GM shows Obama is no Vulcan

May 29, 2009

obama– James Pethokoukis is a Reuters columnist. The opinions expressed are his own –

Here’s why the U.S. government’s growing control over General Motors — Uncle Sam may soon own some 70 percent of the troubled U.S. automaker — is so vexing: This is supposed be the “no drama, no emotion” White House, a place where cool, calculating reason holds sway.

If George W. Bush was the presidential version of the impulsive Captain Kirk of “Star Trek”, then Barack Obama’s supposed counterpart is the superbrainy, hyperlogical Mr. Spock. (It’s a much-bandied about analogy here in Washington, one that the current president says he’s aware of. Indeed, he actually seems to dig it.)

Then you have the highly regarded White House economic team. It’s a bright group steeped in the latest behavioural economics research, a revolutionary field which theorizes that human decision-making is riddled with “cognitive biases” (such as seeing patterns in random sequences of information) and psychological quirks. Homo economicus and rational agents we usually aren’t, say behavioural economists.

Given all that intelligence and self awareness, it’s surprising to find Team Obama’s approach toward GM (and Chrysler, for that matter) marbled with so much illogical economic policy that could have a terrible long-run impact:

1) Bullying creditors. Yes, bondholders may well accept General Motors’ new proposed offer of 10 percent of a reorganized company and warrants to purchase another 15 percent. But that doesn’t change the topsy-turvy reality of unions being favoured over creditors.

Coming out of bankruptcy, the government could own 72.5 percent of the automaker, the United Auto Workers 17.5 percent and creditors 10 percent.

By favouring a political ally over the rule of law — in this case, the fundamental principles of contractual rights — the White House has created both a terrible precedent and enormous uncertainty (perhaps resulting in even higher interest rates for borrowers with worrisome debt loads) as the government continues to inject itself into the private sector.

2) Perpetuating “too big too fail”. Back in December, GM submitted a plan to Congress requesting $4 billion to get through the month and $8 billion to operate though the end of 2009 with the option of an additional $6 billion if the economy really went into the tank.

Imagine if instead asking for $18 billion, then-CEO Rick Wagoner had asked for $50 billion? A more accurate figure since that is apparently what it is going to take to get the company through its probable bankruptcy — with tens of billions of U.S. taxpayer money needed in the future.

Maybe Congress would have balked, though probably not. But many millions of American taxpayers would have had a better idea of what they were getting into.

Letting GM and Chrysler fail would certainly have made the economy worse off and raised unemployment in the short run. But by sheltering companies from the full effects of their own poor decision making, Obama risks creating a less competitive business climate here that could result in higher long-term unemployment as seen in Europe.

3) Creating an auto policy that doesn’t match energy policy. What if GM and Chrysler, at the behest of the U.S. government, create a bunch of small, gas-sipping cars that Americans don’t have much interest in buying unless pump prices start creeping toward $4 a gallon?

Be prepared for even more losses. Now one way to generate interested buyers is by instituting a gas tax that would put a floor under gas prices.

But the Obama administration apparently has no interest in this approach anytime soon. In a new interview, Energy Secretary Stephen Chu said a gas tax wouldn’t be “politically feasible” during a recession. Any sort of carbon tax where the money goes straight back to the government will probably never be politically feasible in the United States. But balancing it with a cut in, say, payroll taxes just might be.

Maybe, in the end, Team Obama is merely falling prey to the classic behavioural economics phenomenon of sunk cost bias. Unrecoverable or difficult to recover costs already incurred tend to influence people’s future decision making, studies show.

Let’s say you have already paid for pro basketball tickets but there’s a terrible storm on the night of the game. You’ll have a tendency to still attend the game because you’ve already paid for the tickets. This is also called good money chasing after bad. Unfortunately for taxpayers, a lot more of their good money is headed into GM.


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If memory serves, in the 1970s the British government fashioned British Leyland which was the State controlled holding company of many of Britain’s auto manufacturers. It was a miserable failure. We again are not learning from the mistakes of the British. Product quality was terrible and productivity mediocre at best. Jaguar Cars Limited was the only profitable venture keeping the other manufacturers doors open. More to our woes, Jaguar exported 80 per cent of it’s cars accounting for its profits. No American auto maker is that successful now.

The notion of State run industries is not new. There is a history of this same approach in Fascist Italy and National Socialist Germany in the 1930s. All of this was done to jump start manufacturing idled by the Great Depression and Treaty of Versaille. Unemployment had brought abject poverty and starvation.

There is far more to be concerned with than merely the economic tangible of State ownership of industries. While socialism is considered a left leaning form of government and Fascism to the right, history has proved George Washington correct. In times of crisis the natural tendency of people is to invest too much power in one man and his administrators. And I quote “Where in one the instance this might be the vehicle for good, it is the customary weapon by which free governments are destroyed”. Germany and Italy of the 1930s are are testament to the claim.

Our Congress has become a rubber stamp for whatever our any of our Presidents will is regarding matters of war , finance and industry. This should be cause for concern for us all. At some point we are all going to have read the Constitution (very quick read) for ourselves and decide whether or not we are going to make our leaders uphold Constitutional law. As for now they clearly are not.

Posted by Anubis | Report as abusive

Is that what Margaret Thatcher was talking about in 1987:

I think we have gone through a period when too many children and people have been given to understand “I have a problem, it is the Government’s job to cope with it!” or “I have a problem, I will go and get a grant to cope with it!” “I am homeless, the Government must house me!” and so they are casting their problems on society and who is society? There is no such thing! There are individual men and women and there are families and no government can do anything except through people and people look to themselves first. It is our duty to look after ourselves and then also to help look after our neighbour and life is a reciprocal business and people have got the entitlements too much in mind without the obligations…

Posted by P Singh | Report as abusive

I suppose all those against public financing of the US auto sector were also against public financing of the US banking sector. Now how many thousands of billions of taxpayers money is that costing? Is it OK to finance Wall Street fat cats, but not OK to finance the auto industry?

Posted by vldr | Report as abusive

whatever happens to GM now and the future, I would not buy any GM product because of the bad news it got during the last several months. Its over GM, accept it!
It will just be a waste of money! There are a whole lot of brilliant, excellent superb quality cars available now. Its too late for GM. They still are at least 50 yrs behind in everything. It would be more logical and sensible to
just break down the whole thing and start all over again at least w/ a new name.

