I'm from the government and I'm here to help the auto industry

As predicted, the Chrysler bankruptcy case has raised questions worthy of Supreme Court review and the Court has just temporarily stayed the sale of Chrysler to Fiat. It will be interesting to see whether the Court that surrendered the private property rights of homeowners in Kelo will be as quick to rewrite the long standing and clear cut rules of creditor priority when the parties are a union on one hand and a public employee group on the other. In any case, the possibility of a 30-day bankruptcy are out the window. Thankfully so, to be frank.

If the sale of American lemon maker Chrysler to Italian lemon maker Fiat wasn’t sufficient to do it, the proposed sale of Hummer to a Chinese heavy equipment firm gives the lie to the argument that government involvement in the auto industry was necessary on national security grounds. Hummer is the single brand most closely tied to national security – the HMMV was initially a military vehicle evolved into a consumer brand because of heavy demand. If government involvement doesn’t prevent the sale of what is ostensibly the closest thing to a tank making division in the entire auto industry to the single biggest potential military threat on the map, national security was clearly no concern of the Obama administration at all. Big surprise that.

The firing of GM’s CEO by the nation’s CEO clearly didn’t solve the poor management problem at GM, merely replaced it with government approved poor management. GM is selling the Saturn brand to Penske, a very well run organization with savvy management that is getting the brand at a steal of a price. Saturn’s best years were when it was a “different kind of car company” outside the main GM network and with something of a management firewall. I would not be surprised if ten years from now Saturn is the best selling and most profitable of the current GM brands.

Ford, meanwhile, has done an admirable job of pulling its own act together without resorting to the government credit line available to it, but is facing serious problems as competitor GM benefits from the bailout of GMAC. With GM now owned by the government, we can expect Ford will face even more unfair competition, but, of course, it won’t be called that – competition is only unfair in the liberal mind when it comes from a highly competent, highly successful private party. Here is a case where Congress should act – Ford investors should receive a breank on dividends and capital gains taxes and the company itself should receive a break on its corporate income taxes for the next several years. The company has shown a willingness and ability to raise its money in the private sector and its management, its workers and the investors supporting the company should be able to keep the fruits of their labors instead of being taxed to support their competitors. That won’t happen, but what did we expect when we heard “I’m from the government and I’m here to help.”

Reblog this post [with Zemanta]