The GM Takeover Is Official

It is now official: "General Motors" has become "Government Motors":

At midday [yesterday], President Barack Obama [announced] details of his administration’s $30.1 billion plan to restructure General Motors. Despite claiming that the administration “will not interfere with or exert control over day-to-day company operations” it is instructive that this announcement is being made by the President, from the White House, and not by the company’s CEO from either the company’s Detroit headquarters or the New York bankruptcy court. Since March of this year when the White House rejected GM’s restructuring plan, their interventionist actions have spoken much louder than their hands-off rhetoric.

It's typical Obama doublethink. Because the media will parrot what he says and ignore what he does, many people will think that his words are the truth.

After firing and replacing CEO Rick Wagoner, the new CEO magically backed Obama's auto greening plan. Go figure. As predicted, GM will now be run on the basis of political decisions rather than business ones. For example, trucks and SUVs are the most profitable vehicles GM makes; they're also the ones that will likely have to go once Obama's greening plan takes root. But don't worry, he's going to make GM profitable somehow anyway.

Also interesting to note is that Obama will be closing 11 GM factories and suspend operations at 3 more. One can only assume this is all part of Obama's plan to save or create American jobs.

So, how about some professional analysis? Here you go:

Michelle Malkin:

George W. Bush stuck the key in the bailout ignition.

Barack Obama floored the gas pedal.

The taxpayers got stuck with a lemon for life.

Hot Air:

The essential issue isn’t fairness, it’s legal and financial equity. We saw this during the Chrysler bankruptcy as well, when senior creditors got intimidated into accepting far less per dollar than Fiat and the UAW received from the proceeds. The Obama administration did an end run around long-established laws governing the priority of liquidation of assets in bankruptcies, in order to give a big political payoff to the union.

The White House did the same thing with GM. Creditors hold $27 billion in notes, for which they will get 10% of the company, or $2.7 billion for every percent of ownership they receive. The government owns 60% for its investment of $50 billion, a rate of $834 million per percent of ownership. The UAW has a $20 billion stake in the company, but the settlement would replace that with 17.5% of GM along with $9 billion in notes and preferred stock, according to the Washington Post. That puts their investment at $11 billion (what they surrender in this process), making their cost per percent of ownership $629 million — by far the lowest of the three major stockholders.

Obama is penalizing the people who invested in GM by devaluing their stake based on whim, not legal or financial rules. They want to skew the result to favor the union and themselves. It’s another political bankruptcy, rather than a legal dissolution of a private firm according to well-established contract law.

You know the best part? The GM dismantling is being run by a 31-year old kid who's never been inside an auto plant before in his life:

It is not every 31-year-old who, in a first government job, finds himself dismantling General Motors and rewriting the rules of American capitalism.

But that, in short, is the job description for Brian Deese, a not-quite graduate of Yale Law School who had never set foot in an automotive assembly plant until he took on his nearly unseen role in remaking the American automotive industry.

Yes, you read that right...he hasn't even graduated yet! But, I suppose that should be no surprise, as the President who appointed him similarly had zero experience running any organization. Just par for the course, I guess.

So where is the end point of this forced greening of a major industry? Lee Cary at American Thinker has what sounds like a really good guess:

...down the track awaits Unintended Consequence (UC) #1: The old GM and Chrysler that once commanded a cadre of loyal customers now has new owners. Who's to say they'll remain loyal? When your favorite restaurant comes under new ownership, and that ownership has a reputation for serving bad food elsewhere, do you keep eating there? Only if you want food poisoning.

When sales of Chevy's and Hemi's continue to decline, the government will have to act to protect their -- meaning "our" -- investment (bailout). That'll require special tax breaks for Chevy-Hemi buyers, and higher taxes on those who buy other brands in order to make up the lost treasury revenues.

When that doesn't work, here comes UC #2: Additional tariffs on imported automobiles. But since many foreign brands are now manufactured in U.S. plants, that's won't work. So, foreign manufacturers operating U.S. plants will be subject to a Value Added Tax (VAT) to subsidize unsold government cars.

When people prefer the quality and superior fuel efficiency technologies of, say, Toyota and Honda, that'll trigger UC #3: Forced downsizing, and even closure, of foreign brand U.S. manufacturing plants in the face of government pressure to unionize their work force. That means lost jobs for non-union American auto workers. The UAW will cry crocodile tears.

UC #3 will trigger UC #4: Tariff retaliation from nations who have auto plants here but also import products from the U.S. In short, a trade war.

And then there's that major fault line in the Obama administration's plan for the American Green Fleet. The federal government has taken over much of an industry that it knows nothing about operating for a profit. In fact, it has no clue how to operate anything for a profit. It's only knows how to be a cost center, not a profit center.

So the government -- meaning "we" -- will subsidize the inevitable, sustained losses of Government Motors and the new Chrysler. Ten of billions more coming in bailouts.

And that will lead to UC#5: We won't have enough money to keep GM and Chrysler alive indefinitely, even with the Federal Reserve's printing presses running in overdrive. The only way for GM and Chrysler to succeed, for awhile longer, will be for the government to substantially reduce competition from foreign brands and tax gas to the point that Ford's profitable reliance on trucks and SUV sales drives it, too, into bankruptcy. Anyone want to bet against that eventually happening?

Then, finally, there's UC #6: Many us have bought our last GM or Chrysler product and will abstain from further purchases on the following consumer principle, that still lives in this as yet only partially socialized nation.

This is exactly what has been predicted by conservatives for months. It's sad that people couldn't be persuaded of reality rather than the soaring rhetoric of the Obamessiah, and now we have to watch this play out in front of us. It is the destruction of a once-proud private industry in action.

I hope that Ford is gearing up for the fight of its life, because they're going to be the prime target of the new GM/Chrysler Obamamotors companies. They will almost certainly outperform Obama's new companies, and that will not be allowed to stand, so Obama's going to have to figure out some way to force Ford to heel. My suggestion to all of you: buy a Ford from now on. It's likely your best chance for getting a truck or SUV in the next few years, and for getting a car still made like a car rather than a plastic toy.

If Ford had any stones, they'd embrace the fact that they're the only major American car-maker who is 100% bailout-free and government-free. Can you imagine that ad campaign? Beautiful. Of course, it would be a little like flipping off the mugger who just shot your friend, so there are certainly some risks involved...the Obama Thugocracy isn't going to like it much...

There's my two cents.


Related Reading:
The Government And GM: How Reluctant A Shareholder?
What's Wrong With GM And What's The Government Going To Do To Fix It?