Posted by Ben Hern | Report as abusive

Amen, Anubis. That’s all that needs to be said.

Posted by Willy | Report as abusive

Any of you ever own a Yugo?
It was cheap, got good mileage, usually because it was pushed or towed more than it was running. It was also the product of a state run auto manufacturer.
Rather than have an American car company’s build cars with the same performance as the Yugo, the nation would be served better to allow GM and Chrysler to fail and allow new companies to emerge that can build a better car at an affordable price.

Posted by Craig Coal | Report as abusive

Jaguar?? Good car?? you’ve got you parties muddled. Jaguar was horrible. Yugo’s??? believe it or not they were a very reliable car. In fact there are several still on the road. The brief ownership of these companies (GM) by the government doesn’t mean it will be fully run by the government. In these trying economic times the government is the only one willing to give them money. They are trying to save jobs and two american icons. Due to free trade, toyota, honda ,hyunda all allow there vehicles to be “assemblied” here. Which may employ a few thousand people but these plants were built with more automation than our big three. I’m not defending them, yes they need to get smart with conducting business but they employ a lot of people. As far as a new company rising from the failure, it will never happen. This isn’t the 80′s. When Chrysler failed they took government money and Lee Iacocca turned it around to a money making company. I wouldn’t say the K-car was reliable but he made a cheap and affordable vehicle that actually got decent gas mileage. The same is happening today except the government is fronting all the money. Lets step back and also look and how volatile gas prices are here. Europe has mostly stabilized the cost of fuel. The U.S. needs to strip away some state taxes and allow them to place a fuel tax that can help stabilize the price. Its easy to say let them fail, but would you want to be one of the thousands of families who depend on a job there?

Posted by bill | Report as abusive

GREAT COMMENT by Anubis. When a government disregards the law, it is lawless. When the judiciary collaborates with the lawless government, it is discredited. Preferential treatment of the UAW over others should be troubling to every citizen. In regard to the prior comment, it is absolutely true that both the German and Italian fascist governments were each elected, each leader made up the law as they went along, were supported by their congress and therefore neither did anything during the war that was illegal — indeed, the customary weapon by which FREE governments are destroyed.

Posted by Ner Vus | Report as abusive

I’m just wondering how Mr. Pethokoukis feels about the administration favoring political allies over the rule of law and market principals when applied to the Wall St. bailouts?

Bullying creditors? Please. In the case of Chrysler, Cerebus, a private entity, saw the books and bought anyway. Why weren’t they held responsible for the debt? If I buy a small business, I get it all. Good and bad. Perhaps it’s political connection?

This is no longer a representative republic. We are an oligarchy. In that light, it all makes perfect sense. The privlileged and connected thrive while the rest of us strive!!!

Posted by Ted | Report as abusive

Seems like the last time these economically-savvy auto gurus ran the country, we wound up in Vietnam. And David Halberstam made a million writing books about “The Best and the Brightest.” Are we heading that way again–with a group that “knows best” and with the best of intentions almost ruins us?

Posted by David Lough | Report as abusive

There was another article here on The Great Debate about the auto plant wars, check it out if you haven’t: =3688

Now that govt will own 70% of GM will the battle shift from union vs. management to (union+management) vs. govt? How quickly do you think those two (union leaders and corporate heads) can go through the all cash? Eh.. :( tragedy of the commons, always relevant…

Posted by Andrew | Report as abusive

For some reason, when it comes to auto companies, everybody and their brother is an expert. But when it comes to banks, we defer to the Greenspans and Geithners of the world. Maybe it is because we (almost) all drive cars, so we think we’re experts on car companies.

Why the double standard between the auto companies and the banks? Why not let banks fail too? The same argument could be applied there. In fact, it is probably more important to let new, smaller banks emerge who will build a more diverse financial ecology that is less susceptible to self-styled masters of the universe.

I know, financial institutions’ impact on the economy, etc., etc. But that’s precisely my point: the auto companies have a big impact on the economy. They are one of the few industries left in the United States where we actually make something tangible that adds to the GDP rather than selling each other credit default swaps.

Also, let’s disabuse ourselves of the notion that the government will be running these companies. It won’t. It will temporarily be the major stockholder while the company is going through bankruptcy, but Obama has no interest in running the auto companies. He has enough to worry about. The government will want to sell the stock as soon as feasible.

If the government had taken a stake in the banks rather than just giving them money, at least the taxpayers would have a return on their investment. As it is, we pour money into banks, who actually caused this crisis, when they threaten to destroy the economy, but when they succeed, all the bankers and stockholders get to take home the profits and the taxpayer is left with next to nothing. Why is that?

And guess who has a major stake in some of the foreign auto companies that are most touted as exemplars of all that is good? The governments of those respective countries. Do you think the Chinese government has nothing to do with the Chinese companies vying to enter the US market? Do you think the Japanese and European companies have received no aid from their governments over the years and recently?

Posted by LiveLong&Prosper | Report as abusive

It is likely that the losses the government and the public have sufered through GM in the past through unseen subsidies – over-risky GMAC loans hurting the economy, inefficient cars pushing up gasoline consumption, air polution and public health costs, GM vehicles creating greater wear-and-tear on publicly-built highways than lighter foreign-made vehicles, failure of GM to invest in “green” and public transit vehicles, etc. – dwarf the present bailout costs. IF these unseen subsidies can be controlled while still maintaining GM as a major employer by giving the government and the employees a controlling interest in deciding the company’s direction, the bailout is well-invested. The investment would realy not be in the old GM but in a new company with priorities more in line with the inteests of the taxpayers who have been subsidizing GM for many years.

