GM's Bankruptcy: Obama's Socialist Hat Trick

Obama Said To Conclude Bankruptcy Best Option for GM

March 31 (Bloomberg) — President Barack Obama has determined that a prepackaged bankruptcy is the best way for General Motors Corp. to restructure and become a competitive automaker, people familiar with the matter said.

The headline above was enough to make a “sick of the bailouts” capitalist rejoice. Was the discipline of the free market system finally being allowed to work? Sure sounded good until the GM bankruptcy option was shortly thereafter revised from “best option” to “likely”.

Obama Said to Find Bankruptcy Likely for GM

April 1 (Bloomberg) — President Barack Obama believes a quick, negotiated bankruptcy is the most likely way for General Motors Corp. to restructure and become a competitive automaker, people familiar with the matter said.

The president gave GM 60 days to come up with deeper cost and debt reductions than the biggest U.S. automaker proposed in its plan submitted last month.

“The president’s position has not changed,” a White House official said. “He remains committed to a significant restructuring without a bankruptcy if at all possible.”

It’s hard to believe that all three of the above contradictory statements were all in the one article. Obama wants a quick bankruptcy but gives GM 60 more days to reinvent itself while a White House official stoutly maintains that Obama does not want a GM bankruptcy.

Deliberate Confusion

This could all be very confusing until you realize that Obama’s “bankruptcy plan” for GM is merely a socialist hat trick motivated by polls that show over 60% of the public is opposed to bailing out the auto industry. Politically, Obama is saying the right words, but in the end, there will be no bankruptcy for GM.

Barney Frank, chairman of the House Financial Services Committee, in an interview with BusinessWeek late last year, was at least honest enough to tell us what the government’s real position on GM is when he said “Well, in the first place, it’s hardly the American way to just let people go bankrupt”. Barney Frank was attempting to define capitalism as socialism, but that’s another story.

Likely GM Outcome

Once the confusing clouds of doublespeak dissipate, here’s the most likely ending to the GM disaster.

-GM will come up with a magical plan within 60 days showing deep cost reduction, debt restructuring and a return to profitability within 2 years. The government will decide that bankruptcy is not necessary after all.

-GM bondholders will be beaten into submission by the Government and given two options - accept pennies on the dollar for all debt or receive an equity position of dubious value in exchange for debt forgiveness.

-The unions will do their part with token concessions and happily avoid any bankruptcy ordered pay or benefit reductions. Those GM employees given early retirement or let go were offered billions in severance and benefits; don’t expect those still employed to accept major wage or benefit reductions.

-The United Auto Workers declare their support for the government blessed “restructuring”.

-GM receives major back door government funding disguised as subsidies or tax breaks for various actions deemed desirable by the government. How about a government subsidy to GM for every “green automobile” that they produce?

-The American public is duped into believe that the GM problem is solved without a bailout until GM needs a bailout again.

-GM continues to suffer from its high cost structure and struggles to compete globally.

Does GM ultimately survive and become a financially profitable enterprise at some point? Who knows - the more important question is can the American taxpayer survive?

Comments

[Cobra 1:]

From BO's brown troopers! His words not mine. Does that sound at all familiar, to anyone? Is this not exactly, almost a to the word, what Hitler did?

As it states below, which was just a matter of time, (imagine that) before the cover thy owns ass became fact! So much for no more protections to lobbyists and special interests!

I had the highest hopes that BO would really make a change, alas, just more of the same but with a stronger move toward socialism. I am for a change, I think the next big change should come in the fashion of a 2nd tea party.

"GM also would seek to have a new deal in place with the United Auto Workers union prior to any bankruptcy filing, the source said."

Apr 01 07:38 AM

[Ishortyou:]

those unions make innovation in any industry very hard to accomplish because that would mean to trim down the workforce to make the economy engine more efficient and productive, on the other hand the CEO's and board of directors care only about their bonuses and not the company/economy engine itselft and on top of that you have uncle Sam taxing the company/economy engine to death to maintain political driven social programs, so if the economy engine is besiege but 3 fronts how in the world are we going to prosper? all those 3 parasites need to be supervised by someone that has the 'cojones' in leadership. Hitler lost his all out gamble on the Russian campaign, that led to socialism-communism spread around the world for the last 60 years and now we are witnessing its consequences. It took 60 years for some to realize that the socialist-communist experiment did not, does not and will not work.

Apr 01 08:50 AM

[Thadeus Tho...:]

Give it a rest please. The new guy "BO" has not accepted Chrysler's or GM's plan for restructuring, giving them a bit more time so you are down on that? And then let's interpret the whole thing as just a show and posturing with a real " secret agenda" in the background? It appears some people are never satisfied with what an administration tries to do in this mess. One has to wonder if we would even be in this mess if we hadn't had almost 8 years looking for WMD and unbridled profiteering in the oil industry. There is absolutely no doubt this weakened an already precarious situation while the auto industry was making inroads to wage and benefit reductions for actually the last 12-15 years.

Yes, there were better product decisions and more effective management choices that could have been made at both Chrysler and GM. Form happened to luck out getting some financing before the financial meltdown. A legacy business like GM or Chrysler doesn't turn on a dime. Things are much more complex than in a small business operation. But it actually seems that isn't the issue for some folks. Some people just will deride and tear down any movement towards progress that isn't apparent to them.

