Another Day, Another $30B

Chalk one up for all those who opposed throwing barrels of cash at Chrysler and GM to stave off bankruptcy, they were right on the money last fall when they said the best thing to do is just let the companies quietly go through restructuring. “Why put off the inevitable?” they asked.

Ah, but the Obama administration saw things differently. They saw an opportunity to take over two of the big three automakers and structure deals that essentially give these giant corporations back to the United Auto Workers. It also puts the government in a position to dictate the kinds of vehicles these two automakers will be putting on the road in the near future.

Over the weekend, the smoke began clearing at Chrysler when U.S. bankruptcy judge Arthur Gonzalez approved the sale of $2 billion in assets of the bankrupt Chrysler to a new company (Chrysler Group LLC) that will be 68% controlled by a health care trust aligned with the UAW. Italy’s Fiat will control 20% and the US and Canadian governments will split the rest.

Now, GM is walking into bankruptcy with its tail between its legs, led once again by President Obama and once again, you and I will be footing the bill. After already giving GM $19.4 billion to keep GM out of bankruptcy, the government is now prepared to pay $30.1 billion to pay their way through it. More wasted time, more wasted money.

In the proposed deal, the government will have the right to replace GM’s current board, made up primarily of people with experience in business and the automotive industry, with it’s own “trustees”—who will see that GM sticks to plan of turning the once great US Auto industry into one that produces products with slightly less quality than those produced by one of your better emerging third world countries. Oh, by the way, Obama also said “GM will not be a government agency,” even though the government will have a 60% stake in the reorganized GM—and will appoint the directors. Give me a break.

Of course, the people really getting the sweet deal here are the UAW workers. As a special thanks for helping him get elected, an additional 21,000 workers at GM alone will be getting pink slipped in the very near future. In addition, the UAW agreed to take equity instead of cash for most of the funding of its health care trust. I have no idea how that’s going to work. I’m assuming it will allow the members to pay for health care with auto parts. In addition, more factories and dealerships with be getting boarded up—more people employed by a President who campaigned on creating jobs, not eliminating them.

The govment’s goal is to get GM’s production DOWN to just 10 million vehicles annually. The administration says it can break even at that point and therein lies the key to this whole thing about what happens when government gets involved in business. The goal here is to just break even. In Obama’s eyes, profit is bad. No one should ever make a profit. In his socialistic way of thinking, if no one makes more money than someone else, then all are equal and the world will be at peace. Of course, when it finally dawns on him that without profits, there’s no money to tax, then maybe he’ll realize that capitalism isn’t all that bad and that business savvy comes from experience and getting answers from people who know—not from glancing through “How To Run An Automaker, For Dummies.”