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Sunday, July 14, 2024

Lies, damn lies and the auto bailout squirm


Michigan has become squirm central for Republican presidential candidates who are trying to explain their opposition to the auto bailout before the big primary in the home of automakers. Their tale is terribly tangled, and President Barack Obama isn’t telling it straight either.

Obama, in taking credit, and Republicans, in assigning blame, have ignored one driving force behind the love-it-or-hate-it bailout: George W. Bush in the waning days of his presidency. Moreover, GOP rivals Mitt Romney and Rick Santorum would have people believe the United Auto Workers union runs General Motors and the government “gave” it away, neither true.

The issue is a particularly nettlesome one for Romney, Detroit-born son of a Michigan governor and auto company chief executive. His provocatively headlined 2008 article, “Let Detroit Go Bankrupt,” has made for tortured explanations in the campaign for the Feb. 28 primary – though the prescription he preached back then is not wholly at odds with what the government finally did.

Then again, Romney is hardly out on a Republican limb. Santorum opposes the bailout on similar grounds. As for the other candidates, Newt Gingrich raised the wild idea that Washington might force people to buy GM cars, and Ron Paul believes the market should let companies rise or fall without the government’s intervention.

A look at some of the persistent claims about the bailout and how they compare with the facts:

ROMNEY: “If General Motors, Ford and Chrysler get the bailout that their chief executives asked for yesterday, you can kiss the American automotive industry goodbye. It won’t go overnight, but its demise will be virtually guaranteed.” – Nov. 18, 2008, New York Times op-ed article.

SANTORUM: “If they’d have gone through the orderly bankruptcy process, gone through a structured bankruptcy, they’d have come out in the same place, only we would have kept the integrity of the bankruptcy process without the government putting its fingers into it.” – June 13 New Hampshire debate.

THE FACTS: No one can know what would have happened absent the bailout. But it’s a distinctly minority view that the private sector, raked then by the financial crisis, would have nursed Detroit back to health without a massive infusion of federal aid. In late 2008, banks weren’t making many loans, much less to companies that were out of cash. The Bush administration moved fast because it saw no time to let an orderly bankruptcy unfold, even if banks had the money and the will to steer automakers through the process.

Romney’s grim prognosis, before GM and Chrysler took the aid, is in stark contrast with the turnaround that followed. Last week GM reported a record profit for 2011, two years after the company’s near-collapse, and said 47,500 union workers will get $7,000 profit-sharing checks, the most ever.

Despite the bold headline – now making headlines of its own – Romney laid out some nuanced ideas, including substantial federal aid.

He called for the government to guarantee post-bankruptcy financing and to back up warranties so people would not be afraid to buy cars from the fragile companies. And he proposed a fivefold increase in federal research spending on energy.

OBAMA: “On the day I took office, our auto industry was on the verge of collapse. Some even said we should let it die. With a million jobs at stake, I refused to let that happen. In exchange for help, we demanded responsibility. We got workers and automakers to settle their differences. We got the industry to retool and restructure. Today, General Motors is back on top as the world’s No. 1 automaker. Chrysler has grown faster in the U.S. than any major car company. Ford is investing billions in U.S. plants and factories. And together, the entire industry added nearly 160,000 jobs. We bet on American workers. We bet on American ingenuity. And tonight, the American auto industry is back.” – Jan. 24 State of the Union speech.

THE FACTS: Lost in Obama’s victory lap was the fact that Bush passed him the baton.

Pushing against a reluctant Congress, Bush steered $17.4 billion in emergency loans to GM and Chrysler in his final weeks in office, on condition they shrink debt, negotiate wage and benefit cuts with workers and submit plans to achieve “long-term viability, international competitiveness and energy efficiency.”

The new Obama administration followed with more than $60 billion in aid, more expansive requirements and hands-on management of the crisis.

With hundreds of thousands of jobs at stake, ideology took a back seat. “Sometimes circumstances get in the way of philosophy,” Bush said in a speech this month. “I didn’t want there to be 21 percent unemployment.”

Steven Rattner, who led Obama’s auto task force, credited Bush with giving his team “a little breathing room” to restructure the companies and for providing a framework of “expected sacrifices that paved the way for our demands for give-ups from the stakeholders.”

Obama’s account of the automakers’ recovery is true enough but skips key points.

For one, “we” had nothing to do with Ford, which declined a bailout and climbed back on its own. Second, viewers of the speech might not know that Chrysler is an Italian-owned company now.

Obama frequently invokes the unspecified “some” who thought the industry “should die” in what is a veiled swipe at Republicans who oppose the bailout, Romney prominently among them. But like the other GOP candidates, Romney never expressed a death wish for the auto industry. Nor did Republican congressional leaders.

At most, some were willing to take that risk by having automakers try to restructure in bankruptcy without a bailout. It’s a course few believed would work in 2008. But bankruptcy is intended as a second chance, not an execution. It’s the path Obama followed, though with massive federal aid that sweetened the odds.

SANTORUM: “All the federal government did was basically tip to the cronies, tip to the unions, gave the unions the company.” – June 13 New Hampshire debate.

ROMNEY: “The idea of billions of dollars being wasted initially – then finally they adopted the managed bankruptcy. I was among others that said we ought to do that. And then after that, they gave the company to the UAW. They gave General Motors to the UAW and they gave Chrysler to Fiat.” – Nov. 10 Michigan debate.

