President Obama on Wednesday said that President Bush was responsible for bailing out auto companies in Detroit, writes the Washington Examiner’s Charlie Spiering.
"Keep in mind," the president said, "That the administration before us, they had been writing some checks to the auto industry asking nothing in return. It was just a bailout, straight -- straightforward."
President Obama said that if it weren’t for his current administration's policies, the auto industry would have been an expensive failure. That is to say, if it weren’t for President Obama’s guiding hand, the auto industry would have collapsed and taken all that Bush-era bailout money with it.
Obama explained that, unlike his predecessor, he "demanded responsibility" from the auto industry, forcing it to "retool and to restructure," making it "more efficient."
Critics argue that the president’s claim that the Bush administration demanded “nothing in return” is false.
As Spiering notes, when the Bush administration authorized the first auto loan of $17.4 billion, in October 2008, some aspects of the loan were contingent upon the companies hitting “Restructuring Targets." Therefore, no one can say that the Bush administration didn't at least demand or impose guidelines.
Of course, this isn't to say that "guidelines" make the idea of a bailout any more desirable, but that President Obama's allegation simply isn't accurate.
The president continued: "Over the past two years, that entire industry has added nearly 160,000 jobs, GM is number one in the world again. Ford is investing billions in new American plants. Chrysler is growing faster. So today, the American auto industry is back."
Again, there are some inaccuracies worth noting.
First, why did the president cite Ford Motors, the only Detroit automaker that didn’t participate in the bailout smorgasbord? Surely, the president isn't planning on using Ford's success to prop up his own economic "achievements." Or is he?
Second, although the president sounded pretty confident during his State of the Union address when he boasted that GM was “number one," Volkswagen would beg to differ.
GM announced earlier this year that in 2011 it sold 9.03 million vehicles globally, according to Motor Trend. Volkswagen, on the other hand, claims it sold 8.16 million vehicles globally.
So why does Volkswagen disagree?
Volkswagen’s 8.16-million figure doesn’t include sales from commercial truck divisions MAN and Scania, according to Automotive News. If the manufacturer added those, it would significantly boost their overall numbers.
“On top of that, GM’s sales figure was padded with about one million sales by Chinese automakers SAIC Motor Corp. and Wuling Motors Co. — companies with which GM has joint ventures, but in which the American company does not have a controlling stake,” reports Motor Trend.
“If those sales were excluded and VW’s truck figures added, Volkswagen would probably steal the global sales crown from GM.”
Perhaps the president meant "number one" in reference to GM's stock quote. But considering the current resting place for GM stock, this claim would be patently false.
GM stock summary as of Jan. 26, 2012
Now let’s go back to this business about the Bush administration’s complicity in the auto bailouts. There's was a lot more involved than simply writing blank checks. Perhaps this part of the bailout story warrants a revisit.
When President Bush threw GM and Chrysler their first lifelines (with President-elect Obama’s assent), he did so without congressional approval. After Congress voted specifically to prevent an auto bailout, Bush turned to the overly broad and hastily written TARP statute, which Congress had passed under extreme duress and threats from Treasury Secretary Hank Paulson that their failure to act would cause financial Armageddon.*
What did this mean in terms of the future of the auto bailouts?
“President Bush erred when he said he had ‘abandoned free market principles to save the free market,’” writes Freddoso. “What he had really done was write his successor a blank check.”
So, while it was President Bush who started the U.S. down this road, it was President Obama who “took full advantage of this unlimited political line of credit, [and used] TARP as a justification for limitless executive meddling in economic decisions best left to private stakeholders,” writes Freddoso.
With the precedent set, an "unlimited political line of credit," and a desire to “fix” things, President Obama introduced “car czar” Steve Rattner to GM:
Rattner fired GM’s hapless CEO Rick Wagoner, something he had no right to do (even if it was a good idea from a business perspective). He later forced out GM’s acting chairman and recruited its new chairman, Ed Whitacre. Rattner’s task force hand-picked staff, micromanaged GM’s relationships with its suppliers and foreign subsidiaries, chose the facilities it would close, chose the brands it would kill, set the pace at which would shed dealerships, even at one point considered forcing GM to move from its iconic Detroit headquarters.**
In that case, yes. Yes, President Obama is correct to point out the differences between his and President Bush's approach to the ailing auto industry. In fact, President Obama was so determined to differentiate himself from his predecessor that he decided the measly $17.4 billion President Bush gave to Detroit was wholly inadequate. President Obama upped the ante and committed a full-blown $85 billion to the “rescue” of the auto industry.
And what has been the result of all of this “rescuing”? Now that the Feds have invested billions of taxpayer’s dollars in restructuring GM, what do Americans have to show for it?
“According to the Detroit News, the Treasury Department announced in November that it expects to lose $23.6 billion in the auto bailout, as a result of the sharp decline in GM stock,” Spiering writes.
Oh, and let's not forget the Chevy Volt. The electric vehicle that has been plagued by safety issues, call backs, poor sales, poor performance, and poor reviews. In short, the Chevy Volt, the "flagship vehicle" of the newly restructured GM, has been an utter and miserable failure.
Now this isn't to say that General Motors is altogether a failed company. While they may not be first in global sales, they're not last. And while the Volt is a massive flop, the Silverado has done well.
The point is this: $23.6 billion in taxpayer dollars that will never be recouped and a failed electric vehicle are not minor issues. And instead of blaming his predecessor, or incorrectly attributing Ford Motor's success to policies, perhaps the president could at least address these two glaring problems. If not, the president will continue to repeat what critics have called falsehoods and inaccuracies every time he decides to tell a crowd that his administration "saved" the auto industry.
(H/T Weasel Zippers)
*David Freddoso, “Gangster Government: Barack Obama and the new Washington Thugocracy.” (Washington, D.C: Regnery Publishing, Inc., 2011) 28.
Front page photo source: Michael Wayland | MLive.com