Obama vs. General Motors

[CalicoPenn]

In another thread, unrelated to politics, a member sarcastically raised the spectre of the government performing a hostile takeover of GM. Someone else responded that when folks get a loan from the bank, they're are often requirements that must be followed. Of course, it was brought up that having someone who has never run a business for profit be involved in making a decision for a corporation seems a bit nuts, while someone else then defended that by stating that good leaders delegate to people who do know how to do things.

 

Of course, all the above is paraphrased summary but I think it gets us up to date. The thread got back on track but to prevent further hijack, I thought I would open this up to folks because I'm sure there is a diversity of opinion on this issue.

 

At issue, in the hostile takeover vein, it appears is the news that Obama "fired" the CEO of GM over the weekend. Of course, that's a simplistic characterization, but one that has made its way into the media. It's probably more accurate to say that GM was told that it would receive no further government funds unless there was a change at the top level. Now I've heard many pundits, particularly on the conservative side, bemoan this as a takeover, or government control run amock, and just plain out of bounds.

 

My take on it is this - the US Government is being asked to invest in the future of GM. Sure, they call it a loan but let's get real, if part of the "loan" is going to be the government backing warranties (kind of like the way it backs a certain amount of bank deposits through the FDIC), then its unlikely we'll see everything we "loan" come back to us. So let's call it for what it is - an investment. Anyone who is familiar with how investment banking works knows that it is not uncommon at all for investment groups who are being asked to invest money into a firm to demand a number of things - often it's majority seats on the board - and sometimes, they'll make the investment if the firm boots out top officers of the company - CEO's, COO's, Presidents - all have been known to be allowed to resign so that investors can see someone they have more confidence in take over the reigns. Heck, it's not that rare for an investor's group to force out the founder(s) of a company they're going to invest in with an eye to bringing it to an IPO position.

 

IMHO, that's all that happened here - GM was given a chance to develop a plan - in the investor's eyes (that would be our government - but they should be looked at in this situation as investors first and foremost) that plan was lacking - and the investors lost confidence in the guy at the top. It's not an unreasonable request then for the investors to say "the plan needs to be reworked, we'll give you more time, but the guy at the top has to go - take it or leave it". Sure, the argument can be made that private investors should have taken up this gap - but realistically there isn't a provate investor group out there with the billions of dollars needed to shore up this enterprise. And sure, maybe we should let them shut down - but then again, they are a symbol of our industrial capacity - we must maintain industrial processes - and the numbers of people nationwide that would be affected is incredible - we aren't talking a few car plants near Detroit - we're talking an entire industry of raw material suppliers, parts suppliers, after-market suppliers, salespeople, service people - and all the folks that support those folks. That's a heck of a set of dominoes to let fall.

 

Hostile takeover? Not in this case I don't think. But we sure could use a hostile takeover of certain Wall Street firms.

 

Calico

[BrentAllen]

I never thought I would see the day that the POTUS forced the CEO of a private corporation out of office. If that doesn't scare you, I don't know what will. Even Michael Moore is sounding off on the issue. My only hope is this action will scare any other companies that might be interested in taking public money.

 

Now, we, the people, are in the auto business? We are also in the auto repair and warranty business?

 

President Obama is now Mr. Goodwrench.

 

How dignified is that?

[GernBlansten]

What power did Obama use to force Wagoner out?

All the Obama administration did was say, if you want more of the taxpayers money, you need to change management. Those were the conditions of the loan.

Force him out. Please.

[BrentAllen]

And he is also telling Chrysler they have to merge with Fiat? Somehow, this just strikes me as going way beyond the executive powers of the presidency. It opens the door for too much politics. The POTUS gets to decide who is too big to fail, and who isn't, and then decides who gets to stay on as management, and who doesn't. I'm sure a nice fat check to a re-election campaign wouldn't have any influence whatsoever in these decisions.

[OldGreyEagle]

A dear friend of mine has a grandfather who was fond of saying "all money comes with strings".

 

When a state takes Federal Money, there are mandates the states must follow, when a College/University takes money from a student who got the money from the Feds, there are rules to follow, Title IX, the reason we have a dominant prescence in female team sports, Soccer, Softball, basketball is because of this.

 

And now, Industry. I couldn't beleive that the Feds would give billions to the same management group that lead the auto compnaies into the ground in the first place. Its like giving a dope/gambling addict a million dollars and then "telling" them to spend it wisely. What did they think was going to happen when you take money? That there were to be no string?

 

I hope there is some oversight on the Financial front as well.

 

No, I dont like the Feds running the Auto indutry, I didnt like they gve them any money but if you take Feds money there are consequences to the action.

[evmori]

Michael Moore is an idiot!

 

If GM is asking for money to bail them out they should be using the money they asked for to help bail them out! My understanding is that is not what the money was going to be used for. I have no problem with what Obama did. If your gonna use MY money, you better be using it for the reason it was given to you!

