Bailout Backlash

By Doug Magill

The Obama campaign, desperate for some accomplishment to parade in front of the voters, touts the so-called bailout of the automobile companies as a success and a marked achievement.  Gullibly, most of the media bobbleheads in agreement and reports accordingly.

Time slowly releases truth despite the best efforts of propagandists, and reports are now trickling out that the bankruptcy process for General Motors and Chrysler may be a bêtise of the first order.  Aside from the obvious economic idiocy of the process as we, the taxpayers, stand to lose billions on the deal, the premise that the companies would have collapsed without intervention is media vapor.    Both companies had significant value because of their capital equipment, highly specialized labor force and incredible brand value.  Just the kind of organizations bankruptcy law was intended to deal with.

Most economists recognize that such concerns not only would have been strengthened by a standard bankruptcy process, but would have emerged stronger and in a better position to compete.  Unfortunately, anxiously wanting to pay off his union backers, Obama chose to circumvent bankruptcy law, destroy senior creditors, provide illegal tax-loss carryforwards and destroy other, non-union, employees.  And, the last line of defense in the world of politics, our media, warbled obsequiously and forgot that they ever took journalism classes.

And why we sold Chrysler to Fiat is still a mystery.  Fiat probably would have bought the company anyway because of its already announced desire to achieve greater penetration into the U.S. market.

So, why do American taxpayers owe an Italian automaker more than it should, say, a German one or a Swedish one or a Japanese one?  Only the self-anointed one in the White House knows for sure.

And, by the way, since our economy is incredibly complex and interconnected, why should we decimate the retirement plans of firefighters and teachers (secured creditors of Chrysler) to give money to the United Auto Workers?  Underneath and unknown is the possibility that the actions of the administration have caused serious perturbations in the bond market which may affect secured financing for other companies down the road.

Regardless, from a business management focus how on earth does it improve corporate governance by adding highly politicized board members, giving the company to a union that supposedly represents workers but is incredibly intertwined in the political process?  And, by illegally firing GM’s chairman (how exactly does Obama have the authority to do that?) and appointing interesting but wholly unqualified people to executive positions, how does the business of making world-class automobiles become more competitive?

UAW contracts were kept in force throughout the bankruptcy process, as were the crushing pension obligations.  So, the main drivers of the pre-bankruptcy business problems of both companies have been sustained.  How does that make sense, let alone strengthen either company?  Today, the unit labor costs continue to exceed those of their foreign competitors.  That cannot continue for long.

What all this does is set a precedent for future radical changes in the relationship between business and government.  And perhaps state and local governmental entities.

Mixed in with all of this is a cavalier and imperious disregard for workers not in the ranks of those favored by the President.  Take, for instance dealership employees.  Over 100,000 of them were summarily dismissed as part of the auto company bailouts.  And I suspect we won’t be hearing form them in any Obama campaign videos.

Several in the duplicitous media sniff dismissingly that those closings would have happened anyway.  Some of them probably would have, as most auto analysts claimed that there were too many dealerships.  But now, Neil Barofsky – former special inspector general for TARP – has written a book, Bailout, that shows how arbitrary and unplanned were the dealership closings by the administration.  The Obama appointees claimed that GM and Chrysler made the decisions related to dealership closings, but Barofsky reports that the companies didn’t want that many closings, and did not believe their future viability depended on what happened to dealerships.

Barofsky also points out how lopsided the process was, as initially few rural dealerships were planned on being closed.  At the end, almost half of the rural dealerships were axed, even though they had little foreign competition in their service areas.  Perhaps it is because they were manned by people that tended to cling to God and guns.

Another group of workers not in line for video ads sponsored by the Obama campaign are the salaried employees of Delphi, the auto parts maker spun off from GM.  About 20,000 of them had their pensions terminated, and it appears solely because they didn’t belong to the UAW.  E-mails obtained by the Daily Caller show that Timothy Geitner (he of tax-cheating via forgetfulness fame) and the Treasury Department pushed to have those pensions terminated, contrary to sworn testimony before federal courts and Congress.

This is the definition of crony capitalism.  Reward friends, punish enemies, and ignore laws that are inconvenient.

So, while Obama bleats about the auto bailouts as a success, we should look at the thousands of people whose lives have been devastated by his disdain for legal process, those who work hard but are not connected to those who support him, and the fabric of our nation which is being cynically rent.

False words are not only evil in themselves, but they infect the soul with evil.  Plato


Doug Magill has worked in the automobile industry and is a freelance writer and voice-over talent.  He can be reached at




  1. Thanks for such insight Doug. We need more articles for the public to read. Oh, I forgot the real puiblic doesn’t read quality such as the Bus Review.

  2. Mary Kay Sobota says:

    How true! This is something that should be shared with all as we approach the election – especially voters throughout Ohio and Michigan.

  3. If you can sail a boat the way you write, the trip will be fantastic

  4. Douglas Magill Jr. says:

    Do not leave out all the creditors whose senority rights have been squashed in bankruptcy proceedings since this bailout that were only possible through the precedence of the GM, Chrysler bailouts. for example A&P and General Maritime. The unintended consequences is that bond financing will become more expensive.

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