Friday, September 7, 2012

No He Didn't! GM and Chrysler Both Failed

What if I told you President Obama did not save GM?  What if I told you he and congressional Democrats spent $80 billion and let GM fail anyway?  What if I told you the company you know as GM is not GM at all, but a new company with the same name created by the federal government?

In an editorial penned in November of 2008, Mitt Romney wrote:

[D]on’t ask Washington to give shareholders and bondholders a free pass — they bet on management and they lost.
The American auto industry is vital to our national interest as an employer and as a hub for manufacturing. A managed bankruptcy may be the only path to the fundamental restructuring the industry needs. It would permit the companies to shed excess labor, pension and real estate costs.
Despite calls to let the natural bankruptcy process work, Obama stepped in and spent $80 million on bailing out GM and Chrysler.  Romney warned that if GM and Chrysler were to receive a government bailout that you could kiss them goodbye and that is exactly what happened.

On June 1, 2009, General Motors, having already received billions from the federal government, filed for Chapter 11 bankruptcy owing more than $170 billion in debt with only $80 billion in total assets.  On June 8, 2009 GM was removed from the Dow Jones Industrial Average.

On July 10, 2009, an entirely new company created by Obama and the federal government called NGMCO, Inc. completed the purchase of all assets, operations and trademarks of GM. [1]  The General Motors we all grew up with was officially no more, joining companies on the failure pile like Lehman Brothers and WorldCom.  The federal government was granted 60% ownership in the new company.

NGMCO filed its initial public offering in November 2010, under the now defunct GM ticker symbol. [2]  As a result of the IPO, the government's position in the company was reduced to approximately 33%, leaving it the single largest shareholder.

So GM was no more, replaced by a wolf in sheep's clothing controlled by the federal government, but what about Chrysler, didn't it get saved by the bailout?

Unfortunately, the story is exactly the same.  Chrysler filed for Chapter 11 bankruptcy, its assets, trademarks, and operations were sold to a new company owned 20% by the foreign auto manufacturer Fiat, 55% owned by the United Auto Workers union, 8% by the US government, and 2% by the Canadian government. [3]

What's in name?

You're probably wondering what difference it makes that the original GM and Chrysler are no longer and 2 new companies have taken their place utilizing their names, after all, they're still producing and selling cars.

Obama and Democrats proclaimed numerous times in their convention that the auto industry is doing better than ever.  "Let's bet on America's workers. And we got management and workers to come together, making cars better than ever, and now GM is No. 1 again and the American auto industry has come roaring back," President Obama said.

In their most recent financial report, filed 3 years to the date they closed the purchase on GM's assets, NGMCO, Inc. was exposed for fudging their numbers by over shipping inventory to dealers and counting that unsold inventory as sales. [4]  In addition, the federal government nearly doubled their purchases of fleet vehicles through GM to artificially inflate sales numbers, making what amounts to unreported bailout to the company they own.  In fact, things are so bad at NGMCO, Inc. that experts believe it is only a few short months away from declaring bankruptcy.  [5]
"Didn't Obama save Detroit?  No, he didn't... There's a lot of pissed off people in Michigan (and Wisconsin and Ohio), people who weren't saved... I'm just stating a fact, and those of you who don't live here should know this." - Michael Moore, director and star of Roger and Me.
Here's the reality of the auto bailout:  8 U.S-based Chrysler plants closed, 19 GM plants were closed or halted, more than 2000 GM dealerships shutdown [6], and GM boosted it's manufacturing in China by 55% [7].

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