Posted on 21 August 2011.
In December 2008 President Bush announced the bailout of General Motors. The Republican President made it clear that he does not understand the importance of free markets as he stated it was important to intervene and prevent a failure of the US auto maker. President Bush claimed that
“Chapter 11 is unlikely to work for American automakers at this time…American consumers understand why: If you hear that a car company is suddenly going into bankruptcy, you worry that parts and servicing will not be available, and you question the value of your warranty. And with consumers hesitant to buy new cars from struggling automakers, it would be more difficult for auto companies to recover…”
The Republican President clearly showed his ignorance and lack of economic knowledge. Bush also stated that “I’ve abandoned free-market principles to save the free-market system.” Only an economic illeterate fool would believe that the market is only important as long as prices increase and people increase their paper net worth. The market works perfectly well when corrections take place as this allows unsustainable, irresponsible, and financially unsound business practices to fail. Intervening in the process only allows the financially and business unfit to survivie. That not only comes at the cost of the bailouts but at the cost of fundamentally sound businesses that cannot compete with their subsidized competitors. Market interference eliminates rationality and fundamental sustainable businesses in the long term.
The Republican Bush administration initiated the nearly $20 billion bailout for the auto industry while placing substantial orders of new government vehicles which directly helped the automakers. Nearly three years after the bailout and after shareholders lost their investments in General Motors, the bailed out company now uses the restructuring to its advantage by telling Americans that it will not repair the defective rear spindle rods on 400,000 Cheverolet Impala’s that are affected by the manufacturing error. Reuters reported:
“NEW YORK, Aug 19 (Reuters) – General Motors Co (GM.N) is seeking to dismiss a lawsuit over a suspension problem on more than 400,000 Chevrolet Impalas from the 2007 and 2008 model years, saying it should not be responsible for repairs because the flaw predated its bankruptcy.
The lawsuit, filed on June 29 by Donna Trusky of Blakely, Pennsylvania, contended that her Impala suffered from faulty rear spindle rods, causing her rear tires to wear out after just 6,000 miles.
Seeking class-action status and alleging breach of warranty, the lawsuit demands that GM fix the rods, saying that it had done so on Impala police vehicles.
But in a recent filing with the U.S. District Court in Detroit, GM noted that the cars were made by its predecessor General Motors Corp, now called Motors Liquidation Co or “Old GM,” before its 2009 bankruptcy and federal bailout”
Posted in Bailout
Posted on 07 June 2011.
GM CEO Dan Akerson was interviewed by the Detroit News. In the two hour long interview GM CEO praised the US Government for the bailout of the auto industry while also suggesting that the US Government should massively increase the tax on gasoline.
Of course the “private enterprise” that was bailed out by the Government not only with billions of cash but also with car purchases expresses gratitude for the socialist bailout of its economic unviable business.
“I actually think the government will be out this year — within the next 12 months, hopefully within the next six months…I have nothing but good things to say about them”
As if taking money from the tax payers is not enough, CEO Akerson now suggests that the government should increase the tax on gasoline as part of a future energy policy. That’s right, the former manufacturer of the Hummer who benefitted from millions of sales of energy inefficient vehicles due to government subsidies is now suggesting to massively increasing the tax on gasoline.
“You know what I’d rather have them do — this will make my Republican friends puke — as gas is going to go down here now, we ought to just slap a 50-cent or a dollar tax on a gallon of gas… People will start buying more Cruzes and they will start buying less Suburbans.”
Let’s get this straight…First GM benefits from the subsidies of inefficient vehicles, then the company receives billions of bailout dollars to prevent the collapse of its inefficiently run business and after receiving all those government perks the CEO suggests that Americans should pay a significantly greater tax at the pump.
Find out which President more than doubled the tax of gasoline.
Posted in Bailout, Politics
Posted on 13 February 2011.
General Motors and Chrysler each received Government bailouts in order to survive and escape bankruptcy. The two mismanaged companies now announce that they are handing out bonuses to their employees and management.
“GM plans to pay bonuses to most managers equal to 15 percent to 20 percent of their annual salary and as high as 50 percent to less than 1 percent of its 26,000 U.S. salaried employees, said one of the people, who asked not to be named revealing internal plans. Bonuses for Chrysler’s 10,755 salaried workers will average about $10,000, with a small group getting as much as half of their salary, one of the people said.”
It’s amazing that the two companies that combined received over $60 Billion in bailout funds from the (bankrupt) Government are now in a position to reward bonuses to their employees. One should keep in mind that not only did the Government bail them out directly but in addition to that provided billions of dollars in incentives to artificially increase the demand for cars. Without government guarantees for car loans, government purchasing new vehicles, and the controversial cash-for-clunkers program the two companies would still be struggling.
General Motors reorganized itself in bankruptcy in 2009 and received nearly $50 Billion in Government bailout funds. GM earned $4.77 Billion in the first three quarters of 2010 and awarded an average bonus of above $3,000 per salaried employee. Despite posting a loss of $652 million in 2010, Chrysler awarded an average of $10,000 to its employees while still not having repaid its $12 Billion in bailout funds.
Ford didn’t need bailout funds from the Government and made a profit of $6.5 Billion in 2010. Ford employees were awarded bonuses of $5,000 per employee.
On top of that, Chrysler CEO Sergio Marchionne just recently apologized after he complained about the terms of the loan that Chrysler received in its bailout. He considered the interest rates on that bailout loan unreasonably high as rates have dropped since Chrysler received the bailout funds. He used the terms as “shyster” to describe the loan his mismanaged company received to remain in business.
It’s not surprising that the two companies that took Government funds that have yet to be repaid are awarding their workforce bonuses. Why pay back debt and cease to reward yourself with bonuses when you can continue to mismanage the company and count on future bailouts down the road?
Posted in Bailout