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Illegal. Illiberal. Ill-Fated.: Why Washington shouldn't run Detroit
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After decades of Europe and most of the West enjoying the fruits of selling off state ownership in private industry, the U.S. is going on a nationalization bender. An inventory of the steps that led us here leads to three inescapable conclusions: This bailout is illegal, illiberal, and ill-fated.
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“We cannot,” Obama said in March, “make the survival of our auto industry dependent on an unending flow of tax dollars. These companies—and this industry—must ultimately stand on their own, not as wards of the state.” Yet now that the state owns the auto industry, is guaranteeing its warranties, and is bailing out its parts suppliers, it will be easier than ever to use Detroit as a submissive vehicle for imposing costly new climate change rules. When those rules lead inevitably to reduced sales, pressure will intensify on Obama to fulfill his other promise from that same March speech: “We cannot, we must not, and we will not let our auto industry simply vanish.”
The president now has the power to prevent the Big Three automakers from vanishing. Whether he can force consumers to buy their products is another story.
Uncertainty Clouds Recovery of Government's Investment in GM
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If a new General Motors emerges from bankruptcy as planned, U.S. financial aid for the company will expand to nearly $50 billion, but neither the government nor the company is forecasting how much of the public money will be repaid.
It's sure to be a stretch. For the United States to fully recover its investment, the value of General Motors stock will have to reach levels it has never before attained.
Killing G.M. Softly
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Chapter 11 is certainly a necessary - and a long overdue - condition for G.M.'s return. But it is not a sufficient condition. What G.M. also needs is a winning business model.
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But recovering its mojo with consumers won't be so easy for G.M. now given that its new owners - government and labor - don't really care about them.
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Save the Motherland: Buy GM!: The trouble with preserving a prehistoric, poorly run, and unprofitable private corporation
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Taxpayers, our president has decreed, are impelled to preserve a prehistoric, poorly run, unprofitable private corporation.
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Will GM be run as profitably and efficiently as Amtrak? Will GM be paid not to produce, like the agricultural sector?
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The global problems with the GM boondoggle
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One might think that a salvage plan for the auto giant would place a heavy emphasis on lowering costs and preserving access to these growing markets abroad. In particular, as the dollar weakens and the U.S. tries to rein in its consumption, the prospect of overseas profits would seem to be one of the few rays of hope available to the suffering automaker.
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However, on Thursday, UAW President Ron Gettelfinger said that GM had agreed not to import the cars from China and to produce them in the United States instead as part of its deal with the UAW.
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GM, Chrysler to face Senate scrutiny on dealers
Remember: the U.S. government has "no interest" in running GM or Chrysler.
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General Motors Corp and Chrysler LLC, both bankrupt, will try on Wednesday to ease congressional concern, and in some cases anger, over their plans to slash more than 2,400 dealerships.
Members of the Senate Commerce Committee plan to grill GM Chief Executive Fritz Henderson and Chrysler President Jim Press about the lone aspect of restructuring that has triggered a broad response from Congress since dealers are nationwide.
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Members of the Senate Commerce Committee plan to grill GM Chief Executive Fritz Henderson and Chrysler President Jim Press about the lone aspect of restructuring that has triggered a broad response from Congress since dealers are nationwide.
"Rapid dealer reductions increase unemployment, threaten communities and decrease state and local tax revenue without any material corresponding decrease in an automaker's costs," said John McEleney, chairman of the National Automobile Dealers Association who sells vehicles made by GM, Toyota Motor Corp and Hyundai Motor Co in Iowa.
How Not to Run G.M.: Obama's environmental and employment goals could undermine profitability.
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Obama seems to have three No. 1 goals: turning a profit, building cleaner cars, and creating American jobs. These priorities clash with each other, with the president's professed desire to "get out quickly," and with his promise of "a hands-off approach."
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He can imagine a world in which the internal combustion engine is obsolete but not one in which G.M. is.
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GM Should Run to Bankruptcy Court: By avoiding bankruptcy, GM only risks trading union demands for federal tyranny
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After recent developments, if there is any intelligent life left at General Motors, it should run—not walk—to bankruptcy court. That may be the company's only chance to free itself from the triple-vise of unions, creditors, and now President Barack Obama—who is by no means the least life-threatening of the lot.
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But GM has to fear the government even if it doesn't go into bankruptcy. In that case, the oversight for its restructuring plan will be supervised not by a court but by the Obama auto task force. And the odds that the task force will be guided solely by GM's bottom-line interests rather than Obama's political agenda are about the same as pigs flying.
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GM CEO resigns at Obama's behest
The President of the United States fires the president of an ostensibly private company. This is the world we now live in.
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The surprise announcement about the classically iconic American corporation is perhaps the most vivid sign yet of the tectonic change in the relationship between business and government in this era of subsidies and bailouts.
GM and Chrysler Will Get $13.4 Billion in U.S. Loans
The total commitment is actually $17.4 billion. What a free-market fundamentalist that George W. Bush is. And what rule of law we have in this country. The money bush is giving GM and Chrysler is coming from the Troubled Asset Relief Program, which was
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“These are not ordinary circumstances,” Bush said. “In the midst of a financial crisis and a recession, allowing the U.S. auto industry to collapse is not a responsible course of action.”
Bank bailout funds could be used for Detroit
George W. Bush, whom the left consistently refers to as a laissez faire ideologue, tells GOP senators that he'll bail out automakers on his own authority if they don't.
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Bush officials warned wavering GOP senators that if they didn't support the legislation, the White House will likely be forced to tap the Wall Street bailout to lend them money, two Republican congressional officials told CNN earlier.
Bankruptcy Doesn?t Equal Death
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Really big firms such as GM, Ford and Chrysler are really big users of productive inputs, like rubber and steel. Almost all of these inputs have alternative uses and could be used by other firms or in other industries.
A government bailout of the Big Three keeps huge amounts of productive inputs in firms that can't use them efficiently. Forcing taxpayers to subsidize the continued employment of gargantuan quantities of raw materials, labor and capital goods in unproductive pursuits is a recipe for economic stagnation. The popular and politically convenient myth has matters backwards: The bigger the unprofitable firm, the more vital it is that it be allowed to fail.
It?s 65 Million B.C. for the Detroit Three: Why use taxpayer money to postpone the inevitable?
Shikha Dalmia details the sad condition of the big three automakers, and explains why throwing more billions at them won't make them competitive. I would add that those billions will be taken from productive companies that make products that consumers wa
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For the Detroit Three, it is 65 million BC—the year that the meteor landed and replaced the dinosaurs with smarter and more agile creatures. There is no point in using taxpayer money to postpone the inevitable.
Don?t Bail Out the Big Three
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Corporate bailouts are clearly unfair to taxpayers, but they are also unfair to the successful firms in a particular industry, who are implicitly taxed and burdened when their competition is subsidized. In a properly functioning market economy, the better firms—the ones that are more innovative, more efficient, and more popular among consumers—gain market share or increase profits, while the lesser firms contract. This process ensures that limited resources are used most productively.
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