Skip to comments.The Auto Bailout Bust
Posted on 04/30/2012 1:00:44 PM PDT by pabianice
Obamas rescue of Chrysler and General Motors unpopular with voters, creditors, and GM management
President Barack Obama has made the auto bailout a centerpiece of his reelection campaign, using it to bash Republican nominee Mitt Romney. But the tactic may backfire as the general election heats up, public opinion surveys suggest.
Recent polling from Rasmussen indicates that 59 percent view the bailouts as a failure and only 44 percent think the bailouts were good for America.
The administration has already written off $7 billion in taxpayer losses in the American takeover of Chrysler and General Motors; those losses are expected to climb as high as $23 billion27 percent of the $85 billion spent on the bailout.
While the bailout is widely credited with saving the two companies, increasing taxpayer losses have made it nearly as unpopular in 2012 as it was when Obama was elected. More than half of Americans still disapprove of the auto bailout compared with 61 percent in 2008.
That has not stopped Obama from using the bailout as a bludgeon against Romney, who backed bankruptcy measures, in a number of campaign speeches.
We could have just kicked the problem down the road. The other option was to do absolutely nothing and let these companies fail, Obama told the United Automobile Workers union in February. And you will recall there were some politicians who said we should do that. Some even said we should let Detroit go bankrupt.
The line drew a chorus of boos from the crowd and Obama has used the talking point often in his recent campaign addresses. He has deployed the line in a number of speeches in front of friendly crowds, despite the surprising lack of enthusiasm among Democrats for the bailout.
Obamas job approval ratings among Democrats remain at nearly 85 percent, according to RealClearPolitics.
That is 20 points higher than the 63 percent of Democrats who support the auto bailout.
Obama is using the talking point as a targeted message to interest groups, rather than a broad appeal to his overall base, bailout experts say.
The reason Obama likes it is because labor likes it, one bankruptcy expert said. The administration went in and took UAW and pulled them up.
The administration handed $85 billion to GM and Chrysler and guided them through reorganization. Obama took on the role of bankruptcy court and bumped the unions to the front of the line, handing them control of Chrysler, while preserving pay and benefits at General Motors.
They came in and forced these companies into pre-packaged bankruptcy where unions were made whole and creditors were squeezed out, the expert said. In normal bankruptcy they dont rearrange stakeholders rights willy-nilly theres no way those union contracts would have been untouched.
Labor is not the only constituency to which Obama has tried to appeal by championing the bailout. After three decades of inaction, were gradually putting in place the toughest fuel economy standards in history for our cars and pickups, Obama said in the same February speech. That means the cars you build will average nearly 55 miles per gallon by the middle of the next decadealmost double what they get today.
Obama tied the bailouts to strict environmental standards that have led to increasingly efficient cars, an achievement he has used to woo green advocates. The move has affected more than just the environment, establishing dangerous legal precedents, according to some legal experts.
The fuel-mileage regulations are expected to drive up vehicle prices by $3,200 and keep consumers out of car lots, according to the National Auto Dealers Association, which sued to block the regulations. A Washington D.C. Appeals Court tossed the suit, ruling that only manufacturers could sue for damages associated with the expensive rules.
This is a great incentive for cronyism, an attorney familiar with the regulations said. The manufacturers colluded with the feds and they pushed these costs onto car dealers and consumers; the government had its first taste of cronyism and learned that if they can bully enough stakeholders and companies, they can get away with it.
Auto executives hailed the bailout as a lifesaver in 2008, but are increasingly uneasy about the governments ownership in the two companies. While the government liquidated a number of its shares in GM during its record-setting stock offering in 2010, it has retained partial control of the company.
GMs executives have wanted the government out for a while now its a huge PR liability for themthey hate the Government Motors stigma, said Edward Niedermeyer, editor-at-large of TheTruthAboutCars.com. The government cant get out now, they dont want to take an even bigger loss on the bailout.
GMs stock price has dropped about $10 per share since its IPO, meaning any sale would increase the taxpayers multi-billion dollar losses in the bailout.
Niedermeyer said the administration might wind up its involvement in GM even if it means higher losses. Timing, he added, will play a key role in that decision.
Theyll wait until after the election before they act, he said.
Not to mention stockholders..............
I am a Chrysler brand loyalist
At least I was. I will no longer buy Chrysler products made after the govt takeover and will remain as such until union ownership has been sold back to Capitalists.
That's only 103%. Maybe there was some overlap of those who thought that the bailout's failure was good for America.
He’s actually saying that higher gas taxes would be better (or, at least less bad) than CAFE. He’s right about that. The Corporate Average Fleet Economy rules are just about the worst way to accomplish their purported goals. They distort the market, they remove most consumer choice, and they will cost you a lot more than higher gas taxes would have.
If you had a choice, would you rather have CAFE, or higher gas taxes? If you were the head of an auto company, would your answer be any different?
Don’t get me wrong. The best thing for government to do would be to get out of the way of the free market. That includes letting the energy market be free. The rationale for this interference — global warming — is a giant scam.
I don't have to buy a new vehicle produced under a revised CAFE standard. I do have to pay more in gas taxes if they are raised. Lutz is now a government wacko shill. Drive the price of petroleum down through gov't actions. Don't raise the taxes. Starve the beast.
We could have just kicked the problem down the road.”... Obama told the United Automobile Workers union in February
Um....you DID kick the problem down the road.
Sorry, they will be known as "Government Motors" forever.
Just to illustrate the incompetence, Fiat outmaneuvered the Obama Administration in the negotiations in every way possible.
They are going to be able to buy the VEBA shares for pennies because liberals know nothing about business.
It is also why taxpayers lost money. Part of the debt was left with the old Chrysler that is bankrupt.
Freepmail "Lazlo in PA" to be added or removed.
Obamaumau is EPIC FAIL personified.
It was Grand Larceny ! GM's & Chrysler's assets were STOLEN
It was not a rescue.
from the owners
and given to 0bama's Brown Shirts.
It was Grand Larceny !
GM's & Chrysler's assets were STOLEN
Where did they take this poll, Philadelphia?
I’ve owned Jeep Grand Cherokees since 1987; but no more. I really did want a GM Chevy Suburban or GMC Acadia (or similar model) for my replacement for my current ‘02 Jeep GC. No frigging way. I’m now looking seriously at Toyota’s SUV line-up.
I will buy Ford
If I buy new
I’m going to look hard at FoMoCo, too, V. Thanks for the reminder. They didn’t take the Govt’s Socialist Cheese; they well-deserve a closer look and the business.
I’ll take CAFE or better yet nothing.
The newest vehicle we own is over 30 years old. The oldest is a ‘55.
Let the free market decide who survives and who is relegated to the ash heap of history.
We’re in agreement about the main part — let the free market decide.
What Lutz is saying — and where I agree with him — is that CAFE is a very bad way to interfere in the market (if interfere, you must). With CAFE, there is no “free” market. Even higher gas taxes (bad as they are) are less bad than CAFE.
You are probably right that CAFE won’t affect you personally. However, it is hurting the auto industry a lot & that affects a lot of people. It makes sense for an auto company head to oppose CAFE.