President Obama forced the resignation of GM CEO Rick Wagoner as a condition of continued government support for the ailing car maker. The Obama administration has examined the plans to restore both GM and Chrysler to financial viability and found the plans wanting. It ruled that Chrysler is not a viable standalone company right now and set an upper limit of an additional 6 billion in taxpayer dollars to hopefully merge with Fiat or the government will pull the plug. The plan for GM is less clear but the administration today indicated that there’s basically a couple months left before the iconic car makers are forced into receivership.
There are a fair number of people, myself included, that feel that receivership should have been the disposition of the car company from the beginning; in which case no tax dollars would have been thrown down the black hole of perpetually unprofitable Detroit. It would seem that costly government intervention failed to save these two companies and the bailout may have vastly compounded the pain involved in having them fail. We have bankruptcy courts for a reason: they can restructure the mess that unions, crazy pensions and benefits and archaic contractual entanglements have produced and give the companies a fighting chance once again.
The demise of GM and Chrysler underlines the continuing damage the economic conditions have produced and it underlines the continued weakness of the American Economy while highlighting the insanity of the American Governments increasingly leftist policies. Once again we’re seeing a disaster in the American Manufacturing Sector because our Unions have simply made it unprofitable to produce, tax law has made manufacturing too expensive and environmental laws have made manufacturing to costly. We need some kind of Manufacturing base in this nation but we must address the principle causes that have outsources our manufacturing sector to overseas locations.
In order to have a sane economy and remain a superpower we must regain the policies that made America a good place to build a factory and manufacture goods. It doesn’t matter if we’re talking cars or TV’s or computers; we need to have a sensible manufacturing base in this nation and we don’t. Remember the old saying: What’s good for General Motors is good for America? Well what’s good for General Motors is to get out of union contracts forcing them to pay lavish amounts to retiree’s for pensions and benefits and outrageously uncompetitive wages to current workers. What’s good for General Motors is to get a big break on taxes allowing for more research and development and to relax some of the environmental red tape and duplication of efforts by having national standards instead of individual states doing it.
Like GM the United States has a bankrupt Social Security fund and a bankrupt Medicare. We can’t afford all the crazy interventionist government that we have now and the whole government will go the way of California and Detroit unless we radically cut our spending. Social Security and Medicare money are gone and we can’t continue the current system much longer without destroying the economy. We need to renegotiate this social contract and secure the funds from politicians who want to loot the fund for some other project. We can’t have growth and a robust economy without a low tax environment and we must have corporate tax relief sooner rather than later because when you penalize success and wealth you get a whole lot less of it. How many times must it be proved? Low taxes give you the economic engine you need to get out of the current mess and solve some of our long term policies. If Obama is able to go back to confiscatory taxation the economy will be back in the 1970’s in a New York minute.
Here are some clips from Fox News reporting on the GM and Chrysler stories and the corresponding URL’s so you can read the whole article:
Monday, March 30, 2009
GM CEO Wagoner Out; U.S. Sets New Rules for GM, Chrysler
It was a tough day for the auto industry, as General Motors’s (GM: 2.72, -0.9, -24.86%) CEO was forced to step down, while the Obama Administration set strict new deadlines by which GM and Chrysler had to take steps toward financial viability and declared that Chrysler was not viable as a standalone company.
GM (GM: 2.72, -0.9, -24.86%) CEO Rick Wagoner is stepping down immediately, the government said on Monday, and is being succeeded by the company’s Chief Operating Officer, Fritz Henderson. Kent Kresa, a GM board member since 2003, will serve as interim chairman.
GM declined to comment on the executive moves.
A White House official told FOX Business that Wagoner was asked by the Administration to step down as a precondition for the company to continue to get help with its restructuring.
News of Wagoner’s departure came as the Obama Administration was preparing to brief some people on Capitol Hill about its plans for the auto industry on Sunday evening, in advance of a formal announcement expected at 11 a.m. Eastern time on Monday.
The government said that neither GM’s nor Chrysler’s plan, both of which were submitted in February, would result in a viable company. The Obama Administration is giving GM 60 days to work with bondholders and other parties such as the UAW and dealers, and stands behind GM’s restructuring effort
Chrysler is being given 30 days, during which time it must wrap up the partnership with Fiat it’s been discussing.
The Administration said it doesn’t think Chrysler is viable as a standalone company, adding that the government will consider investing up to an additional $6 billion to help its partnership with Fiat succeed, but that if an agreement isn’t reached, the government will invest no additional funds in Chrysler.
Here’s another story from Fox News:
Obama Denies Bailout Funds for U.S. Automakers, Sets Restructure Deadline
Neither GM nor Chrysler submitted acceptable plans to receive more U.S. government bailout money, the White House says, setting the stage for a crisis in Detroit.
Monday, March 30, 2009
The White House says neither GM nor Chrysler submitted acceptable plans to receive more bailout money, setting the stage for a crisis in Detroit and putting in motion what could be the final two months of two American auto giants.
The Obama administration, however, has decided not to require the automakers to immediately repay government loan money they previously received, since that would force both companies into Chapter 11 bankruptcy.
A senior administration official told FOX News, “calling in the loans would not be a productive exercise for the American taxpayer since the companies don’t have the money [to repay the loans] and it would simply put the companies into uncontrolled Chapter 11.”