Of Bailouts and Bombast

By Doug Magill

Last week the Plain Dealer printed a front-page article that blithely and blindly repeated the administration’s talking points about the bailouts of General Motors and Chrysler.  Not so coincidentally, President Obama two days later wandered by the Jeep plant in Toledo and bragged about the bailout and how he more or less singlehandedly rescued the automobile industry.

As it is with most things Obamaian, there is always more to the story, and less that meets the eye.

First, a caveat.  There is no earthly way to truly evaluate whether the bailout of those two American icons was better than the alternatives.  There are too many variables, and a cascading array of multiple decisions that cannot be predicted.

As to the facts of the speech, a number of analysts have typed the literary equivalent of groans and guffaws at the President’s continuing distortion and disguising of the truth.

The president’s claim that Chrysler has repaid everything is problematic, as he didn’t cite in his comments money that had been lent to Chrysler under the previous administration.  Contrary to his claims of breaking even “and more”, the government will, in fact, lose money on the Chrysler bailout.

Continuing in a similar vein, Obama claimed that GM would be rehiring everyone that had been laid off during the recession.

Well, not exactly.

He was only referring to those workers that had been let go during his time in office, and excluded a much larger number that had been let go at the beginning of the recession.  And, most of the workers let go in 2008 were only on temporary furlough anyway.

As we all know, Obama tends to reward friends, and the unionized employees of the auto companies are highly visible and enmeshed with the Democrat Party.  So, his claims that Republicans were going to let the companies fail and all of the facilities and jobs would therefore disappear is not only untruthful, but also economic nonsense.

Again, no one knows what would have happened, but all of the assets (plants, equipment, employees, brands) have value and would have been acquired and put to use by someone.  And perhaps, at a cost level that would have made those companies truly competitive.

Even though the government is on the hook for the pension plans of both companies, the story isn’t ended relative to the uncompetitive cost basis that still exists within those organizations.

The damage that was also done to the sanctity of contracts and bankruptcy laws has not been measured yet.  By abrogating the rights of senior debt holders and placing unions ahead of lawful claimants to the assets of those companies incalculable damage has been done to the rule of law, and to the rights of owners.

This story will get uglier.

Despite all of the Plain Dealer’s obsequiousness, it is still hard to fathom why GM’s board and CEO were all placed in their positions by the administration: none of them had any experience in the car industry.  Running a car company requires long-term planning and an understanding of the industry that is lacking.

As a result, the Chevy Volt looks like a good idea, because the boss says so.

Forget those guys that truly know the business, such as Johan de Nysschen, the president of Audi of America, who said “there are not enough idiots who will buy it.”  May sales for the Volt were 481, and for the Leaf were 1142.  To reach the President’s goal of a million vehicles on the road we need to plan out decades, not 2015, which is what he said he wanted.

But, as is his way, the President , while crowing about saving jobs at GM and Chrysler, didn’t mention how he was devastating employment in other industries.

Just ask the guys out of work in the Gulf of Mexico because the administration has been so slow to issue drilling permits.

On another front the EPA is now producing regulations that, according to an analysis from National Economic Research Associates, will costs hundreds of thousands of jobs in the coal industry.  As a result, American Electric Power has announced it will close down five coal-fired power plants while still spending billions to comply with those regulations.

By definition, the cost of electricity will have to rise, costing jobs in other industries.

We also know that the lack of aggressiveness in increasing petroleum production has allowed the cost of gasoline to remain high, costing more jobs.  Expensive gasoline will also adversely affect sales of the vehicles from the company the President claims to have saved.

The administration is also hostile to additional development of natural gas, which will affect employment as well.

And the effects of government hostility to American enterprise are felt in indirect ways as well.  Claiming that his bailout of Chrysler benefited local businesses in Toledo, the President mentioned New Chet’s Restaurant, a favorite of Jeep workers for over 90 years.  The owners announced less than a week after his visit that they were closing the restaurant due to the effects of the overall economy, as well as a recently-enacted smoking ban.

So, while President Obama touts his success in saving his friends in one area, he is ruthlessly destroying others in areas that don’t fit his vision.  Remember, just days before the announcement that the Twinsburg Stamping Plant was to be closed, the President told reporters that the impending bankruptcy of Chrysler “will not disrupt the lives of the people who work at Chrysler or live in communities that depend on it.”

Sometimes, even his friends aren’t safe.

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Doug Magill worked at Jeep Corporation in Toledo and is a consultant, freelance writer, and voice-over talent.  He can be reached at doug@magillmedia.net

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