The Duplicity Never Stops

bankruptcy gm_ImageFileAs Claude Rains might say: “I’m shocked. Shocked!” That was my reaction upon hearing that the GM bailout didn’t quite go as Obama promised it would. When he made the “investment” it was doubtful that he believed it would work out. But the claims he made during his re-election campaign do not qualify as judgments — they were outright, blatant lies.

Investors Business Daily provides their analysis:

Sale of the U.S. government’s stake in General Motors Corp. ends a sorry saga. Not only were Americans lied to about the costs, but the bailout underscores why replacing market forces with federal bailouts doesn’t work.

The Obama administration says it will unload 200 million shares — or about 40% of its holdings — back to GM right away. The rest, 300 million shares, are to be sold by March 2014.

So by dumping the stock and putting GM back in business, the federal government’s “investment” was a rousing success, right? Hardly.

In this Friday, Oct. 14, 2011, file photo, President Barack Obama speaks at the General Motors Orion assembly plant in Orion Township, Mich. The U.S....In this Friday, Oct. 14, 2011, file photo, President Barack Obama speaks at the General Motors Orion assembly plant in Orion Township, Mich. The U.S…. View Enlarged Image

Remember, we were told repeatedly that GM’s bailout would not only save jobs, it might even net the taxpayers a profit.

As Obama’s hand-picked CEO for Government Motors, Dan Akerson, told USA Today in 2011: “I think people go, ‘Wow, I’m glad we invested in GM.’ I’m talking about the American taxpayer.”

Well, GM on Wednesday said it will buy back the 200 million share government stake for $5.5 billion, or $27.50 a share.

The break-even point on the government’s total holdings was $53 a share. But now, with $20.9 billion in taxpayer funds left to pay off from 300 million shares, the break-even point has risen to $69.72 a share.

In other words, at current prices, taxpayers are sitting with a loss of 61%, or nearly $15 billion, on their investment.

Remember how President Obama bragged on the campaign trail about GM’s big comeback?

“When the American auto industry was on the brink of collapse,” he told one rally last summer. “I said, let’s bet on America’s workers. And we got management and workers to come together, making cars better than ever, and now GM is No. 1 again and the American auto industry has come roaring back.”

The statement was filled with exaggerations, half-truths and deceptions — yet it helped secure Obama’s re-election.

GM No. 1? In the 1950s, it owned roughly half the U.S. car market. By 2006, just before the financial crisis set in, its market share had fallen to about 24%. Last year, it was an estimated 19.2%. In March of this year, according to Ward’s Auto Reports, it hit an all-time low of 16.5%.

So while GM does, for now, have the biggest share of the market, it’s not growing nearly as fast as nonunion transplants such as Hyundai and VW.

Obama’s bailout of “workers,” it turns out, was little more than a taxpayer-funded wet kiss to a United Auto Workers union that, along with two generations of sloppy GM management, bears the blame for GM’s — and the auto industry’s — ills.

According to a study last summer by the Heritage Foundation, the $80 billion auto bailout gave the UAW and its members nearly $27 billion due to the fact that GM couldn’t shed its outrageously expensive labor contracts, something it could have done in a normal bankruptcy.

As such, Obama didn’t bail out the auto industry; he bailed out the unions. Without the unions’ added costs, taxpayers would have owed nothing.

It’s not hard to see how this happened. The UAW and its affiliates give tens of millions of dollars each election cycle, almost entirely to Democrats.

This union influence explains why Obama’s auto czars, Steve Rattner and Ron Bloom, arranged a government bankruptcy for GM that flew in the face of hundreds of years of bankruptcy law and violated investor rights.

Bondholders took huge losses, while unions got a big chunk of ownership in GM stock that they weren’t legally entitled to.

In a shocking display of favoritism and blatant unfairness, GM’s union workers kept their pensions, while nonunion workers at GM spin-off Delphi lost theirs.

And no, GM isn’t an aberration.

We’ve seen this time and again, as corporate cronies of the Obama White House pocket taxpayer “subsidies” and “green investments,” then go belly up — whether it’s Solyndra in the solar energy business or Fisker in the electric autos.

U.S. taxpayers deserve better.

The GM bailout wasn’t a success — it was a dismal failure, costing thousands of jobs and billions of dollars. Next time, normal bankruptcy would be a far better idea.

GM wasn’t an unusual misuse of taxpayer funds. It is typical of the Obama Administration and how political investing is political but not investing.

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