Oh what a difference a year makes. It was April last year when a fresh faced POTUS, still riding high and flush on soaring rhetoric and ratings, decided to seize control of Chrysler and GM via Nicorette-filled, back room deals. At that time, Obama fired GM’s CEO, installed a bunch of know-nothing auto czars, and then recently carried thru with his promise he would alter fuel requirements to force restructuring of the production line in order to change a nation’s addiction to combustion engines.
Bold moves for a guy who’s only viable credentials are playing the leading man in elaborate fund raising events, and being a community organizer. But take those “bold
moves this president did, telling the nation it was yet another necessity. And he did so on the taxpayers’ nickel. American’s are on the hook for 61% of GM, and 10% of Chrysler.
And how are they doing? After cash for clunkers conked out, the unsustainable sales fell away as predicted. Again Ford – the only privately owned American auto company left of the big three – remains the only domestic performer. Meanwhile a floundering GM – who posted a $4.3 bil loss for 2009 – and Chrysler (who projected a $4.7 bil loss for 2009), are planning on importing foreign built cars as part of their financial “restructuring”…
Boy, ain’t that good news. Is this what Obama had in mind as “saving or creating jobs”?
But it gets worse for us – the taxpayers. As the banker for Obama’s great auto experiment, we’re also on the hook for the $17 bil in underfunded pension plans for both GM and Chrysler. You’ve got to see the insane aspect to this. The nation’s elderly are in a pickle because Social Security is bust, since Congress has been busy spending it for decades. Meanwhile, the Congress and POTUS who have “saved” us with health care are deliberately delaying that Social Security annual report so they can fudge the numbers with income from “health care”. You know, that ol’ sleight of hand trick: rob Peter to pay Paul, and convince Mary that everything’s cool.
The demented irony is that taxpayers, who’ve paid into the Dem ponzi scheme all their lives, won’t be getting their Social Security.. but they’ll be paying higher taxes in order to provide those GM and Chrysler pensioners their retirement benefits.
WTF? This is sheer madness. How can this be invisible to the nation?
The pension plans at General Motors and Chrysler are underfunded by a total of $17 billion and could fail if the automakers do not return to profitability, according to a government report released Tuesday.
Both companies need to make large payments into the plans within the next five years — $12.3 billion by G.M. and $2.6 billion by Chrysler — to reach minimum funding levels, according to the report, prepared by the Government Accountability Office. Whether the companies will be able to make the payments is uncertain, the report concluded, though Treasury officials expect the automakers will become profitable enough to do so.
If either company’s plan must be terminated, the government would become liable for paying benefits to hundreds of thousands of retirees. The effect on the government’s pension insurer, the Pension Benefit Guaranty Corporation, would be “unprecedented,” the report said. The agency manages plans with assets totaling $68.7 billion, less than the $84.5 billion in G.M.’s plan alone.
~~~The report issued Tuesday said Treasury officials were confident that G.M. and Chrysler would earn enough to allow the government to gradually sell its stakes. But the report warned that the government could push the companies out of business, consequently terminating their pension plans, if their recovery efforts failed.
“In the event that the companies do not return to profitability in a reasonable time frame, Treasury officials said that they will consider all commercial options for disposing of Treasury’s equity, including forcing the companies into liquidation,” the report said.
For those who haven’t caught on yet, is the political expedience to destroy Toyota becoming more clear to you yet?
This POTUS is making history all right. He provides vivid lessons in how to begin to dismantle large US corporations in less than a year, and then, stick the US taxpayers with the bill for the wasted bailout loss.
And he’s just getting started….
Vietnam era Navy wife, indy/conservative, and an official California escapee now residing as a red speck in the sea of Oregon blue.
If you want to know what’s happening to Toyota, read “Airframe” by Michael Crichton. What happens to “Norton Aircraft” is so similar to things happening to Toyota it’s eerie.
http://books.google.com/books?id=MrfVTOG_Jv8C&printsec=frontcover&dq=Airframe&source=bl&ots=DkrtjU1Pdn&sig=VOHFK7Iz5GY02SU40yYhNCLYUQM&hl=en&ei=THq8S8uaC5SonQeKo7HECA&sa=X&oi=book_result&ct=result&resnum=3&ved=0CBcQ6AEwAg#v=onepage&q&f=false
humm humm humm!
ol’
And the nation sits around on its behind waiting for November to save the country. http://www.sosssn.blogspot.com/
‘ taxpayers, who’ve paid into the Dem ponzi scheme all their lives, won’t be getting their Social Security’
Oh, they’ll get it – sort of. The AARP is too powerful for social security to just stop. Instead the federal government will just (continue to) cheat on the inflation figures and the associated COLA, so that the value of the social security checks gradually decreases to a fraction of what it would have been.
