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The Real Cost of the GM Bailout (2012) (Investors Business Daily) The administration claims to have saved the U.S. auto industry. What it really saved was the industry's dominant union - and it weakened capitalism in the process. Michigan is one of those light-blue states where Mitt Romney just may have a chance on Nov. 6. Don't be surprised, then, if Barack Obama's re-election campaign carpet-bombs it with ads noting that Romney once said the auto industry should go bankrupt, and that the Obama administration found a better way. In fact, two of the Big Three automakers did go into bankruptcy under Obama. But it was a bankruptcy like no other before and, we hope, no other to come. Washington not only used taxpayer money to buy control of General Motors and Chrysler, but it also rewrote the rules on the treatment of creditors. Superficially at least, the intervention worked, but it hasn't been cheap. GM is back to making a profit, though it is struggling in Europe and once again has lost its No. 1 market share to Toyota. And the perennial problem child Chrysler is now in Fiat's lap. The administration sold its interest in Chrysler in July 2011, racking up a loss of $1.3 billion. It still holds 26% of GM and is riding the stock price down. With GM shares trading at just over $20, the taxpayer's paper losses are at least $16 billion. Those are just the obvious costs. The government's tweaking of bankruptcy and tax rules freed GM from the usual limits on carrying pre-bankruptcy losses forward. Curt Levey, executive director of the conservative legal group Committee for Justice, estimates that this special tax break adds $18 billion to the cost of the GM deal. Also, the bailouts would have cost much less if not for the favored treatment given to the United Auto Workers. According to analysis by the Heritage Foundation's James Sherk and George Mason University law professor Todd Zywicky, the UAW giveaways were worth about $26 billion. Most of this sum came in payouts - stock and notes - to settle debts owed by GM and Chrysler to a union's Voluntary Employee Beneficiary Association, an entity set up to cover retiree health care costs. VEBA fared much better than other unsecured creditors and even those (at Chrysler) with asset-backed debt. The administration also added to taxpayers' costs by refusing to push for significant changes in compensation to current UAW employees. Bankruptcy law gives firms the right to renegotiate union contracts. Sherk and Zywicky argue that the failure to trim GM's labor costs to something like market levels has depressed profit and taken (by their estimate) $4 billion off the company's stock value. These are just the costs that can be identified today. In the longer run, the Obama administration has sent a chilling message about the rule of law and the sanctity of contracts - both basic to a free market. It's telling anyone who invests in or lends to a business that, should politics dictate, it would deny it equal treatment. Crony capitalism is getting well-deserved criticism this election year, and there was a strong element of it in the bailout of auto companies and unions. The deliberate tilting of the scales toward the dominant auto union took cronyism to an even more destructive level, because it undermined capitalism itself. The Obama team may claim to have saved iconic American businesses. But taking over any company to give labor a leg up on capital - call it crony socialism if you will - sets a precedent that threatens businesses of all kinds. GM CEO Admits 70% of GM Production is Outside of US (2012) (Trade Reform) Dan Akerson, CEO of GM, says that seven out of 10 GM automobiles are built outside the U.S. They have 11 joint ventures with Chinese government controlled auto manufacturers. They are moving R&D to China. When the federal government bails out an industry or provides tax incentives or subsidies, or when state economic development agencies do the same, there need to be terms that benefit the U.S. in terms of production and job growth. We can’t subsidize offshoring. Producing here and selling to our wealth consumer market need to go together. GM got bailout, now ships jobs to China (2013) (Washington Examiner) Saving General Motors from bankruptcy was among President Obama’s most frequently cited achievements when he ran for re-election last year. Democrats everywhere touted the company’s revival as proof of the 2009 bailout’s wisdom.  That was then.  Now, Obama has quietly released the auto manufacturer from a bailout requirement that it increase its production in the U.S. Instead, GM is spending billions of dollars building up its production capacity in ... China. This is happening despite the fact that the Treasury Department has to date recovered just $36 billion of its original $51 billion loan to GM. By most analysts’ predictions, American taxpayers will be out approximately $10 billion when the remaining stock is sold off. Which is a long way of saying that it now appears that taxpayers paid $10 billion to make it easier for GM to accelerate its foreign outsourcing and send more manufacturing jobs to China. Here’s what happened: In exchange for the bailout in 2009, GM promised to meet certain domestic car production targets over the next four years. The obvious point of this stipulation was to ensure that GM jobs remained here at home and weren't shipped overseas. The production targets started at 1.8 million in 2010 and were supposed to rise to 2.26 million by 2014. GM repeatedly missed the targets, beginning with an 81,000-unit shortfall the first year. Production increased thereafter, but never quite enough to meet the targets. Last year, GM fell about 13,000 cars short of its 2 million target. How did it do this year? GM refuses to say. But in February, GM announced in its annual report to shareholders that Treasury had agreed to “irrevocably waive certain of its rights” regarding the federal loan. These included “certain manufacturing volume requirements.” Guess what happened next? GM announced in June that it would stop releasing its North American production figures altogether. Its spokesman tried to justify this move with Orwellian doublespeak about how providing more information would result in “an incomplete data set to look at.” The same month, GM announced it would boost its output from its China plants by 70 percent. It is not just selling Chinese-made cars to the Chinese, either. GM is nearly doubling its export production capacity there from 77,000 units to 130,000. It doesn’t take a Ph.D. in economics to see what is really going on. GM cannot make the domestic production targets and still turn a profit. It wants to be spared the embarrassment of having everyone know that. Obama, who is in this as deep as anyone can be, doesn’t want the embarrassment, either. So both buried the news. It is yet more proof that Mitt Romney was right in the 2012 presidential campaign: GM should have gone through a traditional bankruptcy instead of the politicized farce of a taxpayer-funded bailout and government managed “bankruptcy.” The TARP funds involved could have instead been used to provide liquidity for a managed sale to a private buyer that minimized the opportunities for political interference in the new GM’s operations.