[BrentAllen]

So let's expand this on a couple of fronts. Let's say California takes federal money in the same manner GM did. Does Obama now have the right to tell Arnold to step down?

 

What about a city, with a Republican mayor?

 

Someone please show me one thing the government does effectively and well. Everything they touch ends up costing 5 times over what they predicted. The government had oversight on fannie and freddie, and we see where they ended up. Now we are letting them take over the auto industry? And Geithner says he may replace more CEO's??

 

Here's my nightmare: Obama tells GM and the other auto makers they have to build hybrids and modern-day versions of the Pinto - super fuel efficient tin cans that nobody wants. Then, when nobody buys them because of their high cost and poor value coupled with low gas prices, Obama will add on enough fuel tax to run gas up to $4/gal. Say goodbye to freedom, and hello to inflation, lower standard of living, taxes through the roof, and last but not least - Big Brother.

 

And for the record, I have been against these bailouts from day one. McCain should have gone against them during the campaign.

[scoutldr]

The best suggestion I heard was to take the auto bailout money and give each taxpayer a voucher good toward the purchase of a new car. ANY new car. Let the customer decide which companies are worth saving. (Might just be Toyota...hmmm?) That way, everyone profits, not just the corporate bigshots. Line workers, suppliers, dealers, salesmen, banks who give loans. Also helps to retire the clunkers and get fuel efficient cars on the road. Good ole' American free market competition. What a concept.

[GernBlansten]

Its the golden rule. He who has the gold gets to make the rules.

If GM (Wagoner) didn't want to step down, he didn't have to. He just didn't have to take the tax money. If Chrysler didn't want to merge with Fiat, they didn't have to. Just don't take the money. Nobody is holding a gun to their heads. Its a business decision on their part. Thank God this administration is attaching some strings, unlike the financial bailout of last year.

 

The gov backed warranty thing is actually quite smart. Who in their right mind would buy a car from a company going into bankruptcy? Your warrentee is worthless. Without the feds stepping up and making sure there's money to fix your GM or Chrysler auto, the companies will never have a chance to be viable again because nobody would buy your product.

[Narraticong]

The federal government needs to just stay out of our lives in general. No welfare, no block grants, no pork, no loans, no health care. There is nothing run efficiently by the federal government. State and local governements are better suited to manage public affairs.

 

But government in general has exploded to really become "Big Brother". None of the welfare programs ever instituted have ever led to anything but more welfare and a sense of entitlement.

 

The auto companies begged the feds for help. The answer should have been no. But since they agreed, of course they get a say. But they also now bear responsibility. I'm afraid the only way out of this mess is a complete collapse (bankruptcy) of our federal governement and then the realization that we need to go back 250 years and simplify.

[scoutldr]

Ron Paul 2012

[Merlyn_LeRoy]

So a gas tax = loss of freedom? There's been a federal tax on gasoline since 1932, so I guess we haven't had freedom for 77 years now. Like the punch line says, now you're just quibbling over the price.

[scoutingagain]

The Federal Government nor Obama ever asked to be put into a position of having so much involvement with the private sector. Remember it was the banks and auto companies that came hat in hand(via private jet) to the government for help. They got just enought to survive to get to this point. Now those that begged for help are shocked that the government might have certain expectations on how it's money will be used. It was the private sector that put themselves in this situation. It certainly wasn't a scheme of the current administration.

 

Is this level of government involvment in the private economy good? Certainly not, but don't come looking for taxpayer dollars and not expect some strings attached.

 

I havn't heard Obama has making suggestions on who should run Ford. Why is that?

 

SA

 

 

 

 

[JoeBob]

Why doesn't the Comunity Organizer in Chief fire the UAW chief? Inflated union wages are the underlying cause of US automakers failure.

 

In 2007 GM and Toyota sold virtually the same number of vehicles:

9,370,000 Vehicles sold by GM

9,366,418 Vehicles sold by Toyota

 

$38,730,000,000 Lost by GM ($4,055 loss per car)

$17,146,000,000 Made by Toyota ($1,874 profit per car)

 

The three American automakers generally pay about 30 percent more per hour in wage, pension and health care costs than Japanese automakers.

Ford - $70.51 per hour in wages and benefits

GM - $73.26 per hour

Chrysler - $75.86

Toyota, Honda and Nissan - $48 hourly cost

 

Oh, I forgot. The unions have the Dems in their pocket, so P-BO will force GM into a 'structured bankruptcy' that protects the union's contracts.

 

I love my Suburban. It's great for scout outings and my business. But I'm not sure I'll ever buy another one, because I don't want to subsidize the UAW.

 

 

[GernBlansten]

Sorry Joe, can't let that pass.

The hourly cost for GM, Ford and Chrysler vs. that of Toyota, Honda and Nissan (US factories) are disproportionate because the former have retiree costs added to them. The latter have not been the US long enough to have the retiree costs burden. Take that away, and the hour rate and benefits received by the employee are nearly identical.

 

How can Obama fire the CEO of the UAW? Did the UAW ask for tax dollars?