized. Not the same as more deserving.

      • 0 avatar
        Pch101

        “And the salaried employees benefits apparently weren’t structured in a similar manner”

        The VEBA was a creditor which was owed a substantial portion of the liabilities on the Old GM’s balance sheet.

        Whether the VEBA was “deserving” is (a) a matter of your opinion, which frankly no bankruptcy court cares about, and (b) completely irrelevant as to whether the VEBA was owed the money as a creditor.

        The VEBA agreed to take equity in lieu of cash, which helped to make the bankruptcy plan workable. The union attached to the VEBA also agreed to workforce reductions and other concessions which, again, helped to get the bankruptcy plan approved.

        In addition, the new company needed to have a workforce if it was going to build cars, which is of course also part of getting a workable bankruptcy plan.

        So the union had some negotiation leverage, but not enough leverage to get cash out of the old company. If you want to continue to have sour grapes about that, I suppose that you’ll find an excuse to be upset, no matter what the facts happen to be. I’m surprised that you’re not delighted with one of the net effects of the bankruptcy — a seriously weakened union that is on its last legs.

      • 0 avatar
        chuckrs

        Upstream conslaw had some interesting comments on bankruptcy. Here you have just restated that salaried employees didn’t have the same secured creditor leverage as the UAW => the UAW is better organized.

        Please don’t impute sour grapes to me – I haven’t owned a GM car in 20 years and never owned either GM stock or bonds. For my stock losses you need look no further than BofA, a (dis)organization apparently with more leverage than GM or the UAW.

        As to the need to have a workforce in the successor company, we’ll never know if their bluff could have been called if regular bankruptcy proceedings had been followed. I think the workers worth keeping would have, sadder but wiser, chosen a job over no job. But it would have been even more exciting times.

      • 0 avatar
        Pch101

        “Here you have just restated that salaried employees didn’t have the same secured creditor leverage as the UAW => the UAW is better organized.”

        The VEBA’s interest was unsecured. The GM secured creditors were paid in full.

        It wasn’t a matter of being better organized. The VEBA was created because the UAW got hosed on its earlier pension deal — the VEBA was used to settle and reduce the old obligations. Then it got hosed again by the bankruptcy when the VEBA had to accept stock in the New GM instead of the money that it had been owed.

        In effect, the Old GM defaulted on its union pension obligations not once, but twice. Your desire to paint the union as some sort of winner is a bit comical — the UAW gets bloodied up, time and time again. You should be thrilled by the result.

      • 0 avatar
        chuckrs

        pch101 – Why would you think that I would be thrilled with any of the problems of the past five years? Second time you have suggested that without any basis. Over the past year I have worked for health benefits and gas money. If my company had gone BK, I’m pretty sure that no Wise Men from DC would have come in and meddled in the BK process. That’s the way it should be and should have been for GM. When government intervenes, it chooses (relative) winners and losers, and the rest of us on the hook for settling up remember.
        My bad assuming that VEBA was secured, but you and others have suggested that they had the de facto leverage regardless.

      • 0 avatar
        Pch101

        “Why would you think that I would be thrilled with any of the problems of the past five years?”

        Because the UAW is getting creamed, and the outcome of the bailout is part of the reason why.

        What I find quite funny is that conservatives are utterly convinced that the UAW prospered as a result of the bailouts, when the exact opposite is true.

        The only thing that came out of it is that some of them got to keep their jobs. Not all of them, just some of them. In the meantime, the benefits that you all like to complain about still haven’t been funded as they were originally supposed to be.

        I read the comments on this site, and it’s as if it’s 1984 — you get everything backwards. You think that unions are strong, even though they are weak. You think that the union won, when the union lost. The UAW is going to fail, and the bailout will have been one of the nails in the coffin. But you’re so filled with loathing for the union that you can’t even see that you’ve already won.

      • 0 avatar
        28-cars-later

        I actually cannot disagree on most of your points as I too believe the unions are in a far weaker position post-bailout than prior.

        I’m curious though why do you think they will ultimately fail?

      • 0 avatar
        Pch101

        The UAW is a lot like the Old GM. Part of the reason that the Old GM failed is that the company was trying to maintain the infrastructure of a company with 50% market share, when it had 20% market share. Since it couldn’t regain the market share, it was carrying an excessive burden that the company was too small to carry.

