Monday, September 17, 2012

With No Thanks To Rush Limbaugh Or Mitt Romney

It's time to check in with our favorite plutocrat and blowhard.   Today, Rush Limbaugh maintained

Today, "General Motors Pushing US to Sell Stake -- The Treasury Department is resisting General Motors' push for the government to sell off its stake in the auto maker, The Wall Street Journal reports. Following a $50 billion bailout in 2009, the US taxpayers now own almost 27% of the company.

"But the newspaper said GM executives are now chafing at that, saying it hurts the company's reputation and its ability to attract top talent due to pay restrictions." General Motors is saying that they've got a branding problem because of Obama ownership. General Motors is saying that they cannot hire the best people, who love cars and could help revitalize the company, because they're governed by what Obama says people can make.

And as you all know, Barack Obama is at war with successful, high-earning individuals and wants to do something about it. So at his automobile company, there is a limit on how much anybody can make. And, as such, people called to go in there and perhaps reverse the direction of General Motors, want no part of it because GM is a joke. It's laughed at. It's called "Government Motors," and you can't make any money there. Barack Obama thinks this is "saving" the company.

Limbaugh links to a Market Watch report, which is a summary of a full article, which itself refers to the Wall Street Journal article Limbaugh presumably was touting.  It maintains

But GM executives have grown increasingly frustrated with that ownership, and the stigma of being known as "Government Motors." Executives have said the U.S.'s shadow is a drag on its reputation and hurts the company's ability to recruit talent because of pay restrictions.

Rush deprived us of the following line:   "Privately, executives are also irked at the continued curbs on corporate jet use."   So GM executives not only want to be paid more highly, they "chafe" at restrictions on use of corporate jets.

It is not he Obama administration or the left dragging down the reputation of the auto company.  Rather, Limbaugh and others on the right delight in referring disparagingly to General Motors as "Government Motors," hoping that the business saved by the President goes down in flames.

Nevertheless, it not this effort, nor government restrictions, nor the latter's reluctance to sell its shares until they bring a better price for the American people, which has slowed GM's growth the past two quarters.  The Huffington Post reports

Yet Itay Michaeli, an analyst with Citi Investment Research, said there's cause for optimism at GM if the company properly executes its plans. GM has kept its U.S. costs in line and hasn't resorted to wild cash incentives to juice sales. Its new pickups should hit showrooms next year as pent-up demand pushes up sales, he said.

But the company, he said, has to make its brands more identifiable to customers, and it still has to find a way to reassure jittery consumers so they have enough confidence to buy again.

General Motors' recent plight, like that of the economy generally, owes nothing to the allegedly heavy hand of government, but rather to a lack of demand.   The auto "bailout" saved nearly 3 million jobs and the auto industry while

GM is a much stronger company than it was before bankruptcy, where it shed billions of debt, closed factories and cut its work force to slash costs.  GM has a strong balance sheet.   It's sitting on $38.5 billion in cash and credit lines.   And the company still expects industry-wide US auto sales to total 14 million to 14.5 million this year, far above the 10 million level needed for GM to break even.

With costs down, employment down, and profits up, it would be a conservative wish list, were not a Democratic President the one to set it into motion.  However, Limbaugh is correct when he states  "Mitt Romney has had nothing to do with it, and Mitt Romney wouldn't get anywhere near replicating any of this!"  In November, 2008 Romney argued on the editorial page of The New York Times

The American auto industry is vital to our national interest as an employer and as a hub for manufacturing. A managed bankruptcy may be the only path to the fundamental restructuring the industry needs. It would permit the companies to shed excess labor, pension and real estate costs. The federal government should provide guarantees for post-bankruptcy financing and assure car buyers that their warranties are not at risk.

In a managed bankruptcy, the federal government would propel newly competitive and viable automakers, rather than seal their fate with a bailout check. 

This past May, Romney modestly claimed "I pushed the idea of a managed bankruptcy, and finally when that was done, and help was given, the companies got back on their feet.    So, I'll take a lot of credit for the fact that this industry has come back."

Pretty bold words for a guy who, in March, 2009, contended "Bailout of enterprises that are in trouble, that's not the right way to go. I know President Bush started it with the auto industry. I thought it was a mistake."   As if to remind us how wrong he was, the candidate in November, 2011 rambled "My plan, we would have had a private sector bailout with the private sector restructuring and bankruptcy with the private sector guiding the direction as opposed to what we had with government playing its heavy hand."  His version of a managed bankruptcy would have failed to save General Motors, as explained by AOL Autos Editor-in-Chief David Kiley:

What Romney leaves out of the discussion is that there was a prolonged political debate in Washington that lasted for months about how best, or whether, to rescue the auto companies. If the loans had not been granted by President Bush, the companies would have defaulted on obligations and forced into a messy, sudden bankruptcy. Romney says that rather than the government rescuing GM and Chrysler, the government should have provided loan guarantees to banks and private equity firms that would have then lent the automakers enough money to get through the financial crisis. President Obama funded the auto rescue out of the Troubled Asset Relief Program [TARP] because he could not get the Congress to vote yes on a specific rescue package for the auto companies.

There are two big flaws in Romney's position. According to Steven Rattner, the private equity investor who was named by President Obama to the auto industry task force, banks and private equity firms had neither the capital nor the interest in providing some $80 billion in funds needed for a traditional managed bankruptcy. None came forth at the time. Additionally, recapitalizing the companies with all loans--debt-- would not have fixed the company's problems or led them back to profitability. It was decided that GM and Chrysler needed to shed debt, restructure by shutting down low-performing brands and factories, and that the government would have to take equity in GM and take a risk that it would it get its money back later. Romney and adviser Carly Fiorina have said that the government could have forced the banks to provide the loans given the atmosphere and the fact that the banks were being bailed out too. But the companies would still have more debt than they could handle.

You're correct, Rush:   Osama bin Laden is dead and General Motors is alive, and Mitt Romney had nothing to do with it.

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