Obama's Own "Let Detroit Go Bankrupt" Destroys Foundation of Campaign

Mitt Romney’s factually-accurate but mischievous Jeep ad baited the Obama campaign into admitting that the charge against Romney (“Let Detroit Go Bankrupt”) on which its campaign is based is false.

Romney’s TV spot: “Obama took GM and Chrysler into bankruptcy, and sold Chrysler to Italians who are going to build Jeeps in China,” is 100% factually accurate. That is its beauty.

Yes, it is true that the Obama administration took GM and Chrysler through Chapter 11bankruptcy. GM and Chrysler shares became worthless and their creditors lost most of their investments. Chrysler was indeed sold to Italy’s Fiat. Chrysler’s Jeep has indeed announced that it intends to produce Jeeps in China.

The Jeep ad brought forth a furious counter attack by Obama operatives, media allies, and self-appointed “independent” fact checkers. In its cry and fury, the Obama juggernaut made a fatal mistake: They admitted that Obama “let Detroit go bankrupt,” as Romney proposed. Staunch Obama supporter, the LA Times, could not bring itself to utter the dreadful word: “Chapter 11.” It chose instead to call what happened at GM and Chrysler “brief bankruptcy restructurings.”

A self-declared (but really democrat) independent fact checker really stepped in it with its dismissal of the nefarious and outrageous (but true) Romney ad:
“It’s also misleading to say ‘Obama took GM and Chrysler into bankruptcy’ without mentioning that Romney, too, advocated a bankruptcy plan. In fact, Romney wrote a 2008 op-ed that said: ‘A managed bankruptcy may be the only path to the fundamental restructuring the industry needs’.” At last, we have the two candidates agreeing on a truly important issue. (FactCheck.org: I guess you would love to take that back).

Note the irony: After three years of “I saved the auto industry and Romney wanted Detroit to go bankrupt” in his stump speeches, the Obama team is using Romney to defend the Detroit bankruptcies Obama orchestrated. You mean Bain capitalist Romney did not want to decimate both Detroit and the Ohio auto industry as you have been telling us?  So Obama “saved” millions of auto jobs by following Romney’s advice?

But wait, the LA Times is ready with the standard Obama comeback:  Obama forced GM and Chrysler through a government imposed Chapter 11 because “other sources of financing became unavailable during the recession.”  Not true at all. The treasury could have provided a neutral bankruptcy court with the small amount of creditor-in-possession financing at no taxpayer risk needed to reorganize GM and Chrysler at a small fraction of the $80 billion it actually spent.  With its recognized brand, billion dollar revenues, and inflated costs begging to be pared, GM would have attracted bidders out of the Gazoo, even in 2009.

When cornered with this truth, Obama supporters will play the blame-Bush-game: “Well Bush provided government funds to keep GM and Chrysler running as he passed the baton to Obama. Yes, but then Obama should say: “Bush saved Detroit, not me.” Strange, but I have yet to hear these words.
Although the two candidates are on the same “let Detroit go bankrupt” page, their approaches could not have been more different. Obama used government pressure and blackmail to reward his UAW allies. He knew that the UAW wage and pension contracts could not survive the regular bankruptcy proceeding that businessman Romney wanted. Obama is now getting his payback. Organized labor is his biggest contributor and the organizer of the fabled Obama “ground game.”

Main Stream Media: Where were your fact checkers when Obama was distorting Romney’s “let Detroit go bankrupt”? You seem to notice only when Mitt finally played hardball and reversed the tables.

Where is the Obama apology:  “American voters: Forget what I said earlier. Both Mitt and I agree to ‘Let Detroit Go Bankrupt’.”

Paul’s recommendation: Read Good Intentions, By Bob Zeidman, before voting.

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Fibbing With GM Job Creation Statistics, Bill Clinton Edition

From Bill Clinton‘s Democratic National Convention speech, September 5, 2012

“Now there are 250,000 more people working in the auto industry than the day the companies were restructured. Governor Romney opposed the plan to save GM and Chrysler. So here’s another jobs score: Obama two hundred and fifty thousand, Romney, zero.” Wild applause.
Clinton attributes the 250,000 new jobs created to domestic and foreign auto manufacturers, parts suppliers, and dealers located in the United States to the Obama-directed bankruptcy of General Motors. Without the President’s bold and decisive action, these quarter million new jobs would not exist, and U.S. manufacturing would not have been “saved.”

