Well, it turns out that October sales won’t be released until tomorrow, but luckily we have a hot-and-sweaty-fresh report by the Government Accountability Office (PDF) to keep things interesting. And we’re learning all kinds of new things about the auto bailout. To wit:
Chrysler must either manufacture 40 percent of its U.S. sales volume in the United States or its U.S. production volume must be at least 90 percent of its 2008 U.S. production volume. GM agrees to use its commercially reasonable best efforts to ensure that the volume of manufacturing conducted in the United States is consistent with at least 90 percent of the level envisioned in GM’s business plan.
Who knew? Not us! And as surprising as it is to find that GM and Chrysler face federally-mandated production quotas, we’re almost more surprised that the most the UAW (or whomever) could negotiate was 40 percent of Chrysler’s US sales volume. Especially since the UAW owns a majority stake in Chrysler. But wait, there’s more!
15 Comments on “Bailout Watch 566: Bailed Out Automakers Must Meet US Production Quotas...”
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With only 40 percent the UAW can’t take the majority of the blame when Chrysler again crashes? This is almost entertaining if it wasn’t so sad (and costly).
This translates to U.S. dealers being burdened with extra cars they don’t need, which will force rebates and discounts once again.
Well, if you accept the theory that the bailout was to preserve US jobs, then it shouldn’t be a surprise that keeping US manufacturing plants open and producing would be a condition of receiving bailout bucks.
I think this means nothing really. 2008 was a terrible year. So keeping production at levels at that level shouldn’t be to hard, or even at 90% of that level.
For Chrysler, they don’t have to make it close to that 90% number if they can have 40% of its sales volume come from the US. It can limit the sales of other products to make this work. Not a great plan, but a workable one. The other plan would be to make a large amount of cars that people may not want to buy. That plan is worse.
For GM, it is only a best effort. Not a requirement. Doubtful this gets brought up.
And what’s the government going to do to them if they don’t or can’t meet these requirements? Are they going to make them pay back the money? Or close them down and eliminate thousands of
votesjobs?This is another failed gov’t policy.
So they are going to have the domestics continue to overproduce vehicles and drive both new and used prices down.
That’s great for the brand value. GM and Chrysler are dead brands walking.
Command economy anyone??
“commercially reasonable best efforts”
I’d laugh if I weren’t crying…
But remember, the government doesn’t want to run the automobile industry.
Obama in April: “I don’t want to run auto companies, and I don’t want to run banks,” Mr. Obama said. “I’ve got two wars I’ve got to run already–I’ve got more than enough to do.”
And yet here they are with a new Government PayMaster deciding how much money bankers may be paid and what kind of cars GM and Chrysler will produce, and where they’ll produce them.
Didn’t see that coming.
Chrysler must either manufacture 40 percent of its U.S. sales volume in the United States or its U.S. production volume must be at least 90 percent of its 2008 U.S. production volume.
This is the bad side of central planning. And I say this as a socialist.
There’s nothing really wrong with government acting as a board of directors, especially when your actual board of directors are so gutless, hopeless and useless as to be harmful to the economy as a whole. There’s also nothing wrong with providing regulatory and ethical frameworks. You could debate being a lender of last resort, but it’s not necessarily bad.
As soon as government gets into production quotas, though, that’s crossed the line. Again, I’m a dyed-in-the-wool pinko and even I admit that production quotas are something government just stinks at.
This isn’t full-on planning, but it’s almost there. It’s typical milquetoast pandering: don’t fully nationalize, but just enough to avoid offending anyone.
“…to avoid offending anyone.”
…and offending people of nearly all political persuasions as a result.
It’s typical milquetoast pandering: don’t fully nationalize, but just enough to avoid offending anyone.
The only way to avoid being offended is to be completely asleep through this. Luckily, much of the US electorate is exactly that.
For those of us who pay attention and care and pay for most of this ‘pissing in the wind’ exercise, well, screw us.
The reason the UAW caved in on the 40% production rule is that they are fresh out of options since the bailout’s new money came from government,not union coffers.
It’s a lot like thinking you have juice with your brother’s loan shark-you are concerned, but if he put himself in debt, in part, to give you a paycheck-you’re part of the problem.
You’re not going to stop a broken leg from becoming a fundamental part of the loan process.
At what point does a government that tells a business what to produce and how, tell its citizens they must buy the product?
…and offending people of nearly all political persuasions as a result.
Well, yes. That’s the point. If you offend one group greatly, it’ll stick to you and dog you for the rest of your life. If you develop and refine a low-grade, across-the-board misery then, with luck, you can slip under the radar.
If they had outright nationalized GM, kicked ass, cleaned house and so forth, they’d have far more people screaming “OMG!!1!TEH S0ZCIALISM!!11″, if they did nothing they’d be accused of letting middle America go hang. So you pick the middle raod, which does nothing well but doesn’t raise as much ire, either.
Note: this is what’s happening (and what’s happened in the past) with health care in the US. Instead of a purely private system, which wouldn’t cost money, or a fully public system, which would see everyone covered 100% and cut down on bureacratic nonsense, you get the mealy-mouthed, hacked-together compromise.
Chrysler can do whatever it likes. All it needs to do is to repay the money.
And yet here they are with a new Government PayMaster deciding how much money bankers may be paid
When the banks repay the money, they can do whatever they want. But they need to repay the money.
Moral of the story: If you don’t want the government telling you what to do, then don’t borrow money from the government. It’s not that tough to understand.