Monday, March 30, 2009

Deconstructing the Auto Industry Bailout

The following are excerpts from President Obama's speech today on auto industry restructuring.

While GM has made a good faith effort to restructure over the past several months, the plan they have put forward is, in its current form, not strong enough.

Fiat is prepared to transfer its cutting-edge technology to Chrysler and,after working closely with my team, has committed to building new fuel-efficient cars and engines here in America.

First point, he and his team have determined that GM's plan is "not strong enough". Based upon what? Must have learned the nuances of the auto industry structuring while organizing communities in Chicago, or perpetually campaigning. And, there's a great way to actually determine if the plan is strong enough, that is to let them try it. So to reward them on their good faith effort, that wasn't up to the Obama standards, they get 60 days of working capital, and more help from the Obama Brain Trust.

To Chrysler, he illuminates what may have been missing from GM's plan. Chrysler will get "cutting-edge technology... to build new fuel-efficient cars and engines here in America." Ok. Again, is this some assurance of success? I'm not saying fuel efficiency or cutting-edge technology are bad, but who is the President to decide that issue?

That is why we will give Chrysler and Fiat 30 days to overcome these hurdles and reach a final agreement -- and we will provide Chrysler with adequate capital to continue operating during that time. If they are able to come to a sound agreement that protects American taxpayers, we will consider lending up to $6 billion to help their plan succeed. But if they and their stakeholders are unable to reach such an agreement, and in the absence of any other viable partnership, we will not be able to justify investing additional tax dollar to keep Chrysler in business.

Translated: "I have arbitrarily determined that about a month from now when Fiat decides that it doesn't want to put up with government intervention and Union bosses, I will give Chrysler another $6 billion, again arbitrarily, because I have no idea how to run anything other than a campaign, which full disclosure someone else runs and tells me what to say."

What I am talking about is using our existing legal structure as a tool that, with the backing of the U.S. government, can make it easier for General Motors and Chrysler to quickly clear away old debts that are weighing them down so they can get back on their feet and onto a path to success; a tool that we can use, even as workers are staying on the job building cars that are being sold.

What I am not talking about is a process where a company is broken up, sold off, and no longer exists. And what I am not talking about is having a company stuck in court for years, unable to get out.

So, based upon this, he's not really talking about bankruptcy. He's again, talking about arbitrarily wiping off debt. I wonder if he thinks that's what he can do with the national debt?

In fact, it will be safer than it's ever been. Because starting today, the United States government will stand behind your warrantee.

Well, in that case, I'm sold. If the government backs it, then, give me three.

Finally, several members of Congress have proposed an even more ambitious incentive program to increase car sales while modernizing our auto fleet.

"Ambitious incentive program" that sounds scary. Brought to you by the same minds who crafted the American Recovery and Reinvestment Act of 2009.

I am designating a new Director of Recovery for Auto Communities and Workers to cut through red tape and ensure that the full resources of our federal government are leveraged to assist the workers, communities, and regions that rely on our auto industry.

Edward Montgomery, a former Deputy Labour Secretary, has agreed to serve in this role. Together with Labour Secretary Solis and my Auto Task Force, Ed will help provide support to auto workers and their families, and open up opportunity in manufacturing communities. Michigan, Ohio, Indiana, and every other state that relies on the auto industry will have a strong advocate in Ed.

Another Czar of something? I suppose "Nobody messes with Ed" too.

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