Posted by Nicholas Arguimbau | Report as abusive

“What if GM and Chrysler, at the behest of the U.S. government, create a bunch of small, gas-sipping cars that Americans don’t have much interest in buying unless pump prices start creeping toward $4 a gallon?”
The government always can resort to its heavy weapon – tax. Just slap another $2/gallon of federal tax, and we are right there over $4. But who will bear the brunt of this assault?
Sure not the well-off folks. Whoever could buy a Mercedes will neither hesitate to fill it up nor trade it for that hypothetical Government Motors (still GM – they can keep the old logo :-) ) – produced fuel sipper.
Not the plumbing/roofing/landscaping/whatever contractors driving gas guzzling trucks/vans. They can’t have their tools of trade fit in a compact, but they can pass the fuel cost on to the customers.
But the poor will be definitely hit. They can’t buy these shiny new fuel sippers due to lack of either cash or credit. There’s not that many used small cars available due to both past car buying habits and the fact that larger vehicles usually better survive years of use and abuse. Motorbikes as a mode of transportation are not that bad in India and other warm places, but here we have real winter.
The hardest hit will be minivan moms. There’s no way you’ll fit 2 kids in their child seats, a stroller for younger one, and a bike for older one in a compact. My Volvo V70 wagon is barely enough. And if more than 2 kids – forget it, only a minivan would do. There’s no way to make fuel sipping minivan – its size and weight need energy to move around, and even filibuster-proof majority in Senate will not enable BHO to change the laws of physics. If every trip to the playground will be a hit to the wallet, guess how many of these moms would vote for incumbent politicians come next elections?
And I’m not even speaking about the effect of any new taxes on overall economy that is already deep in recession.

Posted by Anonymous | Report as abusive

Anubis, spot on. Also, in reference to Jaguar, production remained based in the UK. Not so with GM. GM’s most lucrative market is Asia. Cheaper labor, higher profit margin, and they actually view GM as a semi-luxury company (WTF?!?). We are merely keeping the company afloat until they can wrangle their way out of North America, and then ship cars to us in pieces while still probably calling themselves an “American Revolution”. I wonder how UAW auto workers will feel about gluing the trim on a Daewoo.

I think I am finally catching on to what Sprok meant when he said “the buck stops here.” We will soon be paying for things with hope, the new currency. Too bad…all of my savings are in $bucks$.

Posted by Patrick | Report as abusive

Good article. Clearly Obama thinks he can just spend the US out of this current recession (depression likely to come) as he simply does not understand basic economics. The world is no longer US centred. This is not like before where the US had a trade surplus and a positive savings rate (now positive for the last few months) so it could borrow and spend. This $1.85trl deficit for 2009 means that the US has to borrow or print $5bn a day! It is unbelievable and will probably get much worse. The US needs to face up to its debt reliant economic model before it is too late. Supporting GM, Chrysler, AIG etc is not the way forward. The Bond market will not accept this.

He is the wrong man at the wrong time.

Posted by D Rumsfeld | Report as abusive

Hearing arguments about ‘saving jobs, they employ a lot of people, etc’ made me think of the following:

aren’t people being reliant a bit much on The Job, sort of like other people are being reliant a bit much on the government? Jobs come and go, and worker should be able to do so too. If the jobs leave town, follow them. If the jobs are gone for good, make a new one – start a small business, with the advent of the internet it has never been easier. You want manufacturing? – buy an old lathe or a mill and start making and selling small parts on your website. People should not lock themselves into one job for their lifetime, the world is a dynamic place.

Posted by Andrew | Report as abusive

I hope all those decrying the expansion of government never voted for George W. Bush or the GOP congress of the last 8 years. They presided over the largest expansion of government since FDR. They also set the house on fire, and now Obama is being criticized for spending money on water and a fire department to put it out. In the past four months, the GOP got religion (figuratively) and now talks in very serious tones about the need for fiscal responsibility.

I also hope all those being holier-than-thou about the evil auto industry don’t drive to work, especially in California where the average commute time is 35 minutes. If you don’t like the auto industry, put your money where your mouth is and take public transport.

Posted by Spock | Report as abusive

well first off Obama is not part Vulcan and he is not from outer-space. As far as mixed races, most of us here in America are multi-racial. Our skin may not be the color that many want it to be when we say that but being part French and part Russian is just as multi-racial as being part African and part Irish. Difference is the skin color outcome will likely result in a lighter shade for the first multi-racial make-up and a darker shade for the second multi-racial make-up above. But skin color is not race. Race is the tribal origins of a people or “a group of persons related by common descent or heredity”. So if you are comparing multi-racial backgrounds then most people in America are like Spock in that sense.

But when you compare a person that should be judged on his actions to those of a fictional character’s actions, a character who is known for his behavior, then the behavior is what should be compared not racial make-ups.

Obama lies in general, Obama also lies in making false promises to people regarding things he has no idea how to secure, Obama manipulates to advance his career, Obama is either a hate-filled racist or has decided in the past to hang around with hate-filled racists and make promises to them for votes in order to also advance his career within his local community, Obama has in the past co-horted and worked as “community organizer” primarily just to represent and advance people who share his shade of skin color while calling it “helping the poor” (last time I checked poor came in all colors, genders, and races and poor is not something exclusive to one shade of skin color. Call it what it really is, helping people of your own shade of skin color not helping the poor).

Spock doesn’t lie, spock doesn’t promise people things he has no idea how to obtain, spock doesn’t manipulate in order to advance his career, spock isn’t a hate-filled racist and/or doesn’t support them in order to advance his career or get votes, spock doesn’t work to organize people to primarily advance people who share his shade of skin color…

There are no more unique similarities between Spock and Obama than there are between comparing Spock to most other people in the America.

Comparing Spock to Obama is an GREAT INSULT to Spock’s story.

Posted by CJ | Report as abusive

Yes, the government bailed out the banks and Wall Street, and we will find out soon enough that it is a big mistake.
How does this justify the bailing out of the auto industry?
Because we make one mistake are we now bound to make more?
Or would it be far wiser to learn from past mistakes and move forward with prudence. The government is spending trillions of dollars to “save the economy” and justify it by saying they are saving jobs. Then they admit that the economy will continue to lose jobs for some time to come.
During the Great Depression the people were told that they just had to let the government do its thing and prosperity is just around the corner. Prosperity finally came ten years later when America united together in a common cause. It is my hope that we can find a common cause that will get Americans to work together once again without having to fight another world war or continuing to line the pockets of politicians and the lobbing groups that support them.

Posted by Craig Coal | Report as abusive

Because inaction was working so well up until now…

We need to get the ball rolling on American automakers or they will continue to take the easy way out. The economy is falling apart. Corporate America is exploiting and rampaging over the the rights of every American. The ice caps are melting and sea level is rising. We our poisoning our own drinking water. The best you can do is shoot down every attempt to fix anything. Quit playing the fence and lets hear some real ideas. This left and right thing is getting real old.

