I worked my way through law school in a research position with the central Wisconsin investor-owned utility that provided power to the Janesville GM plant. It was the #1 consumer of electricity in that utility's service area at the time, so the utility was constantly being pressured to provide concessions or modify rate structures to help that plant. Every political figure in Wisconsin was extremely attentive and protective of that plant. While it was old and inefficient from the standpoint of the assembly process, it was still extremely profitable because the vehicles made there had the highest gross margins of anything GM made (something like $15K/vehicle.) That changed dramatically after the post-9/11 light truck tax credits expired and as the economy deteriorated in the 2nd half of 2006. When Obama campaigned there in February of 2008 it was clear that the plant's future was in doubt. He was throwing red meat to the UAW in the audience when he indicated that he would help to keep it open.
The CEO's of the big 3 automakers made their famous trek to Washington in September of 2008, in the middle of the presidential campaign, and shortly after the meltdown of Lehman Brothers. Their implicit threat was that at least GM and Chrysler would have to file Chapter 11 by the end of 2008 if they did not get some assistance.
The terrible mistake was indeed made was made by the Bush Administration, when it released $17.8B in TARP funds to GM and Chrysler in mid-December of 2008, to prevent Chapter 11 filings which would otherwise have happened on 12/31/2008. President Bush released a statement at the time the funds were disbursed declaring that he didn't want the incoming President to take office with 2 bankrupt automakers on his plate at inauguration.
What Bush should have done was insist that they file Chapter 11 first, then advance the $17.8B to help them during reorganization (as DIP financing.) What he did by kicking the decision into the next year and the next administration was to give the Obama administration the ability to bend the bankruptcy process to favor the UAW and disadvantage the white collar workers, white collar retirees, and dealers at GM and Chrysler.
Anyone with knowledge of bankruptcy law would admit that the Chrysler and GM bankruptcies were extreme examples of political interference and manipulation. If Obama had wanted to maintain the GM plant at Janesville, he could have done that, among the many things that were buried in the bankruptcy deal.
But he didn't, and the plant is closed and there is tremendous bitterness in the Janesville area about it. The economic downturn that hit the entire country was very pronounced in Rock County and the surrounding area, because the wage levels of the GM jobs lost were at the top of the scale.
Paul Ryan's reference to this matter was factually correct. Look at this brief article from the Wisconsin State Journal (available on the newspaper’s website Madison.com, underlining mine):
GM-JANESVILLE ENDS PRODUCTION
April 24, 2009 12:00 am • Associated Press
The last vehicle has rolled off the line at the Janesville General Motors plant, the oldest in the GM family.
Production of GM vehicles ended just before Christmas, cutting 1,200 jobs. But the plant remained open as about 110 employees finished an order of trucks for Isuzu Motors.
That order was completed Thursday morning. GM spokesman Christopher Lee said about 50 workers have been laid off, while the rest will remain to help guide the plant's shutdown.
It's not immediately clear what will become of the plant. GM could demolish the building and sell the land, or collaborate on developing businesses or parks.
The plant was built in 1918. It was made for tractor production and converted to a Chevrolet plant five years later.
Now the newspaper is running commentary suggesting that Ryan lied and that the plant was “closed” when the 1,200 employees were laid off in December, 2008. But they have not issued a correction, a retraction or listed this piece (above) in an errata column.
I would point out that while the GM bankruptcy petition was filed on June 1st, 2009, the pre-petition bankruptcy planning was going on for probably 6 or 7 months prior to the petition date. The Obama administration was intimately involved in that process. It's not a crime that they did not favor the Janesville plant in the prepackaged bankruptcy plan, but it is a choice that they made. And it is entirely fair to compare that choice to the comments Obama made on the campaign trails in 2008.
The Obama administration wants to campaign this year on a theme claiming that he “saved the auto industry”. To be honest, had they entered a more traditional Chapter 11 process in the twilight of the Bush administration, I can't say that Janesville would have necessarily fared any better. I can say that the Volt would never have made it into production (at a fully loaded, fully subsidized-by-the-taxpayer cost of about $250,000 per vehicle) and Vauxhall – the European GM operations that are hemorrhaging money today – would have been sold in 2009. But Obama wants to claim that the way things played out was the only way to have avoided a liquidation and total vaporization of GM and Chrysler. That's simply not true. There were many alternative scenarios that could have played out, resulting in a continued presence by GM and Chrysler.
With the Obama Administration dialing in the winners and losers in the GM prepackaged bankruptcy they have to take responsibility for the way they did nothing for GM Janesville.
Thanks for posting that info.
Thank you for the details.