THE FACTS: These are distorted accounts of complex arrangements by which the companies, unions, government and courts fashioned a plan to lighten staggering health care and pension costs at the heart of the automakers’ decline.

A trust owned by the United Auto Workers – but not directly managed by the union – received a 17.5 percent ownership stake in GM in return for taking over the health care costs of blue-collar retirees. That stake declined as the company left government ownership by selling stock to the public; it’s now about 10 percent. In return for its share, the UAW could not strike over wages at Chrysler or GM in the last round of contract talks, and it gave other concessions too.

Just as the government did not give GM to the union, it did not give Chrysler to Fiat.

Chrysler and Fiat have paid back all but $1.3 billion of Chrysler’s $12.5 billion bailout – with taxpayers likely to be out the rest. The Italian automaker got control of Chrysler by buying 23.5 percent of the company from the U.S. and Canadian governments, after receiving an initial 20 percent stake in exchange for management expertise and technology, then 15 percent for meeting performance targets.

The government has recouped more than $22 billion of its nearly $50 billion GM bailout, after agreeing to take stock in return for most of its investment. The government would get an additional $13.5 billion if it sold its remaining stock at current value. It is waiting for the stock price to rise before doing so, meaning the final cost to taxpayers is unknown.

GINGRICH: “Having become deeply involved in GM’s operation, the federal government has a vested interest in the company’s success. So what is stopping it from requiring all Americans – under threat of penalty – to buy a GM car?” – In his book “A Nation Like No Other,” published last summer.

THE FACTS: This is called Newt being Newt.

Krisher reported from Detroit.

© 2012 The Associated Press

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16 thoughts on “Lies, damn lies and the auto bailout squirm”

    • Facts may indicate an allegation or stipulation of something that may or may not be a true fact. Are bible facts really the gospel truth? A fact is not truth until it’s proven. As of this day I have yet to see the proof of your facts.

      • A fact is a datum, not an allegation. I have yet to see you refute anything in those articles. But then, ad hominum is standard fare for you.

        • Do you mean ad-hominem. Pointing out flaws that are relevant to an opponent’s argument is not ad-hominem. It is generally accepted when discussing a subject on the internet that one needs to be objective and impartial and that an audience can only evaluate information from a source if they know about the conflicts of interest that may affect the objectivity of the source. Here on Doug’s news site you and some of the other regulars reaction, when someone disagrees with your conclusion, is to claim that they are attacking you personally when in “fact” that is far from the “truth”.

          • from Wiki, spelled as you corrected it…

            “An ad hominem (Latin for “to the man” or “to the person”), short for argumentum ad hominem, is an attempt to negate the truth of a claim by pointing out a negative characteristic or belief of the person supporting it.”

            My use of the terms was not meant to imply an attack against my person or self by you, only that your evaluation of the referenced articles as mere opinion meant that yours was an “argument against the persons” who wrote them (e.g., Ikenson), not the data being discussed, i.e., the facts.

            Again, per Wiki, a fact is “something that has really occurred or is actually the case” although your selection of the lesser Wiki definition as the being “an allegation or stipulation” regards its use more as legalese, as in, “we will stipulate to the court…” usually because such stipulation is merely tangential to the real issue at hand. Thus, in the mainstream, facts need no proof, they are true by definition. If you can refute them, they weren’t facts to begin with.

            That’s where your appeal to opinion comes in… hoping to persuade that the data are erroneous. I’m happy with the facts, as stated therein; if you’re not, go for the jugular on setting the record straight.

  1. Opinions, it’s all a matter of opinions isn’t it? My opinion, Daniel Ikenson is wrong! There would have been no recovery of GM or Chrysler under bankruptcy. Also what would have happened to all the many millions of existing GM and Chrysler vehicle warranties? Listen to the interview at the following link between Dan Neil and Daniel Ikenson. Ikenson appears unsure as he talks out of the crease between his upper legs.

  2. It’s also worth noting that the bailout was predicated on the fact that stockholders, bondholders, etc., lost their money while the new UAW owners ended up fat, dumb, and happy.

  3. It’s worth noting that, at the time, Chrysler was entirely privately owned. In short, the government paid off the owners so the government could bail out their own failing company.

    Nice work, if you can get it.


  4. What difference does it make where I work or what I drive Bill?

    As for red, white, and blue, ever figure out what percentage of Big 3 cars are US, not foreign, content? Maybe the Nissans made in Tennessee, or the Mercedes and Kias made in Alabama, or the BMWs made in Georgia, or the Hondas made in Ohio (need I list them all) have more? Maybe US OEMs and 3rd party suppliers sell them stuff too? Maybe red-blooded Americans build those cars too? Or maybe you’re just one of those who believes that because a company began or has a long history here, it’s OURS… as if you had something to do with it, eh?

    Besides, I was talking about business processes and financial health management, not cars. Try to keep up there big guy…

  5. So the govt essentially acted as the bankruptcy court would have, forcing restructuring that would guarantee some amount of viability… but in exchange for financing… something the court would not have done. Citizens were put on the hook for whatever is not repaid.

    As for the results of bankruptcy., ask all the airlines how that works. They’ve all been there and the ones who restructure effectively fly on today, while the others without sound plans or management are bought by another.

    Sounds alot like this current auto mess., sans govt intervention… er, more taxpayer debt.

    • So anonymous you’re obviously not employed by any of those three mentioned American red white and blue auto manufacturers or the countless number of American third party suppliers? I have to assume you’d rather drive a Nissan ?

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