Strengthening Constitutional Self-Government

No Left Turns

Government Motors

The whole government bail-out/ownership smells, always has. This is especially true with GM. The best short piece I’ve seen on the issue is by

David Brooks in today’s NYT.

Discussions - 12 Comments

And you will now see GM fail, and Ford prosper.

The U.S. version of the Yugo coming soon to a dealership near you!

Re: Raldo,

If only. The more likely outcome is that GM will hold on forever under the protective umbrella of government control and Ford will fail because it can't operate profitably against a competitor that's propped up by the government.

#1: You are completely wrong. Mr. Henderson has the right of it. Ford can't hope to compete against a competitor who can draw on biblically large amounts of tax-payer money, not to mention the fact that the UAW has a vested interest in seeing GM and Chrysler do better than Ford (and may proceed to act accordingly . . .)

Everyone that has held back from calling President Obama a socialist (including myself) needn't refrain any longer. The government is taking control of the means of production, which is literally the definition of socialism.

Recall that it isn't just Ford trying to compete with this new version of GM. It's also the Japanese,{as well as others} and the Japanese car makers probably have legal resort to the World Trade Organization against the United States slanting the market in favour of GM. Which means that Ford should stand to benefit from the legal actions commenced by foreign car makers against what the United States is doing to benefit GM.

Obama already sent signals before of trade wars, but if he tries to really slant things in favour of GM, there are a host of entities with the interest and the will to take him before the World Trade Organization. We'll see.

Maybe Andrew is right. But maybe not. It depends on how sharp the elbows of the government will be in forcing Ford (as well as GM and Chrysler) to do their bidding. If Ford can manufacture products that consumers demand as opposed to products that the government demands, then they may find themselves with a leg up in the market. It may also be the case that consumers will react negatively to the idea of purchasing a government manufactured car. Before the Monday, my husband had tossed around the notion of purchasing a Chevy Malibu based on their current good ratings in Consumer Reports. But after this, there is no way that we would even consider it. Apart from it looking like an ugly imitation of the Honda Accord, it is now tainted with the unjustly spent tax dollars of hardworking Americans. I wouldn't be caught dead in that car. Will conservatives start driving Fords, Toyotas and Hondas and leave the GM products to the liberals? Toyota and Honda are now more American cars than the GM cars--so will conservatives be the ones going around with the injunction to "Buy American!" Will your brand of car begin to be some kind of testament to your political views? And what does this mean for Peter and his Hummer? As for me (1980s excepted), I have always loved my Fords.

Ms. Ponzi makes a good point. It's possible that Ford, freed from micromanagement by the UAW and the federal bureaucracy, might be able to respond to consumers nimbly enough to do OK, even if GM remains an adjunct of the federal government.

Whether it will depends on how much the feds continue their campaign against cars people want to buy -- mainly CAFE laws that penalize SUVs and small trucks (Detroit still makes those well and profitably).

If the enviros so tightly constrain auto manufacturing that U.S. carmakers can only produce 50-mpg shoeboxes, then Ford and GM will both be in the tank. But GM can continue receiving subsidies from Uncle Sam.

GM plants will all close in the USA and they will be in brazil and china. It is not about cars or the environment it is about getting rid of jobs that create a middle class.

Grand Theft Auto: How Stevie the Rat bankrupted GM
Text size
Greg Palast
June 2, 2009
Screw the autoworkers.

They may be crying about General Motors’ bankruptcy today. But dumping 40,000 of the last 60,000 union jobs into a mass grave won’t spoil Jamie Dimon’s day.

Financier, private equity investor, and “Car Czar” at the Treasury Department, Steven Rattner.

Dimon is the CEO of JP Morgan Chase bank. While GM workers are losing their retirement health benefits, their jobs, their life savings; while shareholders are getting zilch and many creditors getting hosed, a few privileged GM lenders – led by Morgan and Citibank – expect to get back 100% of their loans to GM, a stunning $6 billion.

The way these banks are getting their $6 billion bonanza is stone cold illegal.

I smell a rat.

Stevie the Rat, to be precise. Steven Rattner, Barack Obama’s ‘Car Czar’ - the man who essentially ordered GM into bankruptcy this morning.

When a company goes bankrupt, everyone takes a hit: fair or not, workers lose some contract wages, stockholders get wiped out and creditors get fragments of what’s left. That’s the law. What workers don’t lose are their pensions (including old-age health funds) already taken from their wages and held in their name.

But not this time. Stevie the Rat has a different plan for GM: grab the pension funds to pay off Morgan and Citi.

Here’s the scheme: Rattner is demanding the bankruptcy court simply wipe away the money GM owes workers for their retirement health insurance. Cash in the insurance fund would be replaced by GM stock. The percentage may be 17% of GM’s stock - or 25%. Whatever, 17% or 25% is worth, well … just try paying for your dialysis with 50 shares of bankrupt auto stock.

Yet Citibank and Morgan, says Rattner, should get their whole enchilada - $6 billion right now and in cash - from a company that can’t pay for auto parts or worker eye exams.

Preventive Detention for Pensions

So what’s wrong with seizing workers’ pension fund money in a bankruptcy? The answer, Mr. Obama, Mr. Law Professor, is that it’s illegal.