As for taxpayers paying for it, if you look you’ll see that nowadays we’re financing more of the federal budget via borrowing than by personal income tax. Which would still leave taxpayers on the hook if we were ever going to really repay the money, but since we’re just going to print it, it won’t be ‘taxpayers’ so much as dollar-holders that pay for our folly. The Chinese at least will learn a valuable lesson.
I’m glad to see that Ford is doing better, but between their own still-crushing debt load and having to compete against government-owned zombie corporations I don’t think much of their long-term prospects either.
I knew reading the Soviet history of their auto company would come in handy one day.
We need to not sit around, we need to focus everything on winning in November. No butts involved.
bbartlog, don’t sell Ford short. When the Obama administration decided it was going to take over the auto industry (too big to fail, ya’ know) Ford saw the handwriting on the wall and took it’s case not to the government, but to its employees. “We sink or we swim but we do it together” was Ford’s rallying cry. Ford also knew that a Al Gore lunacy infected Obama administration would place such restrictions on Ford that they would no longer be making vehicles that Americans want, but vehicles that Obama wanted.
Even so, with the full force of the federal government trying to destroy Toyota, Toyota sales are up, and the only recent Toyota plant closing has been the one that was union (sometimes there is beauty in pay-backs).
But the prize in the NYSlime’s Cracker Jack article is this little ditty:
“In the event that the companies do not return to profitablilty in a reasonable time frame, Treasury officials said that they will consider all commercial options for disposing of Treasury’s equity, INCLUDING FORCING THE COMPANIES INTO LIQUIDATION,” the report said.”
Do you understand what that means? It means a fire sale like none other we have ever seen, and thousands of jobs are going to go down the drain because those assets will be sold off to the highest bidder (and less than 10 cents on the dollar). So the government is going to force GM/Chrysler to build vehicles they want that are “green” and Ford will continue to build vehicles that people want to buy and in the end, this administration will just blame GM/Chrysler for mismanagement and dump them, and the debt attached to them, on the American tax payer. And remember who is currently the guiding hand of GM; Ed Whitacre, under whose guiding hand I watched my SBC stock go from $58. to $24.
The attitude of this administration seems to be that a company is “too big to fail” UNLESS they decide it is not. Had GM/Chrysler been allowed to go into standard bankruptcy which permitted a suspention of union contracts and debt and had a court controlled reorganization, they would not be facing an administration that is infamous for throwing people under the bus.
I have a great deal of faith in Ford’s prospects. I think there is a gross underestimation of the number of people that are engaged in a GM, Chrysler boycott. They make nothing that can’t be purchased from more responsible, non-government owned manufacturers. I and a great many of my friends are silently NOT BUYING, GM or Chrysler products. We are not supporting out of control unions, we are not supporting this blantant power grab. I’ll buy a Ford because their union membership was realistic and made concessions, but if they get greedy, I’ll gladly buy a non-union made, American built Toyota.
You got my post point perfectly, @retire05. That’s why I bolded that quoted section above INRE dismantling the companies, and relate this looming fiscal disaster to the continued assault on Toyota by this admin and Congress. They desperately need GM and Chrysler to be profitable.
So, as Obama did for his first IL Senate run (when he got his primary competitors removed using the court system), they are using every branch, agency and avenue – from Congress, NHTSA and the WH to community organizing the media – to kneecap the auto competition.
Well for those who voted for hope and change…. Here you have it… Jimmy Carter on steriods…
I have a dumb question about those foreign car plants being run by GM: 1. Are they currently unionized? If so which union and is it tied to SEIU or UAW? 2. If not is any particular US union being given the green light to organize them? 3. Any Obama backers or major DNC contributors tied into these plants?
Only $17B? There is a report out of Stanford this week that says the 3 biggest Californicated state pension plans will have a $500 billion (as in 1/2 trillion) shortfall in the next 15 years. All hail the Pension Benefit Guaranty Corp!
@Airedale, of the two foreign GM operations I know of… Shanghai GM and GM in Canada, the Canadian facilities have agreements with the CAW (Canadian Auto Workers). I am unaware of any labor contract for Shanghai.
Tho the CAW was formed as a regional arm of the UAW, they split off and are their own entity since the late 80s. Guess they didn’t take kindly to the US UAW lobbying to force manufacturing back into the states.
As far as major backers, all these companies are publicly traded to my knowledge.
I guess unsustainable means unsustainable. As in union pension plans.
May I recommend Obama do something he is capable of doing, I think, try a lemonade stand.
bill-tb, I believe Obama already assumed command over the “lemon” industry when he absorbed both GM and Chrysler, guy…. LOL!
BTW, I should have linked the GAO report in the post above… some fascinating stuff. And like @andyinsdca says, when you start piling on government pensions that are more akin to “un funded” than “underfunded”, the PBGC will be another federal insuring giant that will, no doubt, be classified as “too big to fail”.