Clinton gets his figures from the Bureau of Labor Statistics, which shows that U.S. auto manufacturers (both domestic and foreign owned) employed 624,400 at the time of the bankruptcy (June 2009) and now employ 789,500 — an increase of 165,100 jobs. Auto dealers employed 1,009,700 in June 2009 and 1,081,200 today — a gain of 71,500 jobs.  The two gains add up to 236,600 jobs (Clinton’s 250,000).
Sorry, President Clinton. There is no way you can you attribute the 236,600 job gain to the General Motors bailout. According to the carmaker’s annual report, GM North America employed 70,000 in the United States in June of 2009 (the rest were in Canada and Mexico) and 74,500 today, for a net gain of 4,500 jobs. Of the auto manufacturing job increases, GM accounts for only two percent.

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On the Failed Job Creation Front, Obama Has Completely Run Out of Ideas

Unemployment is the millstone around President Obama’s neck in the 2012 election campaign. Attentive voters understand he is offering excuses — a worse-than-expected economy, financial crises requiring longer recoveries, bad luck of tsunamis, droughts, and the Euro — not solutions. Obama cannot deliver solutions because a real jobs program contradicts his core principles, alienates his base, and infuriates his crony contributors. He can only promise more of the failed policies –stimulus and tinkering — of his first three and a half years
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Obama’s last foray into job creation was his American Jobs Act (AJA) submitted to Congress on September 12, 2011.  Labeled “Stimulus 2” by its critics, Obama’s shopworn list of remedies, promised to “put more people back to work and put more money in the pockets of working Americans….without adding a dime to the deficit.” The AJA’s temporary tax credits to businesses that hire, extension of the payroll tax holiday, and more money for teachers and infrastructure stalled in both Houses and had to be taken up piecemeal.  The payroll tax holiday extension passed Congress. Small businesses decided his tax credits for hiring were not worth the trouble.

A deafening silence followed.  Obama’s vaunted Jobs Task Force has not met for more than a half year. Obama is out of ideas. He can only offer excuses, criticize those offering new solutions, and divert attention from the worst recovery in history with chatter about the rich not paying their fair share and his opponent’s tax returns.

One year ago, on the eve of the President’s jobs address, I wrote Why Obama Cannot Support a Real Jobs Program.  In this piece, I showed what a real jobs program looks like and how it largely would have increased jobs, to use Obama’s AJA message, “without adding a dime to the deficit.” Here is the substance of what I wrote then as advice to the President:

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Outsourcer-In-Chief: Obama Of General Motors

At a Colorado pep rally, President Obama praised his GM bailout as an example for American industry to follow.

“The American automobile industry has come roaring back…So now I want to say what we did with the auto industry, we can do it in manufacturing across America. Let’s make sure advanced, high-tech manufacturing jobs take root here, not in China. And that means supporting investment here. Governor Romney … invested in companies that were called ‘pioneers’ of outsourcing. I don’t want to outsource. I want to insource.” Applause!

According to Obama, GM does everything right. It offers high-paying jobs to American workers. It invests at home. GM put American manufacturing back in the high-tech race on American soil. The new GM is good for America, and America is good for GM, as a former GM chairman declared in 1953. GM is back where it should be.

We need to look no further than General Motors’ own figures to  learn that GM outsources almost two thirds of its jobs overseas. Less than one in five GM vehicles are manufactured in the United States.


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American Airlines: The Way Bankruptcy Is Supposed to Proceed

American Airlines is in Chapter 11 bankruptcy supervised by a bankruptcy judge in federal court following normal procedures. American’s goal is to emerge from bankruptcy as a profitable concern.  All of American’s stakeholders – unions, creditors, management, etc. -- are represented and are fighting each other tooth and nail, as they should. American’s management wishes to abrogate union contracts that have made it the highest-cost carrier in the business. Management is trying to extract work rule concessions from reluctant unions. Unions are fighting to protect their contracts and pensions and minimize layoffs.  Another carrier, U.S. Air, is circling overhead, trying to lure stakeholders into a U.S. Air-American Airlines merger.

No matter what, jobs will be lost but probably not more than ten percent. Either a stand-alone American or an American merged with U.S. Air will emerge from bankruptcy, and all the interested parties will have defended their legitimate interests as best they can before an impartial judge. If all goes well, American can survive and make profits.

The American Airlines bankruptcy shows how the GM and Chrysler bankruptcies should have proceeded. Instead the of federal government grabbing the bankruptcy proceeding in a biased way towards the unions and to the disadvantage of creditors or potential third-party bidders, GM and Chrysler could have gone through a normal bankruptcy and emerged with lower costs, free from government diktat, and able to make  their own decisions.

The American bankruptcy case again exposes the emptiness of Obama’s claim that “he saved Detroit.”


Dr. Gregory's latest book can be found at Amazon.com.

A Freudian Slip? “Volt: The Car America Had to Build”

I was struck by GM’s new ad: “Volt, the Car America Had to Build.”  These words are poorly chosen but revelatory of where things stand. The ad masters probably did not know what they were saying, but General Motors is now officially “Government Motors.” Yes, after Obama's bailout, GM indeed MUST produce the Volt. Its job is not to build the best and most competitive cars, nor to create value for its shareholders. Instead, GM’s task is to serve the interests of America (read: the Obama administration). 

And pundits wonder why such a large percentage of Americans stands in fear of Obama being reelected.

A New Low for the Times: “Wide Support for Gas Rules”

The NYT’s “New Gas Economy Rules Generate Wide Support” is a dishonest piece of news reporting, claiming:

 “Nearly everyone involved in the process is on board with the results. More than 90 people who spoke throughout the day asserted that the stricter fuel economy requirements would create jobs, reduce oil consumption, create cleaner air and save drivers money, all while helping automakers increase their profits.”

Not surprisingly, the people “on board” are executives of bailout recipients, GM and Chrysler, and the UAW (whom Obama placed in line before secured creditors). Michigan Democrat, John Dingell (a neutral observer) is quoted as asserting  there is “no significant opposition amongst responsible persons.”

Although the headline and Dingel promise wide agreement, the Times mentions in passing that individual automobile dealers, the National Automobile Dealers Association, and high-end foreign car manufacturers oppose the measure. The article cites as gospel the estimates of an environmental advocacy group, the EPA and NHTSA  that vehicle prices will rise only $2,000. They fail to mention the automobile dealers’ estimate that the regulations will add $5,000 to the car price.

If the Times wishes to be called the “Newspaper of record,” it should cease such irresponsible and biased reporting. Clearly, the new mileage standards are controversial. There is no way to calculate their costs and benefits with any certainty, and there will be strong disagreement. Why can’t the Times simply report this fact, instead of promoting its political agenda in an article that purports to be news reporting and not opinion?

The New GM: It Should Do Well With No Debt

The new GM reported a profit of $2.5 billion for the second quarter of 2011. This compared to a loss of $15 billion in the same quarter of 2010.

Indeed, the new GM appears to be doing a lot of things right. It has reduced its labor force from 263,000 to 208,000. It operates fewer plants. It made slightly more cars, and it has reduced its buyer incentives.

The Obama administration will use this success story as his major economic achievement. He saved GM with the government’s $50 billion bailout. He did not save the shareholders of the “Old GM.” They lost everything.

There is one fact missing in this optimistic story. The $50 billion bailout wiped out $40 billion of GM debt. It is a lot easier to make a profit if you have no debt payments.

In the second quarter of 2011, GM had no interest expenses. Ford, which borrowed money to stay in business, has around a half billion in interest expenses each quarter. The government bailout, in effect, gave GM a huge competitive advantage over its rivals. Without the bailout, GM would be paying more than $2 billion a year in interest costs.  Its second quarter profit would have been $1.7 billion instead of $2.5 billion.

GM now faces an increasingly bleak third and fourth quarter. If its profit drops to, say, $800 million, virtually all of that is due to the bailout of its debt.

Is GM the success story we are told it is?

Obama Didn’t Save Union Jobs, He Saved Union Pay

Contrary to popular belief, bankruptcy does not mean companies close their doors and send employees home. This is the false message President Barack Obama tried to sell on his victory tour of Detroit. If General Motors had gone through a normal bankruptcy without taxpayer bailouts, there would still be GM jobs–maybe even more than there are now. We do not know because that was the road not taken.

We do know, however, what happened to the airlines that went through bankruptcy. Their planes kept flying, and pilots, mechanics and flight attendants reported to work, even if there were fewer of them.
Over the past decade, no industry has had worse breaks than the airlines. They took a huge hit from 9/11. They have been buffeted by fuel prices. The TSA’s intrusive airport screening angered passengers. Furthermore, the airline industry is cyclical; it suffers disproportionately from economic downturns.

Compared to the airlines, GM has had a cake walk.
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