Visiting Obama deserves credit for saving GM, Chrysler

BY TOM WALSH
FREE PRESS COLUMNIST

President Barack Obama comes to Detroit today, looking for love in the factories of America's hardest-hit big city.

Beset by a sputtering jobless economic recovery, Obama will tout the federal rescues of General Motors and Chrysler as bold moves that staved off another Great Depression and saved thousands of jobs.

While the revivals of GM and Chrysler are still works in progress, at least the automakers are still alive to launch the Chevrolet Volt and the new Jeep Grand Cherokee from the Detroit plants Obama will visit. And that's about as big a triumph as the president can claim from his first 18 months on the job.

Yes, there are still partisan critics sniping about bailouts and "Government Motors." But make no mistake about the Detroit rescue.

The fact that GM and Chrysler are not only alive but modestly profitable in a weak market, after years of losing billions of dollars when car and truck sales were 50% higher, looks like more than just a successful government intervention.

It looks like a flat-out miracle.

Celebrate the rescue.

OK, I get it.

People don't like bailouts -- of Wall Street or Detroit.

Most people who work hard and behave responsibly resent it when their tax dollars are used to prop up big companies run aground by insanely wealthy executives.

Here's the key analogy, though.

People didn't like the rationing of sugar, butter, meat and gasoline during World War II, either. But citizens supported these anti-free-market intrusions as necessary in a time of national emergency.
They assumed in the 1940s that government would restore economic freedoms when the war ended, which is what happened. And that's pretty much what's happening today in the wake of the 2008 financial crisis and federal response.

Most banks have paid back their bailout money. GM and Chrysler emerged from bankruptcies as leaner companies, repaid loans and stopped losing money. They are moving to shed their government ownership via stock offerings.

Political opponents, though, can't concede even a small attaboy for Obama on the auto rescue. Sen. Chuck Grassley, R-Iowa, leaps to denounce GM at every opportunity, as he did last week when GM bought AmeriCredit, and when GM repaid $6.7 billion in loans ahead of schedule in April. Even home-state U.S. Rep. Candice Miller has sniped recently at GM and Chrysler for eliminating dealers.

Sorry, but the auto rescue critics are all wet. This was much more than a handout to weather a slump. Obama's auto task force totally reshaped a bloated and dysfunctional industry, forcing sacrifices from all, into something that now looks sensible and sustainable.

"This was not just a rebound from a brutal recession, but it is a repositioning of an industry after a decade or more of decline," said Brian Deese, a member of that task force and now an economic policy assistant to Obama.

Stephen Girsky, a longtime auto industry analyst who's now a GM director and vice chairman for strategy and business development, accepts that GM must live with the bankruptcy stigma and political brickbats until it sheds federal ownership.

"The results are better," Girsky said during an interview, alluding to a $900-million first-quarter profit for a company that lost $82 billion in the four years preceding its 2009 bankruptcy.

"The company is acting differently," he added. "There's a lot of work to do. Nobody's in denial here."
Officials of the U.S. Treasury, which owns 61% of GM, get occasional updates on how the company is doing, but are not asked for approval on business decisions, even moves as big as last week's $3.5-billion offer to buy the AmeriCredit auto finance outfit.

Until GM begins a public offering of stock, expected later this year, we won't begin to get a clear sense of how much U.S. taxpayers will recover of its $50-billion in federal assistance, or when.
The telltale numbers for grading the auto rescue now are the first-quarter profits posted by GM and Chrysler while overall industry sales were still rotten -- compared with the horrific losses in pre-rescue years when people were buying cars like crazy.

These are stunning results. Obama is right to celebrate them. We all should.

Despite all the cries and ballyhoos of "Socialism!" the bailouts are working and saving the jobs of Americans. Would they be happier being unemployed, losing their homes, and living under an economy where there is no government intervention? Farmers have been reciving subsidies from both parties for decades, and no one has been concerned that The US has been sliding towards socialism. Sometimes the government has to step in and do what they think is right for the economy and people in general.

Ideals do not put food on your table.

Nobody said it was socialism. Most everyone in this country was against bailing them out to start with. The unions made out big time in the bailout. You didn't mention that. Ford didn't take a bailout. They did just fine and have been for months.

By the same token, why should they get a bailout while thousands of small businesses tanked in the last 2 years? Good for one, good for all.

Btw, with farm subsidies.... over 70 percent of the subsidies go to the top 10% of producers. Politics is at play. Just another way for Congress to bring home the bacon.

http://www.rd.com/your-america-inspiring-people-and-stories/phony-farmers-exposed/article179127.html

TexasBlue wrote:Nobody said it was socialism. Most everyone in this country was against bailing them out to start with. The unions made out big time in the bailout. You didn't mention that. Ford didn't take a bailout. They did just fine and have been for months.

By the same token, why should they get a bailout while thousands of small businesses tanked in the last 2 years? Good for one, good for all.

Wasn't the bail out money considered to be loans over there? The banks here that were bailed out either had to give the government a non-controlling quantity of shares (such as Northern Rock) or were expected to pay the money back (HBOS and Lloyds TSB).

Yes, they were loans. But the the legislation specifically said the money could be used only for financial institutions such as banks, insurance firms and credit unions. The gov't expanded the auto bailout to also include a gov't guarantee on the warranties for new cars sold by the two companies. He also forced the removal of GM CEO. Also, a majority controlling interest for Chrysler (55%) to be given to the auto workers union.

All of this is unprecedented, imo. This is why the right here screeches socialism. Will the gov't give it back? Sure. But i worry of slippery slopes (constitutionality) of it all. If it's ok for the Bama admin to do this, what's to stop consecutive administrations from doing the same or worse? One can't have it both ways because they happen to like the guy in the White House right now.