Millions of people's jobs, retirement, and family well being are at stake here. Is it all these people's fault that they went to work for GM or Chrysler or a supplier or support business? Some people put their lives into this industry. Maybe that's part of it. Some folks are fearful of their own business downturn or lack of profits in this unhealthy economy and turn their frustrations on GM, the unions, it's people, and the new administration.

What about people that have retired.? Not all retire at 50 years old like some like to report. Some have been retired for awhile and do not actually have a very large pension at all. And some retired a few years ago along with a decimated 401K that they built up on their own to augment a modest pension. So then, force GM and Chrysler to declare bankruptcy; and also force these people on a government pension and possibly out of their homes? These people and their spouses ( over 700,000 for GM) do not have the luxury of time to start over. They put their time, sweat, and youthful years into the opportunity that existed for them where ever they happened to live. If it was a job at GM or Chrysler should they now be penalized for that? If they have to go on government PBGC some people will then complain about that. All these negative comments reveal is jealousy, no compassion for fellow man, and a self centered point of view.

Apr 01 09:12 AM

[Blah, blah,...:]

If you are too stupid to understand what socialism is, please don't invoke it in your articles.

Apr 01 09:31 AM

[elcopone:]

I bet if the Gov. just bailed them out you would be crying about that too. There is no winning with someone like you. Damned if you do damned if you don't.

You seem to have a magic crystal ball and can see the future so please, if you have a better suggestion, why not SAY IT. No, you would rather criticize and point fingers at everyone else.

Apr 01 09:46 AM

[Cobra 1:]

Ford happened to luck out? This had no forethought, no insight into their own industry, and no planning for this exact problem!? It was all shear luck? Does turnip truck seem to be used in your presence on a regular basis?

The quote was from one of BO's people, not me. I have made my position very clear from my first post to this one! The gov has no business bailing out any company regardless of size! No one is to big to fail in a free market economy, NONE of these companies. not AIG, not Ford, not GM, no one! If the posters above want me to re post the definition of socialism, I can, but you think about it and make your own decision. When government becomes and takes over decisions of private/public entity's and takes ownership in them to guide what and when they make decisions on behalf the of the greater society, at what point has this crossed the line of free market?

"Yes, there were better product decisions and more effective management choices that could have been made at both Chrysler and GM. Form happened to luck out getting some financing before the financial meltdown."

Apr 01 10:03 AM

[Cobra 1:]

I am not sure if you have had your hea din the sand or where it has been, but, there have been over 5 million people who have lost there jobs in the last 10 months!

To all of you genius's backing this bailout, answer this, who is bailing them out?! Who the fu&* is watching out for all the small business's that are failing, but have no union or lobbying group paying to own the legislators in Washington! Answer that you fu#$en jerk offs!

You postulate continually that if GM goes down America is doomed! What and when are you going to realize the rest of the American economy has already been trashed! Have you any idea how many people small business's employee in this country? About 4000 times as many as every auto company in the whole of North America combined! They are failing and this is where unemployment is coming from, this is where bailouts should be going!

Get over your bullshit union crap!

"Millions of people's jobs, retirement, and family well being are at stake here. Is it all these people's fault that they went to work for GM or Chrysler or a supplier or support business? Some people put their lives into this industry. Maybe that's part of it. Some folks are fearful of their own business downturn or lack of profits in this unhealthy economy and turn their frustrations on GM, the unions, it's people, and the new administration."

Apr 01 10:12 AM

[casey00001:]

I am just wondering? How will the Gov't beat the bondholders into submission? They can't force them to sell the bonds, and if GM doesn't go backrupt the bonds are still legally binding?

Apr 01 01:06 PM

[Thadeus Tho...:]

Th irate use of profanity, circular reasoning, and stretching what people actually write, does not lend credibility to any legitimate statements you may contribute.
As far as "socialism" goes. Some people keep bringing up Hitler. Hitler was a fascist who used a label of socialism to get people in Germany to buy into his policies. Hitler, being a fascist, ran things under a police state using the SS and fear and terror to control the populous. What is interesting to note is that we in the U.S. came closet to that (using the same fear and terror tactic) in the previous 8 years with "homeland security" and all it's often misapplied policies, some of which, still linger and are having lasting effects to out detriment.

Apr 01 01:32 PM

[henarl:]

Take away Obama's interference AND the taxpayer bailout money and GM and Chrysler would already be in bankruptcy. Beggars cannot expect to be choosers.
Now he needs to get tougher on AIG too!

Apr 01 02:41 PM

[Mr. Ed, Jr.:]

So far, all we have is talk about what Obama thinks is the "best" plan. Oh, yeah...and he fired the CEO. And he will soon be selecting GM's board. By the way, his Treasury Secretary just said CEO's of other companies might need to be replaced, too.

But if you think Obama will just send GM to bankruptcy and let a judge deal with the union contracts-- think again. GM will be back in 60 days with a revised plan, and they will get billions more.

Talk from the center and govern from the far left is the modus operandi. "Change we can believe in" has taken a walk off the end of the pier. But apparently, there are many who still "believe", and no amount of insane spending, wasteful earmarks, cabinet appointees who don't pay taxes and/or are long-time political hacks that are exactly what Obama told us we would not be getting will make any difference to them. And every time the object of their affections gets a critical comment, they say "Well....what about what Bush did? " As if that makes everything OK.

Apr 02 03:42 AM