In 1974, after a series of scandalous take-downs of pension and retirement funds during the Nixon era, Congress passed the Employee Retirement Income Security Act. ERISA says you can’t seize workers’ pension funds (whether monthly payments or health insurance) any more than you can seize their private bank accounts. And that’s because they are the same thing: workers give up wages in return for retirement benefits.

The law is darn explicit that grabbing pension money is a no-no. Company executives must hold these retirement funds as “fiduciaries.” Here’s the law, Professor Obama, as described on the government’s own web site under the heading, “Health Plans and Benefits.”

“The primary responsibility of fiduciaries is to run the plan solely in the interest of participants and beneficiaries and for the exclusive purpose of providing benefits.”

A d v e r t i s e m e n t

Every business in America that runs short of cash would love to dip into retirement kitties, but it’s not their money any more than a banker can seize your account when the bank’s a little short. A plan’s assets are for the plan’s members only, not for Mr. Dimon nor Mr. Rubin.

Yet, in effect, the Obama Administration is demanding that money for an elderly auto worker’s spleen should be siphoned off to feed the TARP babies. Workers go without lung transplants so Dimon and Rubin can pimp out their ride. This is another “Guantanamo” moment for the Obama Administration - channeling Nixon to endorse the preventive detention of retiree health insurance.

Filching GM’s pension assets doesn’t become legal because the cash due the fund is replaced with GM stock. Congress saw through that switch-a-roo by requiring that companies, as fiduciaries, must

“…act prudently and must diversify the plan’s investments in order to minimize the risk of large losses.”

By “diversify” for safety, the law does not mean put 100% of worker funds into a single busted company’s stock.

This is dangerous business: The Rattner plan opens the floodgate to every politically-connected or down-on-their-luck company seeking to drain health care retirement funds.

House of Rubin

Pensions are wiped away and two connected banks don’t even get a haircut? How come Citi and Morgan aren’t asked, like workers and other creditors, to take stock in GM?

As Butch said to Sundance, who ARE these guys? You remember Morgan and Citi. These are the corporate Welfare Queens who’ve already sucked up over a third of a trillion dollars in aid from the US Treasury and Federal Reserve. Not coincidentally, Citi, the big winner, has paid over $100 million to Robert Rubin, the former US Treasury Secretary. Rubin was Obama’s point-man in winning banks’ endorsement and campaign donations (by far, his largest source of his corporate funding).

With GM’s last dying dimes about to fall into one pocket, and the Obama Treasury in his other pocket, Morgan’s Jamie Dimon is correct in saying that the last twelve months will prove to be the bank’s “finest year ever.”

Which leaves us to ask the question: is the forced bankruptcy of GM, the elimination of tens of thousands of jobs, just a collection action for favored financiers?

And it’s been a good year for Señor Rattner. While the Obama Administration made a big deal out of Rattner’s youth spent working for the Steelworkers Union, they tried to sweep under the chassis that Rattner was one of the privileged, select group of investors in Cerberus Capital, the owners of Chrysler. “Owning” is a loose term. Cerberus “owned” Chrysler the way a cannibal “hosts” you for dinner. Cerberus paid nothing for Chrysler - indeed, they were paid billions by Germany’s Daimler Corporation to haul it away. Cerberus kept the cash, then dumped Chrysler’s bankrupt corpse on the US taxpayer.

(”Cerberus,” by the way, named itself after the Roman’s mythical three-headed dog guarding the gates Hell. Subtle these guys are not.)

While Stevie the Rat sold his interest in the Dog from Hell when he became Car Czar, he never relinquished his post at the shop of vultures called Quadrangle Hedge Fund. Rattner’s personal net worth stands at roughly half a billion dollars. This is Obama’s working class hero.

If you ran a business and played fast and loose with your workers’ funds, you could land in prison. Stevie the Rat’s plan is nothing less than Grand Theft Auto Pension.

It doesn’t make it any less of a crime if the President drives the getaway car.

Did you guys read this? That article is in the same issue of the NYT.

A 31 year-old economic policy staffer,Brian Deese, a not-quite graduate of Yale Law School who had never set foot in an automotive assembly plant until he took on his nearly unseen role in remaking the American automotive industry

Keep in mind, Ford was doing the best of three companies that were not doing too well. Now there are three major problems the Ford company has to overcome: 1) it lacks the easy cash flow afforded GM and Chrysler in the form of tax-payer dollars, 2) because they didn't declare bankruptcy they must still deal with a UAW who owns a large portion of two major competitors, 3) it must contend with strict regulations created by a regime that is intent on fundamentally altering the American car industry to reflect their environmental policy.

"If Ford can manufacture products that consumers demand as opposed to products that the government demands, then they may find themselves with a leg up in the market." Julie, depending on the nature of the forthcoming CAFE regulations, it may well be too expensive (or illegal) to produce and purchase the kind of cars consumers want.

Yes, Kate, I saw that too and couldn't believe it. He went to an Ivy League school - he must know better! This administration is becoming a caricature of the Left. I heard a clever comment the other day: "at least Stalin's was a five year plan".

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