        UAW membership is shrinking over the long term, and there are no real prospects for that to change. It is running out of money, and it is highly unlikely to find new sources of revenue to replace the decline in membership. But unlike GM, the union is not going to be bailed out. The UAW is becoming increasingly irrelevant, and there isn’t much that it can do about it.

  • avatar
    KRoyall

    I want to know how a company gets on the special bailout list. Obviously having union workers who are part of the Democrat political complex is critical. What happened to equal protection under the law? Would Exxon or Wal-Mart, who probably employ MORE workers than GM get a bailout from Obama? I doubt it.

    • 0 avatar
      markV

      Exxon already gets a bailout via tax credits and subsidies.

      Walmart already gets a bailout as its US workforce is subsidized by the gov’t as many of them make so little working at walmart they qualifiy for gov’t assistance.

      If you want to find a corporation that isn’t being subsidized by the Federal, State, or Local gov’t you’ll have to find one that is to small to donate political candidates.

      • 0 avatar
        28-cars-later

        Why would the oil giants need a ‘bailout’? They produce and sell a product on which demand is growing worldwide and their supplies run less and less everyday. If anything in the near term they could afford to give bailouts in the form of cheaper energy, not need to receive them.

    • 0 avatar
      highdesertcat

      It’s all about selectivism and favoritism, and who’s in power at the time.

      The Republicans would have bailed out their favorites had the situation presented itself.

      The ‘crats were in power at the time and they bailed out their constituents and supporters.

      America got exactly what it deserved when Americans voted Obama and the ‘crats into power in 2008. In America the majority decides.

      The rest of us who do not support those policies live our lives around them. One way to do that is by not buying GM or UAW-made products.

  • avatar
    el scotto

    Overall, we gave Chrysler to Fiat and “The heartbeat of America” is now a zombie heartbeat. Pissed off? Register to vote. I find a lot of internet douchebaggery on this site. A pinhead who “wins” an internet argument is still a pinhead.

  • avatar
    shelvis

    Congrats Bertel on another in depth piece of political fluff.
    This site needs more cars, less anti Obama crap.

  • avatar
    TomHend

    I will crawl across cut glass to vote against Obama, I could careless about Romney, but Obama? I have seen enough.

    I just lost my healthcare with Local 15 here in NYC as of June 1, and I still see homeless people in the streets without healthcare.

    Redistribution is going straight into Obama’s pockets

    • 0 avatar
      28-cars-later

      Sorry to hear about your troubles, ‘redistribution’ is simply theft by another name. If my heart bled as some do, it would be because those people in the streets have no homes along with a host of other issues, not because they lack healthcare. When I hear people squawk about healthcare all I can think of is another slush fund for the hypocrite leftists and banksters to get rich off of, money isn’t always the answer. I equate the obsession with ‘funding’ healthcare to the obsession with ‘funding’ public education, in the end the ‘people’ don’t profit from it.

  • avatar
    jsal56

    It is simple-the productive sector of our economy is being eaten alive by the unproductive,zombie sector — that includes GM.

    GM is the walking dead.

  • avatar
    oldyak

    my two cents……not that it matters,The UAW built BAD cars.I don’t care about design and so on and so on..they just didn’t give a shit about anything other than a paycheck. Drunk,stoned..whatever they would show up for work(sometimes)and hope for a plant shutdown ‘due to foreign competition’ so they could laze about with an income that was at least 40% more than they were worth!!!!
    If it wasn’t for two tier wages negotiated in the last contract the big 2 would be out of business anyway.
    and as far as the patriotic spiel on ‘Detroit’ goes…A big lesson learned on living off the government tit since it never stops flowing!
    I watched a bit on Top Gear about why Saab failed..
    and it had to do with too much time making the car better than the sum of its parts..not chasing down drunks in the parking lot at the union hall!
    So Saab fails and the big 2 keep marching on…..
    Go figure!

  • avatar
    AJ

    And all Obama wants is more union workers to line the pockets of his fellow democrats. All for the people!

  • avatar
    hriehl1

    Wow… lots of heated opinions here. I suggest many of you go the WSJ and actually read the cited article.

    Its thesis is simple… traditional bankruptcy proceedings were not followed in the case of GM and Chrysler. The UAW and its members were advantaged way beyond where their standing in the line of owners and creditors would suggest. They got unequal sweetheart treatment.

    The precedent-breaking here is, to me, the most troublesome aspect that shakes one’s confidence in almost any public investment. I don’t want my government ever picking winners and losers based on whim and political connections.

