Posted by
John Stone on Saturday, May 23, 2009 12:48:17 PM
There’s an old saying that states; if we don’t learn by our
mistakes, we are destined to repeat them. And so it goes that we are repeating
mistakes made within the auto industry.
The media reports on a daily basis the turmoil within the
auto industry, particularly two of the “Big Three”, General Motors Corp. and
Chrysler Corp. GM is only days away from “Bankruptcy”, or whatever it can be
deemed as today, and Chrysler has already accepted their government dictated “Modified Bankruptcy”. Added to this are the tens of billions of taxpayers’
dollars that has been pumped into these two ailing corporations with little to
no chance of seeing these funds returned.
The Whitehouse has flexed its muscle, unconstitutionally I
might add, and literally taken control of these two corporations by forcing
itself upon the will of these private companies. In an article from the Washington
Post (dated Monday, March 30, 2009), it is written that long time chairman and
CEO
“… G. Richard Wagoner Jr., who met with
administration officials on Friday and has agreed to step down.
The White House's insistence that
Wagoner step down is an extraordinary intervention of the federal government
into the management of a private company. A senior administration official said
Wagoner's resignation was required because the company needs a "clean
sheet."
"We felt that having a change of
leadership would be consistent with the clean-sheet approach," said the
official, who spoke on condition of anonymity because of the sensitivity of the
matter.”
So what exactly is proven here? Although the administration
feels that it has a responsibility and the right to intervene in such matters,
the “senior administration official” was granted anonymity as a condition for
the statement. Why is this? Because what the Obama administration is doing by
its meddling in private business is unconstitutional and illegal. Can’t you
just hear the conversation between Obama and Wagoner? “Well Rich, you just don’t
want to play the game the way I, “The One”, wants it played. So, because of
that and in the immortal words of “The Donald”, YOU’RE FIRED!”
Chrysler Corp. too, has seen the administration take control
of the auto maker’s helm by not only dictating its business practices, but also
negotiating its contracts. The UAW has been given, yes given, the lion’s share
of the company with a 53% ownership stake. Now, how does this make any sense at
all when the UAW, and its outrageous contracts, has been one of the primary
factors in the failure of the industry.
As Chrysler has a history in this area, let’s look at that
history. In 1979, Chrysler’s then chairman and CEO, Lee Iacocca made the trip
to Washington to beg for federal funds for his struggling company. He went
looking to thwart bankruptcy and stabilize Chrysler’s financial situation.
Chrysler had begun its downward financial slide three years earlier in 1976 and
the company’s attempts to recover were ineffective. In a July 13, 1983 article
published by The Heritage Foundation titled “The Chrysler Bail-Out Bust”, author
James K Hickel explores some of the intricacies and inconsistencies of the deal
Chrysler was handed on the company’s announcement that it would complete its
repayment of the $1.2 billion in loan guarantees it received by September of
that year (1983).
“The way they tell the story, Chrysler in
1979 seemed destined for bankruptcy, and now it's showing a profit. What saved
Chrysler, we are told, are the $1.2 billion in loan guarantees provided by the
federal government—so successful was the timely injection of cash that the
company could announce today that it will pay off the remaining $800 million by
September. And it didn't cost the taxpayer a penny, did it, they ask
gloatingly.”
But, what of the myths and truths of this bail out? Who was
the winner and looser? This entire deal was to save Chrysler from certain
demise and save countless jobs. The results, interpreted in many ways, were
mixed. The supporter of the plan touted the deal as a great success but, was it
really? What was the actual cost of this government intervention?
“It shows that if the bailout is indeed the model for an
American industrial policy the consequences could be disastrous.”
Today, as in 1979, Chrysler and GM both, by definition, are
bankrupt. Both are going through the motions as if they had filed Chapter 11
bankruptcy. The Obama administration has taken the lead as negotiator for
redefining and renegotiating contracts with labor, suppliers, bondholders and
stockholders. However, any way the administration wishes to spin it, there is
no true negotiating going on here. All parties concerned, including taxpayers,
have been TOLD how it is going to be and the few who have dared to defy “The
One” and his plan, have met with threats. An example was reported by Jake
Tapper, ABC News Senior Whitehouse Correspondent in an article on May 2, 2009;
“Thomas Lauria, Global Practice Head of the Financial
Restructuring and Insolvency Group at White & Case, told ABC News that [Steve]
Rattner [the leader of the Obama administration's Auto Industry Task Force] suggested
to an official of the boutique investment bank Perella Weinberg Partners that
officials of the Obama White House would embarrass the firm for opposing the
Obama administration plan, which President Obama announced Thursday, and which
requires creditors to accept roughly 29 cents on the dollar for an estimated
$6.8 billion owed by Chrysler.
Perella
Weinberg Partners, Lauria said, "was directly threatened by the White
House and in essence compelled to withdraw its opposition to the deal under the
threat that the full force of the White House press corps would destroy its
reputation if it continued to fight. That’s how hard it is to stand on this
side of the fence."
"The charge is completely untrue," said White
House deputy press secretary Bill Burton, "and there's obviously no
evidence to suggest that this happened in any way." Ummm, OK, but I don’t
believe that for a moment! Why? Because there is more than enough proof that
the Obama administration is continuously throwing its uninvited weight around.
The article continues;
“Perella
Weinberg Partners, which owned Chrysler debt through its Xerion Fund, was one
of Lauria's clients in this bankruptcy, but no longer is. The firm is led by
Joseph Perella. On Thursday afternoon -- after the Wedneday deadline -- the
portfolio manager for the Xerion fund decided to join the larger four creditors
who are owed roughly 70% of Chrysler's debt and had already agreed to
participate with the administration's plan.
Those
four financial institutions - JP Morgan Chase, Citigroup, Morgan Stanley, and
Goldman Sachs -- are recipients of up to $100 billion in federal government
bailout funds, though the Obama administration insists the matters were kept
completely separate.”
So why do you think the other four financial institutions
accepted the administration’s deal? Gees, I don’t know. Could it be the $100
billion in bailout funds they received and a directive from the Whitehouse, “The
One”, to comply, or else?
So what, actually, was the cost of the 1979 bailout of
Chrysler? Let’s head back to Hickel’s 1983 article.
“This
was the result of a clause in the Chrysler Corporation Loan Guarantee Act of
1979 that required creