October 18, 2014

Ohio Casinos’ Parent Is on the Rocks; Ohio Press is AWOL

This one appears to be heading for the “Be careful what you wish for” file.

Ohio has staked a significant portion of its future economic well-being on the gambling industry, and, with voter approval, removed legal barriers previously in place which prevented its growth.

Setting aside the moral hazard issues (which are of course quite relevant), gambling casinos have been sold as economic panaceas throughout the nation, and it’s simply not working out. They certainly didn’t save Detroit, and Atlantic City is dealing with extraordinarily hard times. Many other dominos may soon fall.

A major player in that industry is in deep trouble, and its apparently imminent implosion would almost certainly have Buckeye State impact:

AS DEBT MOUNTS, CAESARS IN TALKS WITH LENDERS

Caesars Entertainment said Friday it is prepared to start formal discussions with some of its bank lenders as it works to reduce its debt and stave off what some see as near certain bankruptcy.

In a filing to the Securities and Exchange Commission, the casino company announced that it has reached out to some of its creditors – namely bank lenders – to find ways to ease pressure on its $24.2 billion debt.

That came a day after the company promised its creditors who are first in line a claim on cash held by its debt-strapped subsidiary Caesars Entertainment Operating Co. in case it defaulted. It’s been in formal talks with that group of creditors, too, for about a month.

…  The tricky part … is the creditors who are second-in-line.

… the company owes more than the company is worth to those who are first-in-line to be paid back. That leaves little for those second in line.

Those in the latter position have declared Caesars already in default of its agreements. The company dismissed the contentions in recent securities filings.

“It’s just hard to see everybody agreeing to a deal without a pretty long bankruptcy proceeding,” (Fitch Ratings financial analyst Alex) Bumazhny said.

The company has 52 casinos in the United States and abroad with most bearing the Caesars, Harrah’s and Horseshoe brand. About 68,000 people worked for the company at the end of 2013.

The company’s related press release is here.

Properties of immediate Buckeye State interest include Horseshoe Cincinnati and Horseshoe Cleveland.

The parent company lost $853 million on $4.2 billion in revenues during the first six months of this year. It had interest expense of $1.25 billion during that period.

None of this is news at the Cincinnati Enquirer, at least based on a vain search for the word “Horseshoe” on its home page, and the results (i.e., none relevant) of a search on “Horseshoe.”

Cleveland.com appears to be similarly devoid of news.

6-1/2 years of a miserable national economy, dating back to the POR (Pelosi-Obama-Reid) Economy’s inception, have left most Americans with little discretionary income. Ohio has over that period been harder hit and has recovered more slowly and unevenly than most other states. People with little discretionary income and a modicum of sense aren’t inclined to gamble away what little they have.

This doesn’t appear to be destined to end well. If it doesn’t, it will apparently come as a big surprise. It shouldn’t.

July 11, 2012

A Very Quiet Story: Joe Biden’s Hometown Is Broke

From an Investor’s Business Daily editorial yesterday which also engaged in what the establishment press seems to be avoiding in this situation — journalism:

Progressive City Learns Big Government Perils The Hard Way

How did the mayor of Joe Biden’s hometown of Scranton, Pa., end up slashing every city worker’s pay to minimum wage? Try big government, a tax squeeze on business and too many free riders.

Scranton’s 300 city workers got a surprise pay cut to minimum wage after talks broke down between Democratic Mayor Chris Doherty of the northeastern Pennsylvania city of 79,000 and his all-Democratic city council.

At issue was $3 million in unpaid bills to vendors and $133,000 in city funds. A judge ordered the mayor to pay the wages, sealed by union contract, anyway, but Doherty ignored them. The lawsuits have begun.

But the mayor isn’t necessarily a hero. A source in the Scranton city council who spoke on condition of anonymity said the big problem was that the mayor and the city council had agreed to borrow to cover the shortfall but a couple of consultants warned banks not to lend to the city until its recovery plan was approved.

The city council balked because it included a 78% tax hike on businesses, some of which are already leaving for friendlier climes.

IBD talked to multiple sources in Scranton. A Chamber of Commerce source said a survey of the group’s members showed many were worried about taxes and health care costs. A recurring theme was that the “Progressive City” had engaged in, well, progressivism.

First Harrisburg (bankruptcy), and now Scranton. Pittsburgh was so desperate for cash in late 2009 that it toyed with taxing college tuitions, and used it as leverage to try to force additional “voluntary ” payments from the city’s universities.

Anyone else think that there might be something fundamentally wrong with how the urban Democratic Party machine in the Keystone State manages things?

March 30, 2010

GM Financial Shakeup, a Conflicted Hire, and Delayed Reporting Either Not or Barely News at AP

GovernmentMotors0609Yesterday, Government/General Motors announced changes in its financial management team.

Chris Liddell, who himself just started at GM in January, brought on a new VP to be involved with its pension investments. More interestingly, he hired a new VP and Treasurer with an interesting background (bold is mine):

During his 11 years at Morgan Stanley (head of Industrials Investment Banking), (Daniel) Ammann was instrumental in many high profile assignments spanning a variety of technology, service, and manufacturing clients. His diverse experience in mergers, acquisitions, raising capital, and restructuring includes leading Morgan Stanley’s banking team in advising GM on its restructuring and sale pursuant to Section 363 of the U.S. Bankruptcy Code.

How convenient.Morgan Stanley helped GM file for bankruptcy, during which the Obama administration engaged in heavy-handed disparate treatment of non-TARP secured creditors during the bankruptcy process.

Oh, and did I forget to note that GM won’t submit its audited financial statements to the Securities and Exchange Commission until about two weeks after the deadline for normal companies (note the “not to worry” tone at the link)?

A search on the company’s name at the Associated Press’s main site as of about 2 PM ET indicates that the wire service has ignored the management shake-up. It did so a story yesterday on the financial statement delay containing all of five paragraphs (presented in full for fair use and discussion purposes):

APonGMlateFinancials032910

Note that the report never mentions that the company is government-controlled, or that the government has pumped at least $50 billion into it.

The unbylined report also lets GM slide by on its excuse about fair value determination. With all due respect, guys, the company has had almost nine months since it emerged from bankruptcy to get it right — and though it isn’t easy, the task isn’t tough enough to justify that delay, especially since fair value is normally based on the date the company emerged and is typically not subject to subsequent adjustment.

Absent a smoking-gun e-mail, no one will ever be able to prove this, but the delay from here looks to be motivated by something other than the need for precision. Perhaps the company is trying to delay the inevitable bad news (if it is indeed bad) as long as possible. Or it could be that the government’s car czars have decided that releasing the financials on about April 15 might cause them to get less press and public attention because of other big news stories. It looks like the AP is set to cooperate.

Cross-posted at NewsBusters.org.

March 21, 2010

NYT Print Edition: Financially Imperiled ACORN ‘Attacked by the Right’

NYTfrontPageACORN032010Who knew that two brave twenty-somethings and a skilled mentor constituted America’s entire right wing?

That’s apparently how Ian Urbina at the New York Times sees it. In a subheadline employed in a front-page article in the paper’s March 20 print edition (relevant portion shown at right) but not used in the online edition’s version, the reporter told readers that the poor, put-upon Association of Community Organizations for Reform Now (ACORN) is on the brink of bankruptcy because it was “ATTACKED BY” the streamrolling monolith known at “THE RIGHT WING” (cue the scare music and the blood-curdling scream).

Actually, it was filmmaker James O’Keefe, his investigative partner Hannah Giles, and Andrew Breitbart, the pair’s take-no-prisoners mentor. Three people, hardly “the right wing,” basically did it all. What followed — the de-fundings, the abandonments by former political and corporate friends, and now apparently its imminent financial demise — was largely inevitable fallout from a brilliantly conceived series of stings followed by a savvily managed exposure campaign that ultimately forced holdout establishment media publications, including the Times itself, to play catch-up after days of embarrassing unprofessional silence.

Obviously, that’s not how Urbina sees it, occasionally with barely concealed bitterness (bolds are mine throughout this post):

The community organizing group Acorn, battered politically from the right and suffering from mismanagement along with a severe loss of government and other funds, is on the verge of filing for bankruptcy, officials of the group said Friday.

Acorn is holding a teleconference this weekend to discuss plans for a bankruptcy filing, two officials of the group said. They asked not to be identified because they were not authorized to speak to the news media.

Over the last six months, at least 15 of the group’s 30 state chapters have disbanded and have no plans of re-forming, Acorn officials said. The California and New York chapters, two of the largest, have severed their ties to the national group and have independently reconstituted themselves with new names. Several other state groups are also re-forming outside the Acorn umbrella, and will not be affected if the national organization files for bankruptcy.

This week, the Maryland chapter announced that it would not reopen its offices, which were shuttered in September in the wake of a widely publicized series of video recordings made by two conservative activists, posing as a prostitute and a pimp, who secretly filmed Acorn workers providing them tax advice. In the videos, Acorn workers told one of the activists, James E. O’Keefe III, how to hide prostitution activities from the authorities and avoid taxes, raising no objections to his proposed criminal activities.

After the activists’ videos came to light and swiftly became fodder for 24-hour cable news coverage, private donations from foundations to Acorn all but evaporated and the federal government quickly distanced itself from the group.

Yep, if it wasn’t for Fox News, Urbina apparently reasons, we might have been able to get away with ignoring those dumb videos and ACORN would still be viable. Puh-leeze.

Urbina goes on to try to impress us with a few statistics about the organization’s allegedly noble endeavors:

A network that once included more than 1,000 grass-roots groups, Acorn, which stands for Association of Community Organizations for Reform Now, was created in 1970 and has fought for liberal causes like raising the minimum wage, registering the poor to vote, stopping predatory lending and expanding affordable housing. The organization helped roughly 150,000 lower-income families prepare their tax returns and obtain $190 million in tax refunds between 2004 and 2009, Acorn officials said.

As I pointed out last September (at NewsBusters; at BizzyBlog), that supposedly impressive tax stat, amounting to 25,000 returns per year, is really laughably unimpressive (a previous link to King County has been removed because its content has since been changed):

25,000 returns nationwide? That’s … just over 200 per year in each of ACORN’s 110 cities, and likely includes a lot of repeat-year returns that are pretty easy to prepare.

By contrast, here’s just one example of a United Way taxpayer assistance outreach effort out of Washington state (bold is mine):

“In 2009, 530 volunteers dedicated 16,000 hours to United Way of King County’s Free Tax Prep Campaign. Volunteers prepared 13,631 tax returns, helped return $17.3 million in federal refunds back to the community, including $5.2 million in Earned Income Tax Credits, and saved customers an estimated $1 million in tax preparation fees.”

The King County group, in just one metro area, did over half as many returns as ACORN did in the entire country, and provided their services for free.

… reporters should be ashamed that they have ignored the obvious indications that ACORN’s offices really accomplish very little of value on behalf of the poor people they allegedly serve.

It would appear that Mr. Urbina was unaware of how truly pathetic the ACORN performance was, because he was actually touting it. If he had recognized it, he might have asked this critical question: What in the world have these people been doing?

Mr. Urbina wrote up part of the answer in a later paragraph:

In Pittsburgh, Acorn officials said they were trying to continue work while they decided whether to stay with the national organization or form a new one. Maryellen Hayden, the volunteer director of Allegheny County’s Acorn, said the group was continuing to counsel people facing foreclosure and had recently sent two buses with dozens of members to Washington to rally for the Democratic health care bill.

The answer, of course, is that ACORN was really all about leftist activism. Tax return prep, housing assistance, and other services served as fig leafs to conceal the organization’s real aims, which were (and will be, if or when successors get back on their feet) to radicalize communities, test the limits of election control systems, and, when called upon, intimidate vulnerable targets.

The country owes O’Keefe, Giles, and Breitbart a debt of bottomless gratitude for decimating this once insufferably arrogant and defiant bunch. Too bad Ian Urbina and the establishment media don’t see it that way.

Cross-posted at NewsBusters.org.

February 17, 2010

Wire Watch: AP’s Ben Feller Shamelessly Spins Obama Talking Points

Note: This post went up at BigJournalism.com and was teased here at BizzyBlog on Monday evening.

_____________________________________________

It’s not exactly surprising to see a writer for the Apparatchik Press — er, the Associated Press — compose an in-the-tank item sympathetic with the Obama administration.

But Ben Feller’s unlabeled analysis Monday morning (“Obama’s challenge: Anger is replacing hope”; saved here for future reference, fair use and discussion purposes) is so over the top and totally backwards that it may merit its own place in the journalistic Hall of Shame.

Feller’s fantasizes that the problem Obama faces is not that his policies and proposals are unpopular. No-no-no. Instead, the president merely has to overcome a “complex communications challenge” to deal with the growing anger out here in the real world and get people over his side.

Here are key execrable excerpts:

Thrust into office on the veracity of hope, President Barack Obama is trying to get himself on the right side of a remarkably different national sentiment these days: anger.

Obama’s expansive domestic goals are largely the same, but his message is changing, now constructed around a concession that the public is disillusioned and wanting results. If he cannot show people that he understands their frustration and is working to fix it, the risks are real.

All that angst that Obama wants to harness as a force for change – as he did in his campaign – will turn against him. That means eroding public support for his agenda and potentially big losses for his party this year in congressional midterm elections.

So it was telling when Obama offered this take on Republican Scott Brown’s Senate win in Massachusetts last month, one that weakened the president’s hand: “The same thing that swept Scott Brown into office swept me into office. People are angry, and they’re frustrated.”

A new White House talking point was born, and it was hardly hope and change.

… The Obama response has come in two parts. One is to try to get better about communicating to people that he is fighting to address exactly what angers them. The other is to put the onus on whomever he deems is getting in the way of progress, hoping to shift the heat onto them.

… And with people fed up about so many things at once – stubbornly high unemployment, partisanship, big government, banker bonuses – Obama’s communications challenge is complex.

He must connect to people’s bitterness without becoming exactly the person he warns about, politicians who exploit anger.

Seldom has anyone packed so much rubbish into so little space.

Ben, Obama’s problem has nothing to do with some kind of “communications challenge.” It has everything to do with his “expansive domestic goals,” which haven’t changed one bit.

Disgust, outrage, and flat-out fear of the long-term implications of those “expansive domestic goals” are the things that drove Scott Brown’s election victory. What drove Obama’s election was his mostly effective and totally false presentation as some kind of third-way moderate — aided and abetted heavily by the AP and the other organs of establishment journalism — when at bottom he is by leaps and bounds the farthest-left president ever.

Feller only got two out of his four identified “fed-ups” right. The problem is that they are direct results of Obama’s decisions and policies:

  • Unemployment, and people are fed up with it, is high because at crunch time Obama and his party chose historically proven ineffective, corrupted-by-cronyism “stimulus” over historically effective tax cuts.
  • Government is bigger, and people are fed up with it, because Obama and his party opened up the federal spending spigots to an unprecedented degree, because Obama has chosen to surround himself with so many czars you need a scorecard to keep track of them, and because he decided that owning two of the nation’s three domestically-headquartered automakers and running roughshod over certain classes of their creditors in bankruptcy was good public policy.

The other two “fed-ups” — partisanship and bankers’ bonuses — are inventions of Ben Feller’s fevered mind. If voters in reliably Democratic Massachusetts wanted to end partisanship, they would have elected Martha Coakley in a landslide and given the Democrats in Washington a 12-month rubber stamp. They didn’t. As to the bankers’ bonuses, Feller “somehow” forgot that just last week Obama did not object to two multimillion-dollar whoppers, demonstrating that neither party is in a position to capitalize on whatever executive pay-related anger that might exist.

The Associated Press is a wire service that expects its subscribers and ultimately its readers to believe that it is an objective disseminator of news. That expectation is more than a little hard to take seriously when one of its more experienced writers outs himself as a shameless, truth-distorting, illogical apologist for a failing administration.

July 5, 2009

Burying the Lede: AP Report On Chrysler Board Questions At Very End Whether US ‘Allocation Will Be Enough’

ChryslerFiat0609Oh. So. Predictable – Both what is happening, and how it is being “covered.”

Chrysler is barely out of bankruptcy, and there is already concern as to whether the money Uncle Sam, (i.e., U.S. taxpayers) funneled into the company — while in the process of ripping off and intimidating its secured creditors, capriciously terminating plants and dealers, and running roughshod over long-held notions of fiduciary duty — will be enough.

Beyond that, how many people know that the magical technology its new owner Fiat, which put no money of its own into the deal, is “more than a year away” from making its way to Chrysler?

“Somehow,” the Associated Press’s Obamacized news prioritizers decided that the info nuggets contained in the previous two paragraphs should be relegated to the final paragraphs of an unbylined report (also saved at host) this afternoon. The report, including its headline (“Chrysler names remaining directors to new board”), appeared to be merely a droll recitation concerning certain Board members. Only readers getting to the last three of the report’s eight paragraphs would have any idea that Chrysler’s situation is already a cause for renewed concern about its viability.

Readers here can make what they will of the Board’s make-up, but, as noted, the real beef in the AP story is in those final paragraphs (bolds are mine):

….. Chrysler emerged from bankruptcy protection after just 42 days, cleansed of much of its debt and labor costs. But with sales down 46 percent from the first half of last year – a year in which Chrysler lost $8 billion – the company faces a huge challenge to make money again under its new Italian owner.

Fiat, which has taken over running Chrysler, will provide badly needed small-car and small-displacement engine technology, but that’s more than a year away.

Chrysler’s poor June performance also casts doubt on whether the U.S. government’s $7 billion allocation will be enough to get the automaker through the U.S. sales slump, which is projected to last into next year. The government has said it stress-tested the $7 billion figure and determined that it is all Chrysler will need to make it until Fiat products arrive and Marchionne can turn the company around.

At the tail-end of its effort to keep Chrysler’s emergence from bankruptcy intact, government lawyers shrieked that the company was losing $100 million “every day its plants are closed,” and that the courts had to set bothersome concerns like centuries of contract law and the U.S. Constitution aside because of the dire situation they had contrived. Assuming that the government’s $100 mil/day claim was a cash burn rate that won’t change, the company will go through its $7 billion “allocation” in less than 2-1/2 months. Even under a supposedly lower cost structure implying a smaller burn rate, it’s hard to see how the company gets very far into next year — let alone to the “well over a year from now” arrival of Fiat’s supposed magic, when Marchionne finally starts “turn(ing) the company around” (though he is on the Board, will he just let it sit there and rot in the meantime?) — while it sells over 60% fewer vehicles than it did just two years ago.

The Obama administration can talk about “stress tests” all it wants, but with an economy heading towards 10% or worse unemployment and a large portion of American consumers clearly shunning the bailed-out pair of Chrysler and General Motors, it looks more than a little likely that Chrysler will come begging for more taxpayer money in some form yet again, or yet again threaten to grind to a halt.

Oh. So. Predictable.

Exit question 1: Will a post-bankruptcy GM be Chrysler writ much larger?

Exit question 2: What are the chances taxpayers are going to get to see meaningful and timely financial statements from either of their new “investments”?

Smart-aleck question: How much more will Chrysler burn through every day once its plants reopen?

Cross-posted at NewsBusters.org.

June 15, 2009

More Attempted Government-Sponsored Auto Bailout Plunder; But This Time, A Judge Pushes Back

GovernmentMotors0609First the federal government’s auto bailout bullies came for Chrysler’s secured, first-lien creditors, and defeated them.

Then they came for General Motors’ unsecured bondholders. The feds appear to be in the drivers’ seat in shafting them disproportionately to force a better deal for the United Auto Workers’ healthcare trust.

Now, in a matter that at first only seemed to interest the Wall Street Journal, they’ve also come after Delphi’s debtor-in-possession (DIP) financing providers as GM attempts to scoop up what it wants from the bankrupt auto-parts supplier. But this time, at least for now, a bankruptcy judge with a richly appropriate name has stopped them:

Judge Orders Auction in a Rebuke to Delphi Plan

A U.S. bankruptcy court Wednesday sided with a group of Delphi Corp. lenders who said a government-led plan to sell the auto-parts maker’s operations to a private-equity fund trampled on their rights.

Judge Robert Drain ordered Delphi to hold an auction and allow bids to challenge the government-brokered sale to Platinum Equity. “What’s so special about Platinum?” asked Judge Drain.

….The ruling is a victory for a group of hedge funds who stand to (lose) 80% or more of their roughly $2.5 billion in debtor-in-possession, or DIP, financing. The decision came on the same day that Chrysler LLC and Fiat closed their government-brokered tie-up over the objections of Chrysler creditors who argued they were treated unfairly by the Obama administration.

The Delphi case is the latest in an escalating debate over the Obama administration’s attitude toward creditors’ rights in bankruptcy court. ….

“The rule of law and commercial rights of lenders cannot bend in the face of political forces,” said Marc Abrams, a lawyer for a group of the hedge funds, in a standing-room-only courtroom in lower Manhattan Wednesday before Judge Robert Drain.

…. The (government’s) plan calls for some DIP lenders, including the most senior creditors owed about $2.5 billion, to receive 20 cents on the dollar for their loans. These lenders argue that Delphi’s plan overstates the amount they would receive. A Delphi reorganization plan that collapsed in April 2008 called for DIP lenders to receive full payment.

“A DIP loan should be money good,” said Mr. Abrams, whose clients include Silver Point Finance LLC and Monarch Alternative Capital. “It’s the T-bill of a bankruptcy claim.”

Megan McCardle at the Atlantic’s Asymmetrical Information blog explains the significance of DIP financing:

…. this is an even more heavy-handed intervention than Chrysler, and considerably more disturbing. Debtor-in-Possession financing, or DIP, is the financing that allows companies to reorganize in bankruptcy. It’s senior to everything else because if it weren’t, no one would be willing to lend money to companies that definitionally have a high probability of failure. Stiffing those creditors in order to make GM, or even Delphi, better off, is incredibly short-sighted.

It also has some potentially scary implications for our political economy. The quasi-legitimate argument in favor of the government’s interventions in favor of the UAW was that Uncle Sam was the only available debtor-in-possession financier, and therefore had a right to call the tune. Screwing over the DIP providers would, of course, make it harder for other companies to get DIP. What new rights could the government discover in those bankruptcies?

In this case, however, the bankruptcy judge wasn’t buying. He ordered Delphi to put its assets up for auction. Now we get to test the theory that the government is acting in ways that actually make all the creditors getting cramdowns better off. If the government has indeed been acting in everyone’s best interest, the auction will be a dismal failure.

Given that the New York Post has reported that Carl Icahn’s Federal-Mogul Corporation appears to be interested in bidding for Delphi, we may already see the judge’s decision vindicated financially.

My only quibble with Ms. McCardle is that the result shouldn’t be the driver here in any event. Trampling on secured lenders rights, as the government successfully did at Chrysler, has no legal basis, and should never have been allowed to stand. Running roughshod over the proportional rights of unsecured lenders has no legal basis and shouldn’t be allowed at GM; it may yet be turned back.  DIP financing provider’s rights must remain superior, even if the government’s plan is better, because that’s what the law says (the same goes for governments’ supposedly superior plans in eminent domain situations that go beyond the Fifth Amendment specific permissions; it’s irrelevant that they’re superior — even though they often aren’t).

Don’t like the law? Pass a new one the old-fashioned way — through Congress.

Most of the establishment media’s laziness in covering these important matters during the auto bailout bankruptcies has bordered on disgraceful, and has been anything but informative.

Cross-posted at NewsBusters.org.

June 7, 2009

Column of the Day: George Will on How GM and Uncle Sam Have Failed

More perspective on what I wrote about here (“GM, Chrysler, and Uncle Sam Have Already Failed”) from the esteemed columnist:

The government’s $50 billion — so far — acquisition of the shadow of GM will injure, with unfair financial advantages, the surprisingly healthy U.S. auto company, Ford. Of course, the government does not intend that injury, any more than it intended to cause protests in Mexico over the high price of corn tortillas, a result of Washington’s mandate that Americans burn corn (ethanol) in their cars.

Washington’s “rescue” of GM began because GM is “too big to fail,” and bankruptcy is (well, was) “unthinkable.” Big? GM’s market capitalization, $375.8 million on Wednesday, is about the size of California Pizza Kitchen’s ($340 million) — is it too big to fail? — and one-eleventh that of Harley-Davidson ($4.3 billion). Fail? If GM has not already failed, New Coke was a success.

The administration is determined to prop up GM as a jobs program for the UAW and Midwestern states rich in electoral votes. This frenzy will intensify as the administration’s decisions deepen the debacle.

Even the “jobs program” aspect of the government’s bailout effort has failed. Ask workers at five Chrysler plants in four states, who were told by Obama, administration officials, and the company executives that their jobs were safe just before its bankruptcy filing, only to see them saw them disappear when the filing took place, how much of a success it has been. Also ask GM workers at 14 plants to be closed in the wake of that bankruptcy.

Meanwhile, Ford’s capitalization as of Friday’s close was $17.8 billion — almost exactly 50 times GM’s. Those investment gurus at Uncle Sam’s place really know how to pick ‘em.

If it weren’t for the Obama Fear Factor, Ford might be worth double what it currently is.

GM, Chrysler, and Uncle Sam Have Already Failed

Note: This was originally posted at Pajamas Media, and teased here at BizzyBlog, on Friday morning.

_______________

No amount of government-supplied capital can change that.

_______________

By the time it “collapsed into the government’s arms” on the morning of June 1, the bankruptcy filing by General Motors surprised no one. In retrospect, given our pathetic leadership, it’s surprising how many thought that it, or Chrysler’s filing the previous month, could have been avoided.

Now, amidst all the happy-talk about how the two companies will succeed once they emerge from bankruptcy, there’s even doubt about that. James Pethokoukis, blogging at Reuters, tells us that former Clinton Labor Secretary Robert Reich thinks that the GM bankruptcy may only be “slowing down the death process so communities and workers and the economy have more time to adjust to GM’s demise.” If that’s true of GM, you can forget about a post-bankruptcy Chrysler having any legitimate viability except as a consumer of taxpayer cash.

Even the companies’ emergence from bankruptcy is, as of this writing, far from certain. Having ridden roughshod over the first-lien rights of secured Chrysler creditors, the vast majority of whom were intimidated into settling for 29 cents on the dollar, the government finds itself still having to deal with a June 5 court hearing in federal appellate court, where recalcitrant Indiana pension funds could conceivably stop Chrysler’s sale to Fiat. There is also a suit by terminated Chrysler dealers that appears to at least have some disruptive potential. A tight deal completion deadline could mean that court appeals by the losing sides in either case, if not promptly heard, would enable Fiat to walk away and completely scuttle the deal.

Thanks to the government’s heavy-handed treatment of GM’s unsecured creditors, that bankruptcy could face similar potential hurdles in the coming months.

But regardless of the bankruptcy-reemergence outcomes at these two former American icons, all of the key players involved –- the companies’ senior managements, the United Auto Workers union, and the government –- have failed miserably, both in the run-up to the mid-December bailout and during the 5-1/2 months that have since transpired.

All three groups, dreading the possibility that vehicle buyers would avoid doing business with bankrupt companies, failed to consider the possibility, long since borne out, that they would more decisively shun the beneficiaries of government bailouts, for reasons both practical (doubts about warranties and repairs) and philosophical (resentment over government involvement in giving money to, and then running, supposedly private companies).

In the first five months of 2009, GM’s reported year-over-year monthly unit sales declines have averaged almost 42%. Chrysler’s average drops have been almost 47%. The companies’ four biggest competitors -– Ford, Toyota, Honda, and Nissan -– have suffered far smaller average declines. Ford actually reported higher worldwide revenue in the first quarter than GM for the first time in over 80 years, moving from 4% behind GM to 11% ahead of it in one quarter, despite operating for a while earlier this year under a mistaken public assumption that the government was bailing out the entire domestic auto industry. Having recovered from a nearly fatal bout of political correctness of its own a bit more than a year ago, Ford appears poised to dramatically increase its top-line lead over GM.

The companies’ senior managements naively assumed that a business-hostile administration run by the most radical president in American history would resist the urge to intervene and then take over their operations.

The United Auto Workers union, as it has for at least two decades, utterly failed at what should have been its prime directive: to preserve workers’ jobs. In the previous quarter-century, as Japanese and other competitors continued to take market share from the Big Three, the union chose to preserve the artificially high wages and benefits of its senior members at the expense of the less experienced. Then, during post-bailout crunch time, union President Ron Gettelfinger balked at potential concessions for far too long. It’s also likely that he has not given back as much as he has claimed. This, and the post-bailout sales declines noted earlier, have forced the companies to idle and ultimately close more plants than they otherwise might have. Immediately after its bankruptcy filing Chrysler closed five plants it had no expressed intention of shuttering back in February. GM will be closing at least a dozen plants.

But even beyond its failure to gauge the negative sales fallout from statist involvement, it is the government — particularly the Democratic Party that has held most of its levers — that bears the lion’s share of the blame for GM’s and Chrysler’s final march from being on the brink a year ago to flat on their faces now. That’s because it is they who brought us the POR (Pelosi-Obama-Reid) Economy beginning in June of last year.

Specifically:

  • They are the ones who struck fear into the hearts of car buyers by telling everyone they would refuse to exploit our God-given fossil fuel resources regardless of the circumstances or consequences.
  • They are the ones who promised punitive increases of 15% or more in marginal tax rates on our most productive people — many of whom tend to buy cars –- in the name of redistributing relative pittances to everyone else.
  • It is their party’s decades-long romance with lending mortgage money to unqualified borrowers that led to the multibillion-dollar implosions at Fannie Mae and Freddie Mac, and to the resulting wreckage at other financial institutions.
  • And finally, at crunch time, it is they who failed to lead the country back from their recession earlier this year by enacting an ineffective, time-delayed “stimulus” instead of broad-based tax cuts.
Mama always said that life isn’t fair, and she was right — U.S. taxpayers have been underwriting all of this, and will continue to.
April 30, 2009

Chrysler files for bankruptcy

News link.

Immediate thoughts: Now we have the prospect of:

  • $8 billion more of taxpayers’ money down the tubes.
  • The United Auto Workers running an auto comany, and ….
  • Representing a competitor’s workers (Ford’s) at the bargaining table.

For all the back-and-forth in Washington about conflict of interest in the most piddling situations, this is a historical doozy that is somehow no problemo. What it is, is an outrage. If I were Ford, I would oppose Chrysler’s apparent plan for bankruptcy emergence tooth and nail as a matter of survival.

April 2, 2009

Cal Thomas: ‘With every fiber of our still-free beings’

Filed under: Bankruptcy & Reform,Economy,Taxes & Government — Tom @ 2:15 pm

At Jewish World Review:

The government, which is decreasingly capable of running itself, will now dictate to corporate America how to run companies. The Obama administration has even promised that government will insure any warranties that might be in jeopardy should GM and Chrysler declare bankruptcy. It is a dangerous precedent that should frighten all of us into opposing the administration’s plans with every fiber of our still free beings.

President Obama says the American auto industry will not be allowed to “simply vanish.” No, but the direction in which it is heading will require what’s left of the companies to manufacture cars even fewer people want to buy, thus requiring the effective nationalization of the automobile industry. If people aren’t buying cars from GM and Chrysler in sufficient numbers to make a profit today, why would they buy them when they are even less attractive?

The numbers of people who will buy GM or Chrysler cars will more than likely shrink on its own in the coming months due to principled objections to bailouts and concern over warranties and repairs, despite government reassurances (we’re supposed be reassured because warranties will be handled by the same people who brought us a now-broke Social Security, a nearly-broke Post Office, and $400 hammers?).

The faster, the better. Companies, or workers, thinking that they will be saved by bailouts need to learn that it’s not going to happen. Obama and Geithner must be forced to see the futility of what they’re attempting, even if means consumers take the role of making GM and Chrysler vanish. Bankruptcy now or very soon is vastly preferable to shoveling never-ending billions into these companies.

February 18, 2009

Couldn’t Help But Comment (021909, Morning)

IBDeditorials.com, outstanding as usual:

Since World War I — the start of the modern financial era — we’ve suffered four major downturns. In three of them, the government cut tax rates. And each time an economic boom ensued. In only one did the government respond by raising taxes, erecting trade barriers and enacting massive new spending programs to get out of the slump. Today, we call that time the Great Depression.

Of course, the Obama administration is using the strategy that didn’t work, and claiming that the ones that did work didn’t.

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Michael Malone at Pajamas Media (“Turnaround Time“) thinks that Silicon Valley may be poised to lead a recovery

All of my reporter’s instincts right now are telling me that Silicon Valley, and much of the rest of the high tech industry, is already starting to come out of this downturn. …. I have never so many entrepreneurial teams at work as I have in the last few months. And they are the tip of the iceberg: each one of these teams represents perhaps a dozen more hidden away in rented meeting rooms and home kitchens.

I may be dreaming, but what I think I’m seeing is the birth of the largest entrepreneurial boom in Silicon Valley history. …. My hunch is that by July enough of these new companies will have emerged that …. it will be obvious to everyone that high tech is booming again.

But, Obama’s stimulus might ruin it all:

If the Stimulus, as many predict, has the effect of attenuating rather than shortening the Crunch, these new companies will quickly hit a wall and many will die. The same thing will happen if Sarbanes-Oxley and other economically suicidal regulations remain in place. And it goes without saying that if Washington decides to outlaw risk and reward, supply and demand, and entrepreneurship most of all, not only will this boom, but all that should follow, will never occur.

The horses of high tech are already in their gates, waiting for doors to fly open. If the track is too muddy or if there is a wall across the first turn, don’t blame them for not finishing the race.

I wish ‘em luck. They’ll need it.

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Recent NewsBusters items I did not cross-post at BizzyBlog are here “Chicago Alderman Sentenced to 4 Years; Sun-Times, AP Fail to Note Dem Party Affiliation”) and here (“Press Calls Plouffe ‘Former Campaign Manager’ As His E-Mails With That Title Continue to Fill Inboxes Across America”).

The former is about a Democratic Chicago Alderman who insisted on taking bribes before she would help developers get inner-city housing projects going. The Chicago Sun-Times ran six stories on her over almost two years and mentioned her party once. AP’s story yesterday didn’t mention it at all.

The latter is about Obama campaign manager David Plouffe, who is still having e-mails sent out in his name from Obama for America but is supposedly not Obama’s Campaign Manager any more. Funny — his e-mails are still signed “David Plouffe, Campaign Manager, Obama for America.”

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In over his head: “(Sherrod) Brown has been named head of the Senate Banking Committee’s Subcommittee on Economic Policy. The subcommittee oversees economic growth, employment and price stability, and reviews monetary policy.”

There is nothing in his biography that would indicate that Brown is qualified for this position after barely two years in the Senate.

In fact, his hostility to free trade would indicate that his presence is dangerous. Free trade hasn’t hurt Ohio (five letters, Senator: H-O-N-D-A); wrong-headed state leadership for about 23 of the last 26 years has.

With the exception of roughly the first three years of George Voinovich (1991-1994), Ohio’s governors and compliant legislatures have done mostly the wrong high-tax, high-spending things since 1983 (Celeste 1983-1991, Voinovich 1994-1999, Taft 1999-2007, Strickland 2007-present). This is why I said here last year that the Buckeye State “went from pseudo-red to blue” in 2007, and in my concurrent New York Post column that Ohio has (economically, of course, since that was the topic under discussion) “mostly acted blue since the mid-1990s.”

Those assertions are both self-evidently true. Ohio has been economically governed like a blue state for most of the past quarter of a century, regardless of the party putatively in power.

Now we have a Celeste Administration refugee overseeing banking and economic policy bringing the worst aspects of the Ohio political mentality to an important position in Washington. Yikes.

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GM’s and Chrysler’s march towards $100 billion of taxpayer money, predicted by some last year when all of this began, continues:

GENERAL MOTORS CORP.

- Asks for an additional $16.6 billion in loans and credit lines on top of $13.4 billion already granted, for a total of $30 billion. Previously GM said it only needed $18.4 billion to weather the auto sales downturn.

CHRYSLER LLC

- Asks for an additional $5 billion in government loans, on top of $4 billion already received. Previously, Chrysler said it would need just an additional $3 billion.

Roughly 60 days after President Bush, with president-elect Obama’s enthusiastic agreement, released TARP money to the two companies, they’re already over one-third of the way towards sucking out $100 billion if the government opens up the cash spigots again. What’s more, if I’m correct, Congressional approval isn’t required for any additional “loans.” It will all come from Treasury Secretary Tax Cheat Tim Geithner’s TARP II.

And I’m pretty sure this doesn’t include the money provided to prop up GMAC and Chrysler credit to the tune of roughly $7 billion.

Combined, the companies say they needs over 60% more than they thought they needed only two months ago. After January’s disastrous sales result, this was completely predictable.

Tim Geithner needs to do something smart for a change and stop it now. Let the two companies file for bankruptcy before we all have to.

February 11, 2009

Couldn’t Help But Comment ….. (021109, Morning)

As General Motors slides towards epic failure, despite a multibillion-dollar cash infusion from Uncle Sam, Michigan Senator Carl Levin is attempting to insert another GM bailout into the mislabeled “stimulus” bill. This time, according to Bloomberg (HT Red State):

General Motors Corp. may win protection from a tax liability of as much as $7 billion when Senate stimulus legislation moves to a conference committee. …. The liability may be triggered by GM’s plan to offer equity both in exchange for debt and for health-care obligations to union workers as part of the company’s restructuring, a person familiar with the matter said Feb. 1.

There may be merit to this, as it seems a bit hard to take that a company losing tens of billions would have such a liability.

But Congress wrote the tax laws. Foregoing $7 billion in cash to the Treasury just for one company should be a big enough deal to require a bit of discussion and debate, and shouldn’t be just another dead-of-night insertion into an already massively wasteful exercise.

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Fundamental truth of American history, as transmitted in Walter Williams’s latest column:

Roosevelt didn’t have an easy time with his agenda; he had to first emasculate the U.S. Supreme Court. ….. federal courts had respect for the Constitution as late as the 1930s. They issued some 1,600 injunctions to restrain officials from carrying out acts of Congress. The U.S. Supreme Court overturned as unconstitutional the New Deal’s centerpieces such as the National Industrial Recovery Act and the Agricultural Adjustment Act and other parts of Roosevelt’s “stimulus package.” An outraged Roosevelt threatened to pack the Court, and the Court capitulated to where it is today giving Congress virtually unlimited powers to tax, spend and regulate.

This act of borderline tyranny, as well as devastating reviews of the New Deal by the likes of Amity Schlaes and UCLA professors Harold L. Cole and Lee E. Ohanianis, explain why FDR’s historical stock on the domestic policy is falling about as fast as Tax Cheat Tim Geithner’s credibility.

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Even without direct competition, Sirius XM Satellite Radio is on the verge of bankruptcy (HT CNet).

This looks to be the near-final result of what Jim Cramer three years ago called “the greatest pump and dump in history.” But Howard Stern got his, didn’t he?

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Ted Strickland opposes the Senate-passed version of the mislabeled “stimulus” bill, because it doesn’t give enough money to the states:

Because the revamped measure reduces money for states, it now threatens Ohio with a tuition increase for 40 percent of public-college students, the loss of thousands of state- and local-government jobs, closure of two “medium-sized” prisons, and 50,000 fewer people receiving mental-health services, the governor said yesterday.

Strickland’s budget calls for using at least $5.4 billion in federal stimulus money: $3.4 billion for general-revenue fund spending, and $2 billion being plugged into federal accounts for Medicaid. That would free up $2 billion in state funds for other spending.

Strickland said in a separate interview with The (Columbus) Dispatch during a trip to Washington yesterday that the new Senate version would hurt Ohio and other states struggling to balance budgets. That’s because it takes what was a $79 billion pot of state stabilization money nationally and cuts it by about half, including $25 billion that governors could use as needed.

Strickland said that means the loss of nearly $1 billion in state budget-stabilization money out of more than $2 billion originally in the Senate bill and a similar amount in the House-approved stimulus bill.

It never fails. A politician threatened with budget cuts makes his own threats to cut the costs that will raise the loudest protests.

Sell the Turnpike, Ted.

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In the midst of an article about another Strickland setback, here is an all-too-typical and predictable story of government excess that crosses two gubernatorial administrations:

The state of Ohio cannot confiscate more than $200 million in tobacco settlement funds that had been dedicated for anti-smoking programs, a Franklin County judge ruled Tuesday.

Common Pleas Court Judge David Fais issued a preliminary injunction preventing Gov. Ted Strickland from using $230 million of the cash that he had been banking on to help underwrite $1.57 billion economic stimulus package he and the General Assembly passed last year.

….. The Ohio (Tobacco Prevention) foundation was created nine years ago with ongoing checks from Ohio’s multi-billion-dollar share of a national settlement with major tobacco companies like Philip Morris and R.J. Reynolds. The idea was for payments to build an endowment in excess of $1 billion, generating enough investment earnings to keep the foundation operating in perpetuity.

For a short time, the state kept to the path. But when the economy turned sour a few years later, lawmakers began routinely diverting the settlement checks to pay for other health programs and such things as tailpipe emission testing in the Cleveland region.

Mr. Strickland permanently cut off the settlement spigot when he championed the idea of selling off future checks for an upfront $5.5 billion in bonds that are being used to directly accelerate school construction projects and indirectly underwrite property tax cuts for senior citizen and disabled homeowners.

From an endowment, to depleting raids of the fund, to borrowing against future cash flows, in nine short years ….. and it’s still not enough.

January 9, 2009

What’s a Bailout Opponent To Do?

NoToGMandChrysler0109jpg

UPDATE, Jan. 13: Ed Morrissey at Hot Air points out that subsidizing the failures at GM and Chrysler put companies like Ford, which hasn’t taken bailout money (but to be “fair” and critical, can do so if it decides it needs it) at a competitive disadvantage. That’s why consumers with long-term concerns about their pocketbooks (and everyone else’s) should not buy GM or Chrysler vehicles.

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Note: This column originally went up at Pajamas Media on Wednesday under the less-than-perfect headline, “What’s a Auto Industry Bailout Opponent to Do? Boycott!” PJM’s subheadline is better (“If you don’t like GM and Chrysler taking taxpayer money, then don’t give them yours”). The column advocates not buying General Motors or Chrysler vehicles — not those of the entire (US-headquartered) auto industry — as long as those two companies are receiving government bailout money. This is the only viable outlet for those who oppose the entire bailout bonanza, auto and otherwise.

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What’s a Bailout Opponent To Do?
The author reaches a reluctant conclusion.

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There is little doubt that the majority of voters oppose the bailouts, and the seemingly endless cascade of calls for more, that have been raining down since early October. That’s when Treasury Secretary Hank Paulson panicked, and blackmailed Congress and the President into passing what I have been calling the Giant SUCKUP — the Seemingly Unlimited Cash Kitty Under Paulson.

Now, in a development that anyone with an IQ above room temperature could have predicted, the Paulson Gang “has now spent or committed more money than Congress has allocated to its financial rescue program, effectively making more promises than it can afford to keep. ….. Congress gave Treasury $350 billion; Treasury has allocated $354.4 billion.” The same guy who (figuratively) put a gun to the heads of bankers to force them to take Uncle Sam’s bailout money — whether they thought they needed it or not — is now putting a gun to the heads of taxpayers.

Most taxpayers probably believe that Congress has to proactively approve the release of the second half of last fall’s $700 billion bailout package. Wrong: “Once Treasury submits a formal request, the money will be allocated by default unless Congress votes to prevent it.”

Now that the spigots have been opened, the bailout requests just keep on coming.

After the banks came General Motors and Chrysler. California’s Governor Schwarzenegger, the Terminator turned Begginator, who years ago abandoned the heavy lifting involved in reforming his state’s dysfunctional political culture, “has ramped up his requests for a federal bailout.” I would suggest that California really owes the rest of us a bundle, not only because the formerly Golden State has been overspending on traditional welfare, i.e., direct aid to individuals and families, to the tune of over $2 billion a year during Schwarzenegger’s entire term in office, but because the state refuses to create oil-drilling and related jobs that could help turn its, and the nation’s, economy around.

Cities like Philadelphia, Detroit (it alone wants $10 billion), and Atlanta are lining up. Now we have a group of states, “led” by Ohio Governor Ted Strickland, asking for $1 trillion of their very own.

This only scratches the surface. I can’t pretend that the following is comprehensive, but others in the bailout line include auto-industry suppliers; General Motors Acceptance Corporation ($5 billion, separate from the bailout money granted to the auto company); retailers; commercial property developers; and two local newspapers in Connecticut.

How bad is it? It’s so bad that when blogger Warner Todd Huston invented a story about how a mythical accountants’ consortium named BANAL (the Bureau of Accountancy and the National Accountants League) had requested a government bailout, Business Week believed it.

But let’s get back to the serious matter at hand. What are those who oppose these bailouts to do?

No matter how hard I try, I can’t get around an inescapable conclusion.

I did consider other alternatives before reaching it.

Boycott the banks? Forget it. Paulson’s “Gun to the Head” Posse ensured that all the big players, and the vast majority of smaller ones, received bailout money (here is one notable exception). Maybe fear of consumer flight to banks not bailed out drove his decision.

Stop paying taxes? Not realistic.

Throw the bums out in Washington? Too late, and we can’t wait two years. By that time, the sheer number and volume of bailouts will have created a permanent culture of bailout dependency.

Though it’s an imperfect and in a sense unfairly targeted response, there really is only one action the average person has available that is practical, and will be quickly understood by the powers that be: Not buying GM or Chrysler vehicles.

It’s not like the two monumentally mismanaged companies and the thoroughly corrupt United Auto Workers union aren’t deserving of our scorn. What’s more, for those who insist on buying American, there still is a US-headquartered alternative. Ford has made a lot of mistakes, including losing about $1 billion in profit margins by failing to respond for two years to a damaging boycott by a social conservative group. Nonetheless, and to the surprise of many, the company isn’t circling the drain, and decided not to take Uncle Sam’s money. Perhaps if enough GM and Chrysler business heads their way, it never will.

Don’t be surprised if many Americans haven’t already reached the same conclusion I have. A Rasmussen poll showed that Americans opposed the GM-Chrysler bailout by a margin of 49%-38%. If even a third of those who opposed it swear off their cars, there will be no recovery at the two companies.

We’re not quite to the point where Hank Paulson can point a gun to our heads and force us to buy certain companies’ cars. If it becomes clear in Washington that consumers have shut their wallets on GM and Chrysler, that bailout effort will be forced to an ignominious end. It will send the two companies into bankruptcy, where they can figure out how to emerge as viable, baggage-free entities.

Most importantly, widespread refusal to buy GM and Chrysler vehicles will also send a clear message to other private entities considering whether or not to seek bailouts, and to politicians considering whether to approve them: Don’t.

December 20, 2008

The Auto Bailout: Admissions Required

This column originally appeared at Pajamas Media Thursday under the title, “The Right Way to Bail Out the Auto Industry.”

As most readers know, since the column went up at Pajamas, a deal was done. It was of course done without what I still believe should have been required admissions before any funds were disbursed. The truths contained in those admissions remain fundamental to understanding how the Big Three got to where they are, and the failure to acknowledge and admit them bode poorly for any “success” the just-authorized bailout might hope to achieve.

The original column follows.

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Let Detroit get its money — but only after Democrats, the Big Three, and the UAW admit the truth.

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There is a way to bail out General Motors, Chrysler, and Ford that free market advocates can enthusiastically endorse.

In fact, given the potential exposure involved in an open-ended bailout ($125 billion, maybe more), this proposal might even make those who would otherwise be reluctant willing to structure the bailout funds as grants instead of loans.

What a principled bailout requires is a signed list of admissions, written into the bailout law and incorporated into all underlying agreements, by:

  • The creators of what I have been calling the POR Economy — namely Nancy Pelosi, Barack Obama, and Harry Reid.
  • The CEOs of the Big Three.
  • The United Auto Workers.

There should be no bailout unless all admissions are made.

* * * * * *

Admissions by Pelosi, Obama, and Reid

We acknowledge and admit that:

  • In June, our statements (Pelosi, Obama, Reid) opposing any expansion of exploration or drilling for domestic energy resources caused businesses large and small to cancel or defer expansion and hiring plans, and consumers in general to curtail their spending.
  • Our consistent advocacy at that time, and throughout the election campaign, of punitive increases in Social Security and federal income taxes on the nation’s highest earners, to take effect as soon as possible, have led those who would be affected to seriously curtail their spending and investing.
  • Our political party’s decades-long insistence that banks approve mortgage loans which violated prudent lending standards led to the collapse of government-sponsored enterprises Fannie Mae and Freddie Mac and insolvency at many financial institutions, thus creating the conditions that led to the blackmail-driven passage of the financial-services industry bailout in early October.
  • The three items just mentioned have transformed what had been a difficult but manageable economic situation in early 2008 into a serious downturn.
  • The election of Obama as President, and the concurrent increase in Pelosi’s and Reid’s House and Senate majorities, are the primary reasons why employers reduced payrolls by 634,000 in November, compared to hiring over 300,000 during November 2007.
  • The collective effect of the aforementioned actions and events have caused sales at the Big Three automakers, which had already been falling at double-digit rates on a year-over-year basis (12% to 22% in May), to decline calamitously (30% to 47% in November), gravely damaging the companies’ already difficult positions, and leading two of them to the brink of bankruptcy.

Admissions by Big Three Management

We acknowledge and admit that:

  • For over 25 years, in the face of a growing competitive threat from more efficient foreign-owned companies with manufacturing plants in the US, we failed to implement a lower, more efficient cost structure in our negotiations with the United Auto Workers Union, and failed to effectively manage our salaried workforces.
  • We have often failed to adequately respond to vehicle market conditions and consumer desires.
  • We have poorly utilized our research and development dollars.
  • We have failed as stewards of our shareholders’ money and trust.
  • The funds to be disbursed by the US Treasury represent a bailout.

Admissions by UAW President Ron Gettelfinger on behalf of the United Auto Workers

We acknowledge and admit that:

  • Our militant abuse of our virtual monopoly position in the 1960s and 1970s led the Big Three to enter into contracts that led to their serious financial difficulties in the late 1970s and early 1980s.
  • For decades, we have run our union for the benefit of our more senior members at the expense of less senior members, including but not limited to two-tier wage structures and, more recently, permanently lower pay for new members.
  • We have negotiated and enforced antiquated work rules and ruinous “jobs banks” that have caused the Big Three to be much less efficient than other vehicle producers in the U.S. We unconditionally agree to eliminate the jobs bank and all work rules that are not directly relevant to members’ on-the-job safety within six months after the first bailout funds are disbursed.

Joint Admissions by Big Three Management and the UAW/Gettelfinger

We acknowledge and admit that:

  • Instead of permanently fixing the domestic auto industry’s structural problems in the early 1980s, we prevailed upon then-President Ronald Reagan to establish “voluntary” vehicle import quotas. These quotas led foreign makers to build manufacturing and supporting parts plants in the U.S.
  • Our continued existence is not a prerequisite for a healthy US economy.

Additional Requirements

The parties hereby agree that the bailout disbursements, not to exceed a combined $22 billion, will be the only bailout disbursements made.

Any subsequent statement made by any party to this agreement that contradicts the admissions contained herein will cause funds previously disbursed to become immediately repayable to the US Treasury without recourse.

* * * * *

These admissions are a small but necessary price that Pelosi, Obama, and Reid must be made to pay to keep their most favored union alive. Similarly, Big Three CEOs must accept their share of the admissions medicine to stay afloat. Finally, the UAW must admit its responsibility for pushing their employers to the brink.

If the parties involved want the bailout badly enough, they will end the posturing and reality avoidance, and make these required admissions. If not, bankruptcy for GM, Chrysler, and perhaps even Ford, is the only option that makes sense.

So sign on the dotted line, folks, and you can have your precious bailout money — this one time.