Despite the risk in transportation or utility pensions, the manufacturing still comprises the bulk of the PBGC’s risk focus. That industry did a 4.8 times increase from 2008-2009, while the entire industry list was 3.5 times higher via GAO projections….
What was that horse manure about how well the stimulus is working again?
No federal pensions are noted in this report, or the above graph, BTW. Perhaps the full picture is more than the taxpayers’ heart can bear.
MataHarley, anyone with two grey cells accidently bumping together should understand that the Obama administration, and specifically Ray LaHood, are on a mission to destroy the largest car company in the U.S. Bear in mind, the Toyota Tundra, a top selling pickup, is made in San Antonio, in a non-union shop in a state not carried by Obama. This is not just a coincidence. And not the only action taken by the Obama administration to throw their weight around to hurt Texas.
These actions against Toyota are all by design. Hell, I have a ’95 F250 and just recently recieved a recall notice on it. I also remember when GM was building SUVs that were prone to rolling over when taking a corner at a reasonable speed. The feds did not set out, at that time, to destroy GM like the actions now taken against Toyota. What better way (in Obama’s mind) to force Americans to purchase a GM product than to destroy the competition? Only, Ford is not going to play that game any more than Henry Ford played FDR’s game.
In the end, it is MHO that GM will be folded by the feds. And at that point, we will not only be on the hook for their losses, but for their pension plans, as well.
No one has yet explained why the US economy as a whole would have been better off a year ago, or better off now, if a few extra million unemployed people had been added to the rolls during an implosion of Chrysler and GM. Lower property tax collections to localities, higher unemployment insurance payouts, and fewer US auto companies available to take advantage of the crisis at Toyota. Make the argument. And, no, an ideological anti-takeover rhetorical screed. I am talking about a practical, economic and accounting based explanation as to how we would have been better off, overall, if Obama had done nothing.
Parallel universe paths are generally a stalemate in debate, billy bob. But I will address your challenge with a dose of fiscal reality.
One man or company’s loss is generally another man or company’s gain. A standard bankruptcy, sans government/public funds infusion, would likely have yielded one of a couple of results… either a restructuring of the company to enable attempted recovery, or a fire sale price that proved lucrative for another company looking to take it over.
A third, less likely but possible, result was a liquidation with no potential purchasers, and the job loss you mention.
Assuming that worst case scenario for debate purposes, the American taxpayer is still in better shape to have allowed that fire sale to happen immediately instead of kicking the demise of either auto manufacturer down the road. A fire sale immediately affects those immediate workers for job loss, and shareholders not realizing full percentage of their invested dollars only.
By contrast, a fire sale down line still affects the same groups, but now adds the fiscal burden of the pensions, plus the loss of any public infusion of cash, to the US taxpayers’ shoulders.
This gets compounded further when there are not enough profits to pay into the pensions, as federal law dictates, starting 2013. Do we then pour more taxpayer funds down the drain, and hope for the best? The projected sales now… still not enough to cover this upcoming expense… are stated as rosy at best by the analysis. Especially when you consider that unemployment is slated to stay high all this year and possibly into the next, combined with the increase in lending rates this year that makes obtaining credit more difficult.
To conflate that point further, this is only a couple of the auto companies that are putting the GPBC into fiscal danger. From the GOA report:
Remember, that’s just the repercussions of the pensions, and doesn’t address the public investment. Talk about piling on…
In short, this admin spent a lot of the taxpayers’ cash to stave off the inevitable, losing the public investment and then assuming the pensions costs, and made it unsustainable when the inevitable occurs. It was best to leave it to the private market’s loss.
Along with the burden on taxpayers, a growing number of those who do currently work are either not paying Federal Income Tax legaly (currently 49 percent do not pay) and is projected that this population of non-tax paying groups of workers to climb to roughly to 60 percent by 2011 means less than 40 percent of the workforce is expected to carry forth the blunt of the majority of programs paid by Taxes such as the GM/Chrysler Pensions or Healthcare provisions.
I have to agree with Mata, it is healthier and more logical to allow a business to proceed with either a full fire sale or file bankruptcy. A bankruptcy would void and null all pensions and Union and CEO contracts, forcing the business to operate at the bare bones ground floor in terms of budget to survive. What has happened to various Banking firms and the Auto industry with Government intervention was to shelter failing systems with taxpayer dollars from an ever decreasing pool of tax payers, this is a plan for disaster.
If you think it is bad for GM now, wait until the union is in charge. Remember how power is divided? The usual political way: (1) Obama (2) Union (3) Stock holders. If GM pays back their loan, the unions will have more say running the company than the ones who invested the money. This is Obama’s reward to the unions for supporting his campaign.
I still don’t know how this can be legal, but the liberals never have worried about legality before, so with them running the House and Senate they don’t have to worry about stuff being investigated.
This is why there should be a “Political Crimes Tribunal” set up just like the “War Crimes Tribunal” to go after politicians who used their position illegally. There would be no statute of limitations with them either.