Obama Steps on The Gas to Socialize America

The auto industry is just the first step to a total over-throw of American industry in general. The use of 'card check', if it passes, will be the next step in his agenda to crush the free market.

In the end, of course, it spells collapse of our way of life, but then, Obama knows this and is only sorry that it will take longer then he thought.

Question - what will we do, if anything, to stop him?

The Obama Autoworks

At GM and Chrysler, politics is now Job One.

Responding to their plea for $21.6 billion more in taxpayer cash, President Obama yesterday declared "the end of that road" for GM and Chrysler. In the next breath, he seemed to put Washington and Detroit on a new road of politicized industrial policy. So pick your poison.

[Review & Outlook]AP

The Administration can be commended for at least promising some tougher medicine. Chrysler got a 30-day ultimatum to sell itself to Italy's Fiat. Having written a $4 billion check to Chrysler in December, taxpayers will still be on the hook for another $6 billion if the deal comes off. On cue yesterday, the companies said that was likely.

GM's CEO Rick Wagoner got the Presidential boot over the weekend, and GM was given two months to reorganize, or get forced into a "quick and surgical" bankruptcy. For once, we agree with Michigan Governor Jennifer Granholm, who called Mr. Wagoner "a sacrificial lamb." The Administration needed someone to take the fall to sate the anticorporate furies it has helped to unleash. Mr. Wagoner wasn't solely responsible for GM's bad business decisions, but only recently did he promote the kind of radical restructuring the company has long needed.

We only wish someone in Washington would also be shown the door, starting with those at the Federal Reserve whose oil-price bubbles also helped to break the car makers. Sacking a CEO for appearance sake was the easy part. Good luck trying to get the unions to make concessions on wages and legacy costs, and bondholders to agree to reduce the debt burden.

A senior Treasury official told us the Administration isn't holding its breath and considers "surgical bankruptcy" the likeliest outcome. In that event, "a shiny new GM" would emerge, said the official, who didn't want to be identified. Asked why GM wasn't forced into Chapter 11 immediately, the official said the Administration wanted to avoid "years of uncontrolled chaos" and needed time to set the stage for "the more surgical process."

Even the Treasury's mention of bankruptcy counts as progress of a sort. President Bush did his legacy no favors by signing off on the bailout in December. Bankruptcy then would have saved taxpayers $17.4 billion (and counting), and started to put those companies or their assets to better use.

However, the United Auto Workers may take a different message from the firing of Mr. Wagoner and from Mr. Obama's speech. To wit, that GM is now /politically/ too big to fail. Listen to Mr. Obama: "We cannot, we must not, and we will not let our auto industry simply vanish." No mention that Ford took no bailout. Or that a third of American auto workers, some 100,000, are employed by successful "transplant," or foreign, car makers in dozens of U.S. plants.

Union leaders outlasted Mr. Wagoner, refusing even to make the kind of concessions that Ford has wrested from them. They'll be even less likely to accept retiree contributions in stock now that the share price has tanked and they assume their Democratic friends will protect them.

Bondholders with $28 billion in GM debt are in for a rougher road. The Administration will offer them pennies on the dollar, nowhere near the 33 cents the ad hoc creditor committee has been seeking in a prepackaged bankruptcy. But Treasury figures the lenders may yet prefer something in a debt-for-equity swap, rather than little or nothing in Chapter 11.

Bankruptcy or not, the larger problem here is Washington's industrial policy. Even if Chrysler merges and GM restructures, Mr. Obama wants the companies to make the kind of cars the political class favors, whether or not consumers want to buy them. "The United States of America will lead the world in building the next generation of clean cars," the President said yesterday. He didn't mention a goal of profitability. To that end, Treasury tapped Fiat's know-how in small vehicles for Chrysler and wants GM to move in this direction. Yet the Treasury's own "viability summary," released yesterday, points out that "GM's product portfolio is more vulnerable to CAFE [fuel-economy] standard increases than the portfolios of many of its competitors."

Only nine of GM's "top 20 profit contributors in 2008" were cars; the rest were SUVs and trucks, which are politically incorrect on Capitol Hill and with the green lobbies. Chrysler has a similar problem. Even GM's much-vaunted electric Volt car is "too expensive to be commercially successful," according to Treasury.

In other words, Mr. Obama's industrial policy vision runs directly counter to a strategy that would get the companies back to profitability as soon as possible. To help them sell those unwanted cars, Mr. Obama yesterday was already pledging that taxpayers will cover new-car warranties. And he urged Congress to pass a new "incentive program" (read: subsidy) for "cleaner car" purchases.

All of which is to say that the taxpayer commitment to the Obama autoworks is only getting started. We're glad the Administration is at least talking a tougher line on bankruptcy than Mr. Bush. But the better route would have been to use Mr. Obama's political capital now, at the start of his term, to use bankruptcy to force the companies and their union to make the hard decisions that politics may still let them avoid.

From now on, GM and Chrysler are Mr. Obama's companies, and taxpayers should hold him accountable for every dollar they are forced to spend to save jobs for the UAW and to make cars that Americans don't necessarily want.