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Tuesday, September 15, 2009

"The Success of Our Economy Depended On It."

The president was in Pittsburgh, Pa. speaking to a group from the AFL-CIO when he defended his decision to bail out the automakers like this.

Kicking off a day of outreach to blue-collar America, President Barack Obama defended his bailout of the auto industry, saying "the success of our economy depended on it."

"Our belief was that if GM retooled and reinvented itself for the 21st century, it would be good for American workers, good for American manufacturing, and good for America's economy," Obama said. "I'm pleased to report that's exactly what's begun to happen at this plant and at others."

"And I'll tell you what: I will double down on the American people and all of you any day of the week," Obama added

The problem with not being able to speak the truth is that your cover story usually doesn't pass muster. In this case, I am of the opinion that President Obama saved the automakers because he was paying back the unions. If GM and Chrysler went down, that would be tens of thousands of jobs lost. That was something the folks at the AFL-CIO and their compatriots in other unions would not stand for. As such, the President stepped in. Not only did he save the companies, but the new companies give an extraordinary amount of new power to the unions.

Yet, the president says that he saved GM because, "the success of our economy depended on it." If that's really the case, then GM needs to be broken up immediately. The success of our economy should never be dependent on any one company. It shouldn't be dependent on any one industry. Yet, the president proclaims that without a successful GM our economy fails.

He goes on, "Our belief was that if GM retooled and reinvented itself for the 21st century, it would be good for American workers, good for American manufacturing, and good for America's economy," That maybe so but that's frankly the case for any company. What about Circuit City? If that company were re tooled, wouldn't everything the president said also be true? Yet, the president didn't give Circuit City a bailout. The government didn't step in and buy a bunch of their shares, takeover a majority stake, and make sure that Circuit City stays in business. Why not, isn't there success a good thing for our economy? Yet, Circuit City was put on the auction block while GM was kept in tack.

Think about it. The auto industry is plenty vibrant. There are dozens of companies around the world making a plethora of auto mobiles. Even our domestic auto industry is thriving with or without GM. About 80% of Hondas and Toyotas sold domestically are built here in America. Who cares if its a Japanese company making the final profit? There's nothing that says that an American company has to be the one that profits from automobiles.

Yet, President Obama makes an exception for the automakers that he doesn't for nearly any other industry. Last month, Taylor Bean and Whitaker, the mortgage company, went out of business. TB&W was the third biggest FHA lender in the country. One could argue that their survival was vital to the vibrancy of the mortgage industry. Isn't the vibrancy of the mortgage industry vital to our economy? Yet, no one even thought about saving TB&W. TB&W was mismanaged much like GM. The difference was that TB&W was allowed to fail while GM was saved. Besides that there's little difference between the two companies.

In reality, this is exhibit A of the president picking winners and losers. GM maintains a major constitutuency, the unions. TB&W and Circuit City do not. One is saved using tax payer funds and the other two are allowed to fail. This is nothing more than politics in action and the president's attempt to dress it as something else is nothing short of a ludicrous assertion.


Anonymous said...

Simplistically, the President could not be seen as bailing out Wall Street, which is ostensibly everything his liberal base is opposed to, and not bailing out what's left of America's manufacturing sector.

There are also other considerations, too. Its clear General Motors technology could not be allowed to fall into the hands of SAIC and AutoVAZ.

mike volpe said...

That's quite the conspiracy theory. I don't know what to say besides that you read to many political thrillers.

Anonymous said...

What's conspiratorial about that? We're talking basic IP here. Russian and Chinese car companies have money but not much technology or branding to enter the US market. If GM fell, SAIC and BYD would be first in line to buy its assets. We're already seeing the exact same thing going on with GM's sale of Opel to Magna. China had the better bid but GM and the German government bent over backwards to favor Magna. Even then GM dragged its feet until it got assurances that Magna's Russian partner's would get its technology and that they wouldn't try to sell in the United States.

Tell me, Mike. Is it a conspiracy if it happens in plain sight?