Wednesday, April 1, 2009

Latest Obama Moves in Auto Industry: It's About Taking Care of Friends

The Obama Administration is very easy to understand. Obama takes care of those who helped get him elected. Wall Street insider money and union vote organizing capabilities were two keys to his election win. Wall Street insiders are doing very nicely. And, the latest moves by Obama on the auto front appear to be nothing more than payback to his auto union friends for a job well done.

WSJ's Holman Jenkin's Jr. reports: The ousted, "Rick Wagoner...was not as popular with UAW Chief Ron Gettelfinger as Mr. Wagoner's replacement, Fritz Henderson. "

Jenkin's continues:

GM bondholders understand this: They've been intransigent precisely because they calculate the UAW is too important to Democratic electoral politics for Mr. Obama to risk losing control of the reorganization process to a bankruptcy judge.

The GM bailout has become a political operation run out of the White House. It will stay that way. Talk of UAW layoffs already disguises the fact that UAW workers are actually offered generous buyouts and early retirement -- they aren't just sent away with a last paycheck...Mr. Obama played the tough guy in getting rid of Mr. Wagoner, but he won't go after the labor monopoly. In fact, the union will emerge with a stronger grip on Detroit -- because it will be a major shareholder in a reorganized GM...

Jenkin's predicts that there won't be any bankruptcy:

The same administration that inserted itself into GM's corporate governance to order the resignation of a CEO is hardly likely to defer to the prescribed legal order for a failing company, namely bankruptcy. Even a "prepackaged" filing runs too much risk of a judge imposing more "sacrifice" on the UAW than the administration is prepared to tolerate...Mr. Obama will be content with incoherent policies that poll well -- which means GM, Chrysler and perhaps Ford eventually will need taxpayer subsidies as far as the eye can see -- or until a real bankruptcy sometime after November 2012.
As I pointed out last year, the auto bailouts are all about the unions.

1 comment:

  1. IT columnist Robert X Cringeley isn't usually thought of as a political or economic commentator but every now and then, outside of his IT patch, he puts out a surprisingly good article. Take for example his piece on the Detroit bailouts called "It's the cars stupid!". Somehow or other the cars have taken a back seat in the debate.

    Interestingly Cringeley highlights an aspect of the automobile / energy use debate that I haven't heard before. The perverse consequences of government clean air regulations drive up fuel consumption. Perverse consequences from government regulations. Who would have thunk it!

    (If you want another example of an excellent non-tech article from Cringeley, check out his column from September 13, 2001. It reminds me of Robert Higgs.