Posted by Natheya | Report as abusive


Posted by Edson Magalhaes | Report as abusive

First Anubis is right on.
It isn’t the goverments job to intervene in the private sector to this level ever.

2nd the Anonymous post is correct with the soccer mom and mini vans comment.
This nation will always need a varitey of Vehiceles for all sorts of things such as if you have a camper or a boat gas sippers will never pull them. There would be a lot more people out work if we stop making campers ,boats ect. Not to mention what about the parks where they go what about all KOA’s with no campers can they survive.

Bottom line is we need to get our own fuels (OIL), (natural gas)we have it we just have to drill it.

Know this if we had “the” alternative fuel right now
we wouldn’t have the Infastructure to implement it’s usage fully for at least a decade.

There is way to much unknown about the “GREEN” stuff to shut our nation down just to find out. And please don’t post a bunch of websites about this i know of a few hundred myself going both ways hence none of them are probably all right.

We just have to survive , grow, and be as responsible as we can be as we go not digg a hole to see if we can get out.

Our goverment is suppose to work for us we do not need them to tell us what we need but rather we need to be teeling them what they must do to stay in the position that they are in.

That is the problem with the GM thing here. Let them build cars ,all of the auto companies. And quit slappin the ignorant emmision laws on them that strap them ;R and D is big cost come up with 1 fair set make it nation wide and shut up already.

Posted by Free | Report as abusive

Craig Coal:

No, during the Great Depression, people were told that the markets were self-correcting and all they had to do is wait. They waited until 1932, when they got rid of Hoover and elected FDR.

Posted by Spock | Report as abusive

Response to Vldr

We cannot compare GM with Wallstreet. Both are broken, but they are not comparable.

All submarkets (e.g. labor ,product, etc.) on wall st. are very hyper competitive. The end result is that they deliver prdocuts/service that the nation wants. In fact, the current credit fiasco is because they are too competitive and it got over-creative… but, the fact is, America will not be what it is today without a healthy capital market.

GM (or the big three in general) is a whole different story. The big three are basically running in a socialistic/communistic model. the Union take away the competition among the labor, and therefore, taking away the incentive for the workers to improve themselves. The huge labor burden also creates constraints on what GM can do with their products. They cannot close outdated plants and cannot replace workers with new automation due to the Union. Developing products require capital and buffer funds… but the Union squeeze the big three so hard that they cannot risk developing new innovative products.

I am not against the workers. but I am against the Union. It is the Union that destroy the company and the lives of the workers.

So, net net, it is NOT a good idea to finance either (W.S. or GM). But if the gov wants to finance one, they should finance W.S., not GM.

The Obama administration, unfortunately, is paying back all the political capital they had received, disregarding the basic principle of economics. I really hope that the American ppl will wake up and see the long-term effect of his policy… if things continue like this, the U.S. economy will suffer for a long time to come!

Posted by LZ | Report as abusive

Hey Spock,

Clearly, you must be joking about the Great Depression and Hoover, right? Hoover did spend money and the economy got worse. Look it up. And as for FDR, he spent money at an alarming rate and the economy didn’t improve until around 1945 when unemployment tanked due to our involvement with the war. And now look at what we have thanks to FDR – things like Social Security (bankrupt).

Larger government, be it Democrat or Republican isn’t viable. We have thousands of years of governmental history to review. Guess what? Not one case shows that those economies lasted when governments grew. Not one.

Posted by tired | Report as abusive

Why does everyone look at GM’s failure as a “good for them!” deal. Look past the GM and Chrysler. Look at the area that supports these two big giants. Local restaurants, steel mills, glass factories and hundreds of smaller businesses. The one who said “jobs come and go, just go were the work is” has obviously never had to deal with this problem. The loss doesn’t contain itself to Michigan or Detroit in general the loss will ripple through out. To compair our government to socialistic or facist regimes is insane. We quickly dismiss the greed of banks and lending institutions that reaked havoc on our economy but quickly denounce helping the working men and women of this country. Yes the UAW has a strong hold on this indistry but that can change. To say that ” Unions take away the competition among the labor, and therefore, taking away the incentive for the workers to improve themselves” is off mark . I’m not a pro union person but a Union does create labor competition. It also insures other competing manufactures don’t use unskilled or cheap illegal labor. You would be suprised how well trained auto workers are. In fact thank them when your car starts in the morning to get you to your job or home in a storm. Everyone from the engineers to the line worker is skilled. Sure the automakers need to stop rolling around in the large margins they made from sales and reinvest but we are in stranger times than the depression. I’m not associate at all with the auto industry, I’m just a hard working American.

Posted by Dean | Report as abusive

I agree with most of you on some of the screw up.

But thing which gets me is that calling UAW which supported him as friends getting preferential treatment and calling bondholders as greedy.(He should have checked that bondholders are retirement funds} and not rich fat cats.

That is audacity of stupidity which has resulted in making bad worst. Everybody marvels at the brilliance of person surrounded by vulcans {which everybody thinks } and throwing sound economic principles out of the window.

Maybe training under ACORN helped, though never ran a business. Add to mix irrational voters we have a great recipe for disaster of epic proportion which has had no previous equivalent, we could call it of biblical proportions.

But it does not change the facts that our economy is being f****up for political gains or some hidden agenda.

Posted by VJ | Report as abusive

GM shows Obama is no Vulcan…

James Pethokoukis:
Given all that intelligence and self awareness, it’s surprising to find Team Obama’s approach toward GM (and Chrysler, for that matter) marbled with so much illogical economic policy that could have a terrible long-run impact … By…

I wondered last year how long it would take for the media to compare the President to a Vulcan. In all honesty he always did remind me of Spock even during the debates. On a similar vein, I believe the Ferengi were patterned after Warren Buffet who has really large ear lobes.

Well, it’s a Democratic administration. So to me, more important than any short-term outcome, it is comforting that somebody wants the stuff in the box to reflect what is written the packaging. That’s important from a standpoint of trust.

However now that we are beyond that initial hurdle, yes I believe the administration is hyper-reactionary. This is not to say that I do not consider the problems urgent. The underlying barrier is that we don’t know how to consistently fix certain problems. There are various solutions that make sense from an historical standpoint. But our faith is misplaced. History does not repeat itself exactly all the time.

So here we are waiting. We expect everything to return to normal. It has always returned to normal before. Bush used to complain about people still fighting long after the Iraq was was declared finished. The fact Bush was a bold-faced liar has not escaped the general population. I see that Kremlin-style propaganda tactics have infected the US government.

