After many billions of taxpayer dollars flushed down the toilet to prevent it, General Motors filed for bankruptcy today.
The question now facing 56,000 auto workers, 3,600 GM dealers and the Obama administration: Will it work?
Monday, U.S. President Barack Obama defended government intervention in GM as the auto maker enters Chapter 11 bankruptcy, saying the actions are part of a “viable, achievable plan that will give this iconic company a chance to rise again.”
Under the plan, the government would own 60% of the new GM, but Mr. Obama said auto executives “will call the shots and make the decisions about turning this company around.” He said the government would refrain from playing a management role in all but the most critical areas. “Our goal is to help GM get back on its feet…and get out quickly,” he said.
They’ll call the shots and make the decisions, except for the government hand-picking executives, mandating product lines and choosing the lucky winners of the Let My Plant Stay Open lottery, a situation that is ripe with opportunities for political payback.
The Foundry has a suggestion for keeping federal involvement short and sweet:
The only way to limit government control of GM is to limit government ownership. If ownership can’t be avoided, President Obama must at least establish a firm — and early — termination date, making clear when and how this company will be returned to private control. While such an exit strategy would not prevent the reluctant shareholder from becoming active, it would stop it from being permanent.
The American Thinker has some thoughts on unintended consequences:
So down the track awaits Unintended Consequence (UC) #1: The old GM and Chrysler that once commanded a cadre of loyal customers now has new owners. Who’s to say they’ll remain loyal? When your favorite restaurant comes under new ownership, and that ownership has a reputation for serving bad food elsewhere, do you keep eating there? Only if you want food poisoning.
When sales of Chevy’s and Hemi’s continue to decline, the government will have to act to protect their — meaning “our” — investment (bailout). That’ll require special tax breaks for Chevy-Hemi buyers, and higher taxes on those who buy other brands in order to make up the lost treasury revenues.
When that doesn’t work, here comes UC #2: Additional tariffs on imported automobiles. But since many foreign brands are now manufactured in U.S. plants, that’s won’t work. So, foreign manufacturers operating U.S. plants will be subject to a Value Added Tax (VAT) to subsidize unsold government cars.
Much more at the links.