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  • Washington Occupies Detroit

    Congratulations. If you are a U.S. taxpayer, you will soon be a part owner of a car company. Under the latest reorganization plan released by General Motors, Uncle Sam would take ownership of 50 percent of the challenged automaker in return for forgiveness of $10 billion of debt now owed to the Treasury. The deal would give Washington controlling ownership of a major industrial corporation for the first time since Conrail was sold in 1986. And the first time the U.S. has ever owned an automaker — joining China and several European governments in that club. In fact, as one industry analyst put it: “They are going to control more of GM than the government of Lower Saxony owns of Volkswagen or France owns in Renault.”

    Word of nationalization came as General Motors made otherwise welcome moves toward streamlining its operations — announcing that it would drop four moribund brands, including Pontiac, and cutting back it workforce and bloated dealer network. It also offered bondholders 10 percent of the reorganized firm in exchange for cancellation of debt, as well as equity to the UAW in exchange for health coverage claims.

    But, while these moves grabbed headlines yesterday, they actually didn’t move anything down the road much. The cutbacks were long anticipated — smart Pontiac dealers started looking for alternative work months ago. And the paltry offer to bondholders — at a fraction of what the Feds and the UAW got — looks almost certaintly to be refused. Because of that, GM is still looking at a probable bankruptcy.

    Frankly, even word of nationalization doesn’t change much in the short term. Ever since Rick Wagoner was unceremoniously dumped by the White House a few weeks ago, GM has been run from Washington. Sure, there are quibbles about the degree of control — but its inconceivable that GM will make any substantial decision inconsistent with White House policy.

    The stock acquisition formalized this existing control. Far more dangerously, however, it turns that control — which had been based on temporary loans, into an indefinite ownership stake.

    In other words, it looks like Detroit is in for a long-term occupation by Washington. That’s bad news for all of us.

    Posted in Economics [slideshow_deploy]

    16 Responses to Washington Occupies Detroit

    1. ozzy6900 says:

      So the Government turns debt into stock asset with a wave of the wand. Also involved is the UAW in the part ownership deal. So now, the Government and the UAW are part of management, but the UAW has to represent the workers and sit at grievances but must decide the outcome of said grievances AND negotiate both sides of a working contract along with the Government! I won't BEGIN to try to figure out how arbitration will work with the UAW sitting on both sides of the issue!

      Tell me how a union can sit on both sides of the fence as management and representative of the employees? Further more, tell me how to turn debt into asset so I can own a company like the Government! Last of all, both the Government and the UAW are supposed to PROTECT people, not manage them! What the Hell is happening in this Country?

    2. Spiritof76, New Hampshire says:

      Let us see. A car designed by Washington political hacks and their power brokers, the UAW will result in a Cadillac with no provision for wheels. They will have solar powered car with photovoltaic cells on the roof and can’t go anywhere.
      GM and Chrysler will be history. We are going in the same direction as Britain did with their auto industry.

    3. Eric Sweeney, Richar says:

      Perhaps they'll change its name to "American Leyland" in honor of that highly successful British conglomerate.

    4. rich weirton says:

      My next auto purchase will be a car NOT made in America. I just can't imagine what a government made car would look like….

      They can't run the country. What makes them all of a sudden auto experts?

    5. Ben C, Ann Arbor, MI says:

      Thankfully Ford is hanging in there. Our next purchase will be an MKX – very cool car.

      I posted a thought on another board:

      Lets name the new Federally mandated vehicle the "Barrymobile" given it is the automobile he thinks we will purchase.

    6. Richard, Spring, TX says:

      By the time they are done the new GM car will be an expensive car that no one wants and the value of the stock owned by the Federal government will be $0. Do you expect anything else?

    7. Bill, Forney, TX says:

      Taking control of the largest car manufacturer in the U.S. is merely another step in a centralized government telling all Americans how they must live. As has been mentioned in numerous blogs, GM will now make the "dream" car that the environmentalists have demanded (but the buying public has not). This will put pressure on Ford in that Ford will now only have the non-governmental market to sell to. There is sure to be a mandate that ALL government (& possibly public) vehicles purchased in the future be GM vehicles. This is one more area where free enterprise will be thwarted. Ford will do well because they will be wise & produce the vehicles that the public actually wants. One thing is for sure, Toyota will be the #1 automaker in the world and possibly in the U.S. in the very near future.

