by John Hawkins | March 31, 2009 10:28 am
Our Socialist-In-Chief has apparently decided that he has being President down so well that he can handle being the Super-CEO of General Motors at the same time. So, Obama has begun, Hugo Chavez style, to tinker with General Motors. The CEO and the Board? They’re out. The business plan? It has to be rewritten to the satisfaction of a guy who has less business experience than the average assistant manager at Burger King or Wal-Mart. This is in addition to borrowing billions more to throw down the GM rathole.
President Barack Obama’s rejection Monday of restructuring plans offered by General Motors and Chrysler increases the likelihood that one or both carmakers could declare bankruptcy.
Obama found the plans inadequate to turn the companies toward sustained profitability. The plans were required to be submitted before the government would give nearly $22 billion in taxpayer aid that the two companies sought.
Instead, Obama promised GM enough working capital to get through the next 60 days and Chrysler the next 30 days. The firms were sent back to revamp their restructuring plans, and the administration signaled clearly that bankruptcy, once unthinkable, is now an option for GM.
…Late Monday, an administration official confirmed that among the options on the table is a plan that would separate the “good” parts of GM from the “bad.”
Under such a plan, the stronger GM divisions, such as Chevrolet and Cadillac, would avoid bankruptcy while the weakest, such as Saturn and Hummer, would enter bankruptcy with the hope that they could be sold or liquidated. The official, who wasn’t authorized to speak publicly and requested anonymity, cautioned that no decision had been made on this plan or any other.
…Just weeks ago, both GM and the administration were confident that bankruptcy could be avoided. Now it appears likely. A senior administration official, discussing the matter on the condition of anonymity in order to speak freely, emphasized that a “significant restructuring that employs parts of the bankruptcy code is the best way to turn GM around quickly.”
…Obama confirmed that his administration had asked GM Chief Executive Rick Wagoner to step aside. Wagoner’s successor will be GM’s operating chief, Frederick “Fritz” Henderson, whose resume and compensation package is similar to Wagoner’s.
Obama’s auto task force chastised GM and Chrysler for not presenting realistic plans to produce more fuel-efficient cars profitably. The government is now setting manufacturing priorities for the carmakers. Some automotive experts questioned the logic of forcing carmakers to produce hybrid vehicles.
“The market for fuel-efficient vehicles rises and falls with gas prices. Until there is a consistent and compelling reason for consumers to buy hybrids, such as stabilized gas prices, automakers cannot realistically turn over their product lines to that more-expensive, less-profitable product that has only achieved 2 percent market share after all these years in production,” Michelle Krebs, editor of Edmunds AutoObserver, an online news site covering the auto industry, wrote in a commentary Monday.
…administration officials rolled out a plan to provide a federal backstop for the warranty of any GM and Chrysler vehicle purchased in the current period of turbulence. Obama also promised to unveil soon a series of tax incentives for owners of older vehicles who are willing to trade them in on new fuel-efficient vehicles.
…Two big hurdles remain at GM, which seeks more than $16 billion in additional taxpayer bailout funds to stay alive. Its negotiations with the United Auto Workers and bondholders fell far short of what Obama’s task force required by a March 31 deadline.
The most ironic thing about this is that back in November, when the bailout first hit the news, those of us who were opposed to it were saying that this should be handled via bankruptcy, not a bailout. Hence posts on RWN like Bankruptcy, Not Bailout For The Big 3,
One of the big questions of the day is whether or not you, me, and the rest of the American taxpayers should be bailing out the Big 3 Automakers. Not only should we not be bailing them out, we shouldn’t even be asking the question. It’s not the job of the government to decide which businesses succeed and which businesses fail — although they do it all too often through subsidies, tariffs, and corporate welfare. Those are areas we need to work on as a country, too, but for the moment, let’s concentrate on the bailout.
…All we’d be doing with a bailout would be kicking the can down the road because the underlying problems would still exist. How in the world are these companies ever going to be competitive when they are paying $22-$25 more per hour to their workers than their competitors?
So, why continue this farce with a bailout? Because the Democrats would be able to pay back their union allies for the hundreds of millions of dollars and hundreds of thousands of man hours they put into the Dems’ election efforts this year. In other words, your tax dollars would be used as a political payoff from the Democrats to the unions.
Now, after wasting billions of taxpayer dollars, we’re back to the bankruptcy option that they should have pursued all along. Still, better late than never on that front.
However, what Obama is doing is still extremely problematic. He shouldn’t be putting more taxpayer money into GM or Chrysler. We shouldn’t be guaranteeing the warranties on these cars. He shouldn’t be picking personnel in the company. He shouldn’t be within a thousand miles of any business plans because he doesn’t have the slightest idea of what he’s doing and the more politics that’s inserted into the process, the less likely it is that the company will ever turn around. Moreover, one of the biggest problems that the Big 3 have is their out-of-control unions which will be protected by the Obama administration from the harsh cuts they’d be sure to endure in bankruptcy.
So, look at the situation we have, particularly at GM: We have a failing company that’s hemorrhaging money and will be likely to continue to do so as long as the economy is bad, incompetent government officials reducing their chances of turning things around by meddling, and an egomaniacal President who has tinkered with the company so much that he essentially owns their success or failure.
If that sounds like a recipe for wasting tens or perhaps even hundreds of billions of taxpayer dollars while prolonging GM’s woes, that’s because it is.
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