    Even if one stipulates that the UAW is more “worthy” than the other unsecured creditors, were they “entitled” by law or by precedent to a disproportionate settlement? I don’t think so, but correct me if I’m wrong.

    Anybody here wanna buy unsecured GM bonds that might once again be set aside in favor of equally-unsecured obligations to the UAW? How about bonds from American Airlines, or Caterpillar or whomever?

    • 0 avatar
      Pch101

      It’s a bad thesis. Under Murdoch, the Wall Street Journal op-ed has the credibility of Fox News. Again, I realize that it appeals to those of you who like being in the echo chamber, but don’t confuse being opinionated with being well-informed.

      • 0 avatar
        hriehl1

        Then please inform us rather than toss out an ad hominem wisecrack.

        As I see it, GM owed the UAW money that was not secured. They also owed money to unsecured bondholders.

        So:
        1. Did the UAW get more on-the-dollar than unsecured bondholders?
        2. If so, Why?
        3. If so, are disproportionate payouts to equal-seniority creditors common in bankruptcy settlements?

        I’m asking because I really do not know, but the authors’ of the original made it sound pretty unusual.

      • 0 avatar
        Pch101

        From the first part of the article:

        “A bedrock principle of bankruptcy law is that creditors with similar claims priority receive equal treatment.”

        That is false. There is no consensus about this being true. Some would like to argue that it is, but courts don’t necessarily follow it.

        I’ve explained this many times on this website, but it doesn’t seem to sink in — bankruptcy courts are courts of equity, not just courts of law. Like family court, their goal is not to just follow statute and procedure, but to deliver a reasonable outcome, albeit within legal constraints.

        In a Chapter 11, the goal is to create a workable company that gets creditors paid at least what they would have been paid in a liquidation. If pari passu is called for in that case, then courts will use it. If they think that the process is better served by doing something else, then they will do something else.

        That’s just one example of what is wrong with this article. And since you seem to be hanging your hat on this bogus point, you should be embarrassed.

    • 0 avatar
      psarhjinian

      The UAW was an unsecured creditor. More importantly, the government was. No one wanted equity, and GM had no cash or assets worth a buyer, so those unsecured bondholders would have functionally zero.

      Traditional bankruptcy proceedings were followed, inasmuch as a company that was worth less than nothing and owed it’s union’s VEBA fund and the government a huge loan, during a credit crunch, could be considered “traditional”.

      Would I buy bonds in GM, or another functionally-broken large company, knowing that the government will insure me against losses? Really? Is that what’s being asked?

      • 0 avatar
        hriehl1

        That is not what I’m asking.

        I’m asking whether long-standing practices in bankruptcy proceedings, maybe even defined by rule-of-law, were swept aside to benefit a political constituency.

        If that occurred, then I’m troubled, no matter what party did it or what constituency was benefitted. I’m looking at it as an investor might, and whether my investment’s safety can be downgraded based on political whim.

        Stated differently, if we’re running this country the way a sultan can run his kingdom, on the whim of the moment, I’m troubled.

        Many have suggested the GM and Chrysler bankruptcies were adjudicated in that fashion.

  • avatar

    Okay guys do not worry. Obama is not life time president yet. And knowing American way of doing business GM will go into bankruptcy again and next time UAW will be not as lucky to have Obama or other Democrat in the office. Republicans will certainly will do anything to finish UAW. All that union BS is so XX century. See what happens in Europe as a prelude. The the wealth accumulated by West is not real. It is based on complex unstable structure made of personal debt and unsustainable increasing national debt. So this house of cards will collapse. Don’t you think so? Or like Obama you would rather crow about hope and change. Change is coming yes but without hope.

    • 0 avatar
      highdesertcat

      Obama may not be a lifetime president but he will be with us for four more years. The damage he has wrought so far will be with us for decades. But that is what America wanted and voted for, and that’s what America got.

      GM will indeed go bankrupt again and will be bailed out again no matter who’s in power or lives in the White House. No one in government is going to admit that bailing GM out the first time was a mistake, and they will continue to bail GM out just to prove that it was not a mistake. But Chrysler? The government couldn’t dump that loser fast enough! Even bribed Fiat to take it. And now look at Chrysler go.

      America will also bail out Europe when it comes to that, and the American tax payers will foot the bill.

      Our financial house of cards will never collapse, just as it didn’t collapse during the Great Recession, most recently. People with money won’t notice a thing and people without money will become even poorer than they were before.


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