So I have been waiting to melt because of global warming. I’m waiting for the economy to pick up in 2010. I’m not going to change the way I do things. Why should I? Everything is perfectly normal. Now sure if we were in trouble and had to change the way we live, I would accommodate. But as far as I can tell everything is fine. So we can just keep on at it and do nothing differently.

Posted by Don | Report as abusive

Hmm, me thinks Comrade Chairman Obama is quite comfortable having the federal government “centrally plan” everything from the banks, the autos down to the temperature you will be allowed to set your thermostat at.

Naw, that’s mean, our Alien in Chief, Barry Dunham is a temperate, moderate fellow. ha, ha, ha…….

Posted by RSG | Report as abusive

Nothing in Obama’s demeanor ever really reminded me of Spock.If one feels the need to relate him to a fictional character he actually is much more like an amalgam of Chauncey Gardener and Reggie Hammond

Posted by Lynn | Report as abusive

“I suppose all those against public financing of the US auto sector were also against public financing of the US banking sector. Now how many thousands of billions of taxpayers money is that costing? Is it OK to finance Wall Street fat cats, but not OK to finance the auto industry?”
Since the government created the federal reserve, and took control of the monitary system, yes. Wall street fat cats? Those “fat cats” are pension funds and personal baking and investment accounts that a huge number of everyday people are involved in. If the UAW and GM go out, its painful for a sectore of Michigan and Indiana. If the banking and credit system goes down, every industry in the country stops. Short and long term credit are what keep goods flowing in all industries. The UAW/GM bailout are all about paying back supports during the last election, not whats good for the country. If GM can’t compete, because the UAW is paid above their value, good riddence, let someone else give it a shot. If they produce a good product at a fair price I’ll buy it. If not let the company die.

Posted by brad | Report as abusive

I wonder how many Americans outside of the rust belt are going to give GM a shot knowing that the UAW is empowered with each purchase. I’d rather help non-union workers in the South even at the risk that the profit flows back to Japan.

Anything that emboldens these idiots to further the delusion that increased unionization of our economy is a good thing gets thumbs down for me. Look no further than GM, Chrysler, teachers unions, postal service and the rest of the bloated and unionized government beauracracy to see how well that turned out.

Want to help GM? Let them go bankrupt so they can reorganize and move South to more hospitable lands. Michigan is dead.

Posted by Tom | Report as abusive

Brad,I hated bailing out banks, but the idea was that everyone was being effected by the credit crisis.Small businesses were losing lines of credit even when they behaved responsibly for years. Consumers could get car loans and the car industry benefited by credit being available.The car industry is a narrow interest. The writing has been on the wall for years. CEO bonuses were ridiculous, UAW wages and benefits were ridiculous and consumers and investors just kept getting pushed aside. I would rather help a credit-worthy small businessman get a loan than than endlessly bailing out an industry that just doesnt have the courage to face reality and expects the govt to keep it going.

Posted by spock | Report as abusive

“I’d rather help non-union workers in the South even at the risk that the profit flows back to Japan.”

I understand the sentiment, but it’s not a risk that the money flows back to Japan, Germany, etc, but a certainty that it does.

Posted by docob | Report as abusive

One aspect also not learnt from the British Leyland experience: At one stage British Leyland decided to “rationalise” it’s dealerships- shut some down so as to have just one dealer per town. I gather there’s some controversy over the selection of GM dealers to be cut loose- but if the British experience is anything to go by they’ll mostly be up and running selling rival cars in a very short time. It doesn’t help expand business.

Posted by Pat | Report as abusive

Problem with Bush as Kirk and Obama as Spock:
Kirk was competent.

Posted by Analogy-Watch Inc. | Report as abusive

I sincerely hope that the vehicles I own today – free of liens – will see me through the nightmare that is Barack Obama. GM is the LAST automaker from which I would willingly choose to make a purchase, and never more so than now when this anti-trust felon and his cronies will be incorporating every big brother notion and tracking device into their cars so as to force me to live my life the way they dictate. Le mot juste, I’m sure you will agree.

Posted by elephant4life | Report as abusive

Not Spock, McCoy:

“Damn it Jim, I’m a politician, not an enterprenur”

and in 2012

“The economy’s dead, Jim….”

Posted by Thucydides | Report as abusive

Natheya, when you boo hoo hoo about the melting ice caps and rising oceans, you’re basing that on what? I’ve lived by the ocean all my life. Guess what? No change. At least none the eye can see. Yes, there are some atolls that are sinking, but that really isn’t the same thing, is it? Because the ocean cannot rise in selected areas. All connected, you see. There’s some ice melting at the poles, always, just as it’s growing in other parts of the poles. Please spare me the horse-squeeze about all those scientists on board with global warming. Consensus isn’t science. It’s opinion.

Posted by Steve Steinberg | Report as abusive

Only Lilliputians like Pethokoukis use analogy in argumentation.

Posted by Steve Stone | Report as abusive

“it’s surprising to find Team Obama’s approach toward GM (and Chrysler, for that matter) marbled with so much illogical economic policy that could have a terrible long-run impact”. How can that be surprising?

President Obama and team are not logical. They don’t use reason. They believe in the initiation of force wherever they can use it. They are looters. They are spending your money and mine with little regard. They are borrowing at levels never seen before. They are going to push for taxes. They are going to attempt to complete the enslavement of doctors.

None of it is logical. It is looting — plain and simple.

Spock, no. With those ears, more like Yoda.

The takeover of the US auto industry is repulsive. I am sure there are many like me that will never buy an automobile from a company owned by the UAW and the Federal government. I wonder if they have that sales decline built into those 10 year projections.

Posted by TexasT | Report as abusive

1) Spock, yes, but as designed VI Lenin, Ceausescu or Mugabe.
2) One of the things Obama’s praisers love to remind everyone is how much money he was able to rise and spend for his election. Now, after we’ll draw the line in this GM affair, they we’ll be able to religiously evoke the enormous amount of money he spent for his re-election!

