“Yes, the auto industry is big. And important. But Congress shouldn’t dole out more taxpayer dollars to save firms that missed opportunities to help themselves.” And so begins The Dallas Morning News‘ editorial advising its readers that Motown should be left to its own devices. The News is home to one of automotive journalism’s genuine gems: writer Terry Box. Box has always been loyal to his readers’ best interests; this editorial has his fingerprints all over it. Be that as it may, Motown may wish to point out that Texas is home to Toyota’s massive– and now underutilized– Tundra factory. Of course, it’s also the state where you’ll find GM’s Arlington plant, once-proud maker of the GMC Yukon, GMC Yukon XL, Chevrolet Suburban, Chevrolet Tahoe and Cadillac Escalade. No matter how you slice it, The Lone Star state has at least one dog in this fight. Make the jump for the rest of the ed [thanks to peakwarehouse for the link].
“Rick Wagoner, GM’s audacious chief executive, wants the federal government to invest $3 billion in a merged GM-Chrysler, take over about $3 billion in pension obligations and buy another $4 billion in commercial paper to keep the newly combined automaker flush with cash. And he wants the money to come out of the $700 billion that Congress recently approved to rescue financial institutions.
Gee, Rick, why not ask the Treasury to pick up the lunch tab, too?
The demise of these companies would come at a terrible time for their workers and the economy as a whole. By some estimates, more than 2 million jobs would disappear, and the federal government would inherit massive pension obligations if the automakers landed in bankruptcy court.
But both automakers have known for years that this day of reckoning was coming yet steadfastly resisted the long-term manufacturing and cost-cutting decisions that would have made them leaner and more competitive with foreign automakers. They repeatedly opposed attempts to improve fuel-efficiency standards and placed the lure of short-term profits from oversized gas guzzlers ahead of their long-term health.
To add insult to self-inflicted injury, the industry’s latest request for federal welfare comes barely a month after the government agreed to loan them $25 billion to retool factories for fuel-efficient cars.
A bailout would not solve the automakers’ problems. Standard & Poor’s Ratings Service predicts that the companies would still be on life support. Both are bloated and aren’t making cars that Americans want to buy. Although onerous, bankruptcy would finally force the automakers to address the market and financial realities.
A government commitment to prop up the automakers would squander good taxpayer dollars on a bad deal. Enough is enough.”
Let me tell you about this bailout. I, along with my Treasury Secretary, himself a Wall Street guy, are bailing out OUR friends. OUR friends are on Wall Street, and will not be missing their bonuses this year.
You Guys in Detroit are not OUR friends. You might have friends in the next administration, but for now, you don’t go the the same Clubs we do and don’t travel in the same social circles. Sorry. The cash pipeline only goes to NY, not West.
Sad, but it couldn’t happen to a better bunch.
speedlaw:
Cerberus is the private equity firm that, with a mix of arrogance and stupidity, bought Chrysler. Cerberus is run by former George W. Bush Treasury Secretary John Snow.
This is their address:
Cerberus Capital Management
299 Park Ave.
New York, NY 10171
(not Wall Street, but walking distance)
So basically all of your assumptions are wrong.
This is a company that has very good friends on Wall Street and goes to the right clubs; giving them a bailout would be a cash pipeline to New York (very literally – the money will be wired to Cerberus in Manhattan).
Chrysler and its employees are SOL. Everyone knows that GM can’t save them. The only question is whether a private equity firm loses its poorly invested private equity when Chrysler goes Chapter 7, or whether the government gives money to GM to buy Chrysler from Cerberus, at which point GM will shut down the new Chrysler subsidiary under a Chapter 7 and loose the Federal Government’s equity.
That the Treasury has so far refused to support this horribly stupid merger is one of the few things left to convince me that we don’t live in a Kleptocracy.
There was an interesting segment with Newt Gingrich on NPR this morning (I can’t find a link to this talk unfortunately) about him commenting his stance against bailing-out any failed business or bank “as it supports failure to those who are getting paid to prevent it”.
The imports aren’t dying, they built better products that we purchased. Why should we then have our tax-money support companies we didn’t want to support to begin with?
no_slushbox: I was under the impression that Cerebus bought Chrysler with OPM (Other Peoples’ Money). I don’t know that Cerebus gets left holding the bag for the pension obligations, etc, in a Chapter 7. But I could be wrong.
given i wouldn’t part with my hard-earned to acquire a d3 product, why should i part with my taxes to support those products? it’s totally unlikely that $25b + $10b + $?b will ever result in the d3 making anything i’d buy so why am i expected to piss away this money? time for another tax revolt, methinks.
i’ve been trying to find a soapbox app that would allow me to send this message to my congress critters …
SexCpotatoes:
I was oversimplifying things a bit – the equity is that of both Cerberus and other large investors from the island of Manhattan – Cerberus is kind of like a very high fee mutual fund for institutional investors.
My point was that this GM-Chrysler merger is just another Wall Street bailout. It is not about jobs in the heartland and it will not save jobs in the heartland.
In the Chapter 7 the pension obligations will fall on this agency: http://en.wikipedia.org/wiki/Pension_Benefit_Guaranty_Corporation , basically the pension version of FDIC. Like the FDIC it is self-supporting and does not rely on taxpayer money.
Chrysler is an LLC, and would likely be sold to GM under that structure, which means that the owner, whether Cerberus or GM, will have no personal liability for any Chrysler obligations unless special circumstances cause the court to pierce the veil ( http://en.wikipedia.org/wiki/Pierce_the_corporate_veil ).
I don’t particularly think that Cerberus should be held personally liable, unless they did something like “Siphoning of corporate LLC funds by the dominant shareholder member”, but if Chrysler is insolvent or becomes insolvent then Cerberus should lose every cent that they and their backers invested.