PJ Media

GM, Chrysler, and Uncle Sam Have Already Failed

By the time it “collapsed into the government’s arms” on the morning of June 1, the bankruptcy filing by General Motors surprised no one. In retrospect, given our pathetic leadership, it’s surprising how many thought that it, or Chrysler’s filing the previous month, could have been avoided.

Now, amidst all the happy talk about how the two companies will succeed once they emerge from bankruptcy, there’s even doubt about that. James Pethokoukis, blogging at Reuters, tells us that former Clinton Labor Secretary Robert Reich thinks that the GM bankruptcy may only be “slowing down the death process so communities and workers and the economy have more time to adjust to GM’s demise.” If that’s true of GM, you can forget about a post-bankruptcy Chrysler having any legitimate viability except as a consumer of taxpayer cash.

Even the companies’ emergence from bankruptcy is, as of this writing, far from certain. Having ridden roughshod over the first-lien rights of secured Chrysler creditors, the vast majority of whom were intimidated into settling for 29 cents on the dollar, the government finds itself still having to deal with a June 5 court hearing in federal appellate court, where recalcitrant Indiana pension funds could conceivably stop Chrysler’s sale to Fiat. There is also a suit by terminated Chrysler dealers that appears to at least have some disruptive potential. A tight deal completion deadline could mean that court appeals by the losing sides in either case, if not promptly heard, would enable Fiat to walk away and completely scuttle the deal.

Thanks to the government’s heavy-handed treatment of GM’s unsecured creditors, that bankruptcy could face similar potential hurdles in the coming months.

But regardless of the bankruptcy-reemergence outcomes at these two former American icons, all of the key players involved — the companies’ senior managements, the United Auto Workers union, and the government — have failed miserably, both in the run-up to the mid-December bailout and during the five and a half months that have since transpired.

All three groups, dreading the possibility that vehicle buyers would avoid doing business with bankrupt companies, failed to consider the possibility, long since borne out, that they would more decisively shun the beneficiaries of government bailouts, for reasons both practical (doubts about warranties and repairs) and philosophical (resentment over government involvement in giving money to, and then running, supposedly private companies).

In the first five months of 2009, GM’s reported year-over-year monthly unit sales declines have averaged almost 42%. Chrysler’s average drops have been almost 47%. The companies’ four biggest competitors — Ford, Toyota, Honda, and Nissan — have suffered far smaller average declines. Ford actually reported higher worldwide revenue in the first quarter than GM for the first time in over 80 years, moving from 4% behind GM to 11% ahead of it in one quarter, despite operating for a while earlier this year under a mistaken public assumption that the government was bailing out the entire domestic auto industry. Having recovered from a nearly fatal bout of political correctness of its own a bit more than a year ago, Ford appears poised to dramatically increase its top-line lead over GM.

The companies’ senior managements naively assumed that a business-hostile administration run by the most radical president in American history would resist the urge to intervene and then take over their operations.

The United Auto Workers union, as it has for at least two decades, utterly failed at what should have been its prime directive: to preserve workers’ jobs. In the previous quarter century, as Japanese and other competitors continued to take market share from the Big Three, the union chose to preserve the artificially high wages and benefits of its senior members at the expense of the less experienced. Then, during post-bailout crunch time, union president Ron Gettelfinger balked at potential concessions for far too long. It’s also likely that he has not given back as much as he has claimed. This and the post-bailout sales declines noted earlier have forced the companies to idle and ultimately close more plants than they otherwise might have. Immediately after its bankruptcy filing Chrysler closed five plants it had no expressed intention of shuttering back in February. GM will be closing at least a dozen plants.

But even beyond its failure to gauge the negative sales fallout from statist involvement, it is the government — particularly the Democratic Party that has held most of its levers — that bears the lion’s share of the blame for GM’s and Chrysler’s final march from being on the brink a year ago to flat on their faces now. That’s because it is they who brought us the POR (Pelosi-Obama-Reid) economy beginning in June of last year.


  • They are the ones who struck fear into the hearts of car buyers by telling everyone they would refuse to exploit our God-given fossil fuel resources regardless of the circumstances or consequences.
  • They are the ones who promised punitive increases of 15% or more in marginal tax rates on our most productive people — many of whom tend to buy cars — in the name of redistributing relative pittances to everyone else.
  • It is their party’s decades-long romance with lending mortgage money to unqualified borrowers that led to the multibillion-dollar implosions at Fannie Mae and Freddie Mac, and to the resulting wreckage at other financial institutions.
  • And finally, at crunch time, it is they who failed to lead the country back from their recession earlier this year by enacting an ineffective, time-delayed “stimulus” instead of broad-based tax cuts.

Mama always said that life isn’t fair and she was right — U.S. taxpayers have been underwriting all of this, and will continue to.