Posted by misanthropicus | Report as abusive

Poor dear Mr Pethokoukis. You were obiously away with Mr Spock on a mission of exploration for the past year. You are assuming the country elected some version of Mr Spock to work diligently & honestly in the National Interest. That didn’t happen, we elected “The Chicago Way” to govern us for the next 4 years. If you understand that the White House is corrupt at its core then White House actions in regard to GM and Chrysler are completely rational and logical. 1. Obama is paying back the unions which helped put him into the White House. What better way then abrogating the property rights of investors and giving the unions a compeltely undeserved priorty in bankruptcy court. Also what better way to insure those uncomptetive pay and benefit packages keep flowing than to give them direct access to the U.S. treasury? 2. With this arrangement the opportunities for payoffs, graft, corruption, and pay for play are endless. The only limit is the U.S. treasury. So stop looking at it like the White House is an honest place. Look at it through the green colored glasses of corruption and it will all fall into place for you! Let not your mind be troubled!

Posted by valwayne | Report as abusive

Spock: Yes, one of FDR’s greatest accomplishments was to make the depression of the thirties not just another downturn but “The Great Depression”. We had several financial depressions before 1929 and they did correct themselves.
Hoover acted as the George Bush of the era by setting things up so FDR could set up the greatest transfer of wealth from the middle class to a selected group of wealthy individuals up to that time. I think Bush-Obama is now out-doing the Hoover-FDR team on taking wealth from the middle class and transferring it to political cronies.

Posted by Craig Coal | Report as abusive

I have a question. Whether or not a financial institution accepted TARP money, that doesn’t relieve them of their fiduciary responsibility to act in the best interest of the bond holders does it? If not, then all the bond holders, whether seniors, teachers unions, even speculators, cold sue the banks for fiduciary breach couldn’t they. After all if secured creditors could do allot better in court then the peanuts offered by the administration, why wouldn’t they insist on taking their changes in bankruptcy court. How many law suits is this going to result in?

Posted by KM | Report as abusive

I fell in love with the GMC Acadia and have been wanting to purchase one to replace my wife’s Honda. However, as other commenters have posted, I will not buy a car from a company owned by the UAW and the US government. Who is really willing to put their hard earned cash into the stock market when boards do not hold CEO’s accountable, companies become too big to fail and bad management is further emboldened instead of punished, and finally the US government then completely destroys contract law. As bad as he is, Bernie Madoff is not the only wolf picking at the bones of our once dynamic free market economy.

Posted by Robert Brammer | Report as abusive

Pethokoukis is a far right wing shill….he just doesn’t do objectivity. A week before the election he was predicting a McCain victory. Why anyone with a brain in his head would pay the slightest attention to his ideologically biassed comment is a mystery. God knows whether the rescue of GM and Chrysler will work out but of this I’m sure it had to be tried. Pethokoukis btw was for just letting them fail last year regardless of the consequences and they would have been dire. Sure this total nonsense plays with the crowd of no nothing rightists here but it has no contact with the real world.

Posted by Ottovbvs | Report as abusive

I am one of those fools who always bought American cars when everyone I knew had turned away from them. I also bought bonds in Ford and GM and, of course, I have had to learn some tough lessons:
Bonds are not safe investments
There will never be another Chryler or GM vehicle in our garage.
My loyalty and my trust were trashed.

Posted by D. Gustafson | Report as abusive

What worries me more is that nobody seems willing to point out that allowing political contributors to keep their dealerships open, while simultaneously closing competitors’ dealerships smacks of some unsavory political favoritism. Why is the media ignoring this issue? And why is it that the Obama Administration can continue to create such monsters without any outcry from the media? In a similar vein, why is nobody concerns about the downside of a “Cyber Czar?” On one hand, sure, we need internet security. On the other hand, how do we know that this isn’t just another way to keep political opponents quiet? What do you want to bet that suddenly some conservative blogs and websites can’t find servers once the new apparatus is in place? Slippery slope, folks, slippery slope. I said before that their ain’t no such thing as a free lunch, and I think pretty soon a great many Obama supporters are going to find out the real results of their vote.

Posted by Ellen K | Report as abusive

Anyone who believes GM and Chrysler are being directed down the wrong path because the concept implies $4.00 gas should be summarily dismissed as an ostrich.

For those who believe the 2016 fleet targets are unattainable, just look at the MPG ratings for the Toyota Camry and Toyota Prius. Taken together they meet the 2016 standard in 2009 and the market has shown a lot of people want to buy these cars. Perhaps GM can create similar attractive offerings.

Posted by syzygy | Report as abusive

I’m an English teacher working in South Korea, and even with my limited knowledge of economics I can see the U.S. economy snowboarding off a cliff under the the gentle tutelage of the Obambi-Ayers-Wright junta.

Back in the OSSR , boys! You don’t know how unlucky you are boys, back in the OSSR!

I think everyone can guess what the “O” in the OSSR means.

Long live the Holy Trinity-Adam Smith, John Galt and Dagney Taggert!!!

Posted by Michael Gallagher | Report as abusive

“In fact thank them when your car starts in the morning to get you to your job or home in a storm. Everyone from the engineers to the line worker is skilled.”- Posted by Dean
Yes, I thank the engineers who designed my car. I thank the workers who built it. The Swedish engineers and workers. And I also appreciate the American non-union workers at Volvo dealership who keep it running, service after service, year after year. And who put it right when it was hit hard from behind. And especially appreciate the ones who built in it the strength to withstand hits like that. The Ford Windstar van – much bigger and heavier vehicle, built by UAW, that hit my Volvo, was taken away by a flatbed, its front completely smashed, driver taken by ambulance. I drove the Volvo away, and my family didn’t suffer as much as a scratch.
Before getting into Volvo I kept open mind, and would have considered an American car if the price and features were right. Now, and especially after reading this piece, I will consider a car built by UAW only when the hell freezes over.

Posted by Anonymous | Report as abusive

I have owned various GM vehicles/trucks for my businesses in the past. However, Government Motors is never getting any of my money or business in the future. I refuse to do business with any company that abuses the rights and claims of corporate bondholders solely so that union workers can be paid back for their campaign contributions by the Obama administration and continue to be grossly overpaid for the services. I will buy either from Ford, the only American company with enough courage to refuse TARP money try and survive on their own merits (even if their UAW workers are overcompensated although not as bad as the other two bankrupt US auto companies); or I will buy from other foreign automakers, who incidentally also hire hundreds of thousands of American workers and are more competitive in the marketplace.

