“Written to enlighten, guaranteed to offend”
A Publication of Seth J. Frantzman
June 23, 2009
2) Obama is remaking U.S industry much the same way Bush ‘remade’ Iraq: Bush remade Iraq, sort of. Obama is attempting to bring the same incompetence to the U.S car industry by appointing twenty-five year old college graduates who never worked and have no knowledge of cars to reorganize it. The U.S automobile industry will end up no better in six years than Iraq has ended up six years after the invasion.
Obama is remaking U.S industry much the same way Bush ‘remade’ Iraq
Seth J. Frantzman
June 1, 2009
The radical prescription being meted out to the U.S automotive industry by the Obama administration is being managed with about the same level of competence as the U.S managed the ‘rebuilding’ of Iraq between 2003 and 2005. For those that recall what happened in Iraq in those years it was one giant piece of incompetence after another. It began with sending legions of youthful idealistic wet-behind-the-ears Americans to Iraq to set up stock exchanges and write constitutions. Alongside this was a massive level of outsourcing, from mercenaries to food, to companies. Then there was a huge level of wasteful spending running into the billions of dollars. The incompetence went further with revelations of hundreds of thousands of missing rifles and stacks of hundred dollar bills being doled out to less than reliable locals.
Now the same incompetence is being directed at the U.S auto industry. An article in the New York Times on June 1st 2009 revealed that a 31 year old graduate student with no background in economics, no job experience and no previous interest in the auto industry has been given the job of dismantling GM and Chrysler. This is Brian Deese, a special assistant to the President on economic policy.
Alongside the incompetence is the giving away of the auto industry to the very people who drove it into bankruptcy in the first place: the unions. In addition Chrysler has been sold to Fiat, a foreign company, while Canada will receive part of GM. So much for helping American workers and so much for U.S tax-dollars going to Americans.. The destruction of share holder equity and bondholder investments should send shockwaves through the U.S financial industry. If those who invest in companies can suddenly be deprived of their investments by the federal government so easily so that companies can be given away to those such as the United Auto Workers who donate to the political party of the president there seems to be something wrong.
The proposed settlement for GM looks something like this: the U.S government which has invested only 13 billion in the company and plans to invest a further 30-60 billion. For this the government will receive a majority stake, some 60% of the new company. Bondholders, owed 27 billion, will receive only 10%. The UAW which is owed some 20 billion in pension plan payments will receive 12%. The Canadian government which has invested almost nothing will also get 12%. The irony of all this is that the companies themselves allowed the government to get its claws into them by begging for the bailout. Had the automotive companies just declared bankruptcy in 2008 and never asked for a bailout then the Bondholders, who actually invested in the company over many years, would have been given a fare shake. But by letting the government in the companies are now being turned over to their unions, which never invested a cent in them.
It is also the fault of the former CEOs of Chrysler and GM. They were the ones who drove to Washington in several badly managed stunts to beg for bailout money. It is they who didn’t plan for the future, stopped innovating and drove their countries into the arms of the government. It is they who fired 90% of the GM’s workers over the last few decades, dismantling a workforce once half a million strong. It is they who destroyed communities across America by closing manufacturing plants and moving overseas. It is ironic that they wanted the taxpayers to bail them out when it is they who have ruined the lives of so many taxpayers. But with the government run bankruptcy of GM we are witnessing the final destruction of American industry. The ‘arsenal of democracy’, those great automotive plants that were converted to churn out bombers and weapons during the Second World War are being closed, if they already haven’t been. Soon there will be very little manufacturing industry in the U.S. This is a dangerous precedent. America is no longer an economic powerhouse built on a solid foundation. The government run dismantling of GM will turn out no better than the government run attempt to rebuild Iraq.