    8. Steve -- Fort Nyers, says:

      GM shold be alloweded to die an honorable death on the altar of unbridled capitalism. The same is true of AIG, Citibank, Bank of America and all the other failed corporations whose utter lust for revenue and profits has resulted in their own self destruction.In lieu of an honorable death, there is facism. Welcome to the new world order!

    9. Kent, Virginia says:

      Paying Back those 90 million or so that the UAW gave to the Dems to get elected or re-elected gets expensive for those of us who pay taxes (and our children, grandchildren, and great-grandchildren.)

      Obama spent more than anyone ever has to purchase the Presidency — with OTHER PEOPLE'S MONEY, of course. He's good at that.

      That — and traveling across the known world apologizing for America. Our consistent financial aid to the rest of the world notwithstanding, he, as well as his wife, is NOT proud of America. He's probably not even Constitutionally able to hold his office, but nobody much seems too concerned about THAT. Not even the Supreme Court.


      Jeremiah Wright? Bill Ayres and wife? The founder of ACORN (also SDS)? People who care more about power than human life, than liberty, than money itself.

      Is it just a few million of us who are alarmed?

      Look at history (the real thing, not the revisionist version that demonizes anyone who was white AND male) — Socialism doesn't work. It just doesn't. It sounds real nice, but it doesn't work.

      It isn't nearly enough, but . . .

      as long as Ford holds out against bailouts, we'll buy a Ford next time!

    10. Marshall Hill MI. says:

      I like the B.O. Mobile!

    11. Claude Cornell says:

      What a waste of taxpayer money. All that money

      down the drain and the results will be no different than if the government would have stayed out of it. It's all about control.

      But it is a shame that the American consumer

      can't get it through their head that if you don't

      support American industry you will lose it.

      We have lost the clothing and shoe industry to

      China and now we have just handed over the control of the American auto industry to Japan.

      Way to go. Buy American !

    12. Ben Franklin, Kendal says:

      To Bill from Forney, TX:

      You are on the right track, but you didn't take it far enough. Once the government has control over one of the automakers, they can effectively control all of them. Two words: Environment and Safety… they will implement a carbon tax and a safety tax on all vehicles that don't meet their standards on emissions, making the non-Government Motors vehicles just as expensive, if not more so, than the GM ones. And for good measure, the GM vehicles will be subsidized by the taxpayers, forcing the American people to either drive the cars Obama thinks they should, or pricing the vehicles the public really wants out of the market. The Japanese and other foreign automakers won't be immune to this pressure, because they can't sidestep the taxes. Meanwhile, as they coax gasoline back up to $4 per gallon, that will make the GM "super-hybrids" less prohibitive.

    13. Jim - Utah says:

      I added a comment before and said I was considering a Ford for my next purchase, well I have bought a Ford Fusion and couldn't be happier. When I told the dealer why I was doing it, because they didn't take a government hand-out, he grinned with pride. I am now the owner of a new Ford and a new Toyota and will be driving them long after the demise of GM.

    14. rich, new york says:

      we need to sit back and watch the government and the uaw finish destroying the u.s. auto industry..

    15. Dave from Shelby Twp says:

      When will people realize this is NOT about a "benevolent" Obama or Democratic Party governing from the top!? This IS about hegemony; pure unadulterated control, power, and money! If "greed" were REALLY the issue, why aren't more liberals up-in-arms about George Soros? Oh, that's right… he keeps funding their asinine ideology!

      On a related note, wanna know what political-correctness, liberals & Democrats, and Johnson's "Great Society" might REALLY look like? Just look at Detroit!!! Nigh unto 30% unemployment, 50% truancy, 70% illiterate, 80% corrupt and liberal government employees and elected officials, and 100% bankrupt… both fiscally as well as morally!

    16. Pingback: Morning Bell: Free Enterprise’s 100-Day Death March | The Foundry: Conservative Policy News.

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