Posted by David | Report as abusive

I don’t see any logic in the direction the current administration has chosen. In its stead I see an almost willful arrogance to discount the logical course of action. While most households in western societies are being prudent – cutting expenditures and trying to minimize their exposure to the economic downturn, the administration is doubling their deficit spending, manipulating capital markets through massive intervention programs and going off the reservation in terms of monetary policy.

With academics at the helm of the economy, the administration has “rolled the dice” and their Keynesian approach to the solution had better work, because it’s the only card in their hand! Unfortunately, the approach may have witnessed its only success in simpler times, when economies of scale were dominated by imperial interests and not the complexities of globalization.

The exposure is considerable! The record deficit spending will devalue the currency, increase interest rates which in turn will drive inflation. These conditions are toxic to the formation of capital markets and the resulting unemployment combined with stagnant growth paint a very bleak picture for the US economy.

The only logical thing for the administration to do was to cut spending drastically, lower taxes and let the market work itself back into a state of prosperity. It would’ve got there on its own, without any intervention, if only given the chance.

Posted by gregson | Report as abusive

I will never buy a GM car from a government run car company.

How long will it be before the government REQUIRES you to buy a GM or Chrysler? Or, they will tax other cars so heavily, that you will have to buy from them. America as we know it is gone…….

Posted by Skippy | Report as abusive

I remember when the federal government decided – in its infinite wisdom – that no toilet could use more that 1.6 gallons per flush. The National Energy Policy Act of 1995 it was called. Except, the initial models were terrible. The crap wouldn’t go down, and they plugged up. There was an active smuggling operation bringing toilets down from Canada that exceeded the 1.6 gallon usage (but would actually work) for almost a decade.

Chryslet and GM were already selling small cars (at less than their cost of production) just to keep their fleet sales up to CAFE standards. Now the federal government is saying to them to stop selling the cars that people were actually buying at a profit and sell cars that no one wants and that even if they did, Detroit would be another decade actually getting the bugs out of the new cars.

If Detroit thinks this is the path to profitability, they are wrong. It is the path to permanent government dependency for the UAW while foreign manufacturers take all the jobs.

Posted by George Hanshaw | Report as abusive

I hope all you lefties cheering on Obama Motors are going to belly up too buy those vehicles. Because no true conservative will ever consider doing so. If Obama and crew want to break the back of capitalism, I for one want to break Obama Motors.

Obama and the democrats have been running roughshod over conservatives with glee in so many ways. But now they are going to learn the rule of unintended consequences, one can forcibly drive horses to bad water, but you can’t make them drink it. It is a way to strike back at Obama, and strike back hard, by not buying a damnable thing from any enterprise he has control over.

Posted by Travis | Report as abusive

This is a kabuki dance – it has nothing to do with saving GM – that’s just the fig leaf – the real intent is to grift as much taxpayer money as possible before liquidation. No one will buy these government cars – well almost no one – government will buy them along with some other coerced entities, but that’s it. It’s all about squeezing every last dollar out of the people least able to say no, the investors and taxpayers.

What’s interesting is the wave of boycott talk at the idea of buying a GM car, now tainted with the curse of government ownership. If that GM boycott transmutes into a tax boycott, a tax revolt, then you might see real “change”.

Posted by JohnnyO | Report as abusive

Not allowing GM and Chrysler to go bankrupt dooms this economy in the long run. They would have reorganized, and emerged as better companies. Instead the government, legally or otherwise, in order to please the unions took these companies over. The “concessions” the unions made were not nearly enough. It is criminal what the administration did. These car companies are going to be worse than anyone could ever imagine.

Posted by lee | Report as abusive

Silly Travis,
Liberals don’t buy American cars, knuckle dragging red staters do, or did until GM became OM. I have purchased only American brands up until now, 1 Jeep, 2 Mercury’s and most recently a Pontiac, but from now on I’m only going to buy cars built in Red States like Toyotas or Hondas.

Posted by Dave | Report as abusive

I strong Obama supporter, but one of the main reasons I have been is Bush’s disrespect of the rule of law. I felt Obama would have a strong fidelity to the concept of the rule of law taking precedent over temporary political situations. As a result, I have to agree with the author strongly and say that I am very disappointed with regard to Obama’s handling of GM. If it is not a result of emotionalism or “sunk cost bias” (as the author says, then the only other explanation is an overwhelming prejudice in favor of unions over investors. The treatment of secured creditors in this situation, and in Chrysler, is a very blatant case of putting personal political goals of the moment over and above the rule of law and it does not portend well for the cost and availability of future secured credit. As an attorney that has worked on past asset backed/secured credit projects, I can guaranty that this will effect the deals I see in the future. And the effect will NOT be more projects and more jobs. I must agree with the author as having nailed his analysis on this situation and say that I am very disappointed with Obama.

Posted by D. Abercrombie | Report as abusive

Travis, your righteous indignation is partially misdirected. It was Bush who began the bailout for GM and Chrysler. Do you really think Republicans are conservative and Democrats, liberal? And what of the gargantuan rescue of the financial industry that the auto bailout pales to in comparison. The government runs day to day operation of banks. Both parties began signing away our future long before the second Bush arrived on the scene.

The finance and manufacturing industries are under government control. Next will be energy, insurance and health. Our institutions and cities are crumbling all around us. Yet we are told the worst is over and things are getting better. For who?

The decline of capitalism an ominous development. Karl Marx stated that a society and their government that become fascist is a symptom of capitalism in decline. The first half of twentieth century world history makes a great case study for Marx’s claim.

Posted by Anubis | Report as abusive

America is in a profound crisis that nobody seems willing to refer to by name, but which too many biased commentators appear to think is “almost over” as though it would just “go away” the way it just somehow “happened”.

But because it didn’t, it won’t.

This crisis is no accident. It was engineered, and it won’t end until the command-level crimes that caused it are prosecuted.

There is no way America can spend its way out of the crisis, because at consumer level there is virtually nothing left to spend that hasn’t been tainted and mortgaged by white-collar criminals who need rounding up and jailing like any other common Somali pirates.

The problem is, this problem isn’t new. It’s safer than any GM vehicle to say this epidemic crisis of monumental proportions cannot be solved or healed by subsidizing incompetence and duplicitousness, i.e. by donating bipartisan “billions” aka Trillions to the very same power-drunk kleptoholics who drove America into the ditch, and have been doing so for several decades now.

To suggest that the current administration is interested in anything other than doling out public money and public excuses by the ton to the same old zombie predators, to the point of public extinction – any more or less so than the previous White House cabal, is the height of lunacy.

General Motors is a joke with no punchline. If Obama were the least bit serious about ending the crisis at General Motors, he the first thing he ought to have done would be to appoint Ralph Nader as Auto Czar.
But of course, he didn’t.

Meanwhile the crisis continues without end. It’s not just about cars, it’s about whether America intends on going anywhere, at any speed, ever.

Apparently however, bipartisan America is more interested in spending its declining years on blocks in the front yard until its wreckers finally come off the publicly subsidized meth binge and report to their parole officer.

Posted by The Bell | Report as abusive

The phrase “Buy American!” will soon become an Offer You Can’t Refuse.

Posted by Neil Ferguson | Report as abusive

The message of Pethokoukis’ piece is much appreciated. Obama and Co. are well on their way towards “. . .fundamentally transforming the United States of America.” Unfortunately for the people of the U.S., this means the third phase of soft fascism, American style (phase one = FDR’s New Deal, phase two = LBJ’s Great Society): More spending, regulation, intervention, and taxation; less freedom, choice, self-determination and liberty.

Minor quibble: Did Pethokoukis come too close to the line of not giving credit for his basketball ticket example? Or is this a common story around the ‘net?

Posted by Marshall | Report as abusive

Maybe he is a Vulcan, and after he has transferred America’s, and as many other countries as possible, liberty and wealth to the already wealthy he will pull out his communicator and say “beam me up” as he disappears into thin air.

Posted by Peter H | Report as abusive

Let’s cut to the chase. This Messiah is a disaster.

Posted by Independent60 | Report as abusive

We are in big trouble…

Show me a government entity that runs efficient, cost effective

There is no-way that we can competitive at global level which our American automobile with this level of inefficiency

But i’m praying that i’m wrong

Posted by Sam Q | Report as abusive

Looks like the Vulcan is a bust.

Where is a Ferengi when you need one?

Posted by Anon. | Report as abusive

The government could do something. Right now they take in tremendous sums of money in taxes. Once they set money aside for the military, infrastructure, boarder security, congressional sessions, and the courts, they should return the money directly to the population instead of using it run poor quality programs themselves.

That way you and I have a real financial safety net. Let the government institute a national sales tax of two percent on all commercial sales. They can collect this money and keep forty percent for their operations and give the remaining sixty percent back to you and me.

This frees businesses from having to pay into retirement plans. It eliminates the union/management struggle, and it gives every American the means to provide for their own health care and education by utilizing the markets.

Profit is still possible. But the profit motive does not rule the economy. And providing a truly equal social safety net encourages risk taking and innovation, which sparks industry. This in turn produces more tax revenue, sixty percent of which goes to the social safety net. The cycle is one of sustainable growth.

You end up with smaller more efficient government, a free market that can profit, and a consumer base that is being invested in.

Tired, your acts are dead wrong. The U.S. had very little debt in the 1920s and 30s. New Deal borrowing did not accrue until the end of the first FDR administration. The government literally took years figuring out what to do. Public spending began twice. In 1936 and 1939. During 1938 the economy tanked again after FDR won his balanced budget in 1937.

The Lend Lease Act increased deficit spending way beyond the New Deal programs. The deficit was staggering and was the first step to lifting the nation out of the Great Depression. GDP grew rapidly. Debt reached in excess of 125% of GDP by 1943, the highest it has ever been. High wages, price controls and rationing mandated by Washington ensured workers would earn far more money than they could possibly spend. So the American people saved and bought war bonds. These domestic policies in my view created the middle class. The vast savings and appetite for automobiles lifted the nation out of the recession subsequent to WWII.

As for the thousands of years of history empires seem to be the big losers. Is that what you meant by big government? The United States certiainly fits that bill.

Posted by Anubis | Report as abusive

Ok Benny. Lets get serious.

If you are going to start repeating your ideas in every forum, at least try to find out if your idea is workable first.

Get your hands on some government and economic records. Crunch the numbers for your socialist experiment. See for yourself if it is workable.

Until you do that, you are wasting everyone’s time. Because as your idea stands, it can simply be dismissed because it doesn’t add up.

Posted by Anon | Report as abusive

the trouble with your idea is that if everyone started getting checks from the government, a lot of them would quit their job. Who would continue to work full time if they didn’t have to? Then productivity would go down, and the GDP would go down.

Perpetual motion isn’t real, not even in economics.

I used this on another commentary and thought it appropriate here also.

It is obvious that between Doug Pelmear  /article?AID=/20090530/BUSINESS03/90530 0338/0/BUSINESS02

and Johnathan Goodwin motorhead-messiah.html

both gas and diesel engines produced by Detroit have been in no way engineered to help the US and it citizens become oil independent. Detroit continues to cater to big oil to the detriment of our efforts to get off of foreign oil. The entrepreneurs above are making Detroit look ignorant and incompetent. This Administration should have let the Big Three fail and given the Bail Out money to visionaries like Pelmear and Goodwin. At least then you could have truly called the money “stimulus”. Only a fool would think that with all the engineers in the auto industry the only viable solution to the high cost of fuel and the reduction of emissions they could come up with was the “Hybrid”. No competing solutions; no competing technologies; while acting like the wall had been reached on the internal combustion engine and no further efficiencies could be achieved? Here is the evidence that they were either grossly incompetent or not honest with the American People.

Even the British are breaking away: 0mpg-iceni-biodiesel-sports-car-nears-pr oduction/9928/

Notice the investment? UKP2.3M to get the car to production. For the Big Three this wouldn’t get it on paper much less to production. Obviously the cost of this vehicle is high but there are economies that could be taken advantage of to bring the cost into the range of the average US citizen.

I intend to circulate this information to every TV and Radio station and every news web site I can find in an attempt to get the word out while advising everyone I can to do the same and to not buy a car from any auto manufacturer that does not provide efficiencies comparable to what these guys get. We have already wasted billions of taxpayer money and I do not intend to waste another dime on an industry that has worked against this country and it people.

Now, Mr. President, what are YOU going to do about it? One thing I can think of is to create an Auto Industry Recovery and Innovation Czar. The two mentioned above would be very good candidates.

Posted by B.Free | Report as abusive