While the auto bailouts were beneficial to the Valley and Lordstown continues to produce cars, the question remains: was it good public policy? What if GM had gone through a traditional bankruptcy or liquidation? The remains of GM might have evolved into multiple companies producing better cars at lower prices. Or it might have been economic Armageddon. We’ll never know for certain.
Clearly there are those who believe the Feds had no choice but to step in to save the industry. As a result GM was forced into a government managed bankruptcy, and it was then that things started to smell.
GM was a failed business model, having lost $39 billion in 2007. The financial crisis of 2008 was the final nail in the coffin. The bailout wasn’t perfect. Thousands of GM employees lost jobs, dealerships were forced to close, and the Obama administration played favorites, picking winners and losers. The UAW appeared to receive special consideration, some suggest, because of politics. Bankruptcy laws were turned upside down with secured creditors having to get in line behind unsecured creditors.
We are glad that GM is doing better today, but they have paid zero in federal income taxes despite record earnings in 2011 of $7.6 billion. According to the Treasury Department’s daily TARP report, GM still has $23.49 billion outstanding and unpaid. After receiving a cash infusion of $51 billion from TARP, special tax breaks worth billions, product liability exemptions, stimulus funds, $7,500 tax credits for Chevy Volt purchasers, billions for cash for clunkers, it’s clear that a lot of our money has been spent. Did we get a good deal? I’m not so sure.
The charge that the administration picked winners and losers is most obvious with the situation involving former Packard Electric workers who retired from Delphi. Even though it had no legal requirement to do so, New GM agreed to “top-up” various pension programs of retired Delphi union workers at a cost of $1 billion, while letting pensions of salaried workers take losses up to 70 percent.
The TARP special inspector general had been trying for more than two years to get the facts surrounding this uneven treatment. Members of the automotive task force were asked to testify, but they refused to cooperate. Only when faced with a congressional subpoena did they finally appear.
By some calculations, the UAW received $26 billion in benefits, far more than they would have received if the bankruptcy had been handled in a normal way. Because of government interference, GM may have lost its best chance to fully rework itself into a truly competitive organization. Today President Obama rails against “outsourcing,” but taxpayer funded GM is poised to build yet another plant in China. This mammoth $1 billion assembly plant will build 300,000 cars per year. This is the same GM that is owned in large part by U.S. taxpayers and a UAW trust, and is building 70 percent of its vehicles outside the U.S. Obama’s hypocrisy is astounding.
Politically, Obama may have helped his friends, but here in Ohio there are tens of thousands of voters who were affected by this unjust treatment of Delphi salaried retirees. This is a problem that can be fixed without taxpayer funds. Obama should remember that as Ohio goes, so goes the White House.
Mark E. Munroe is chairman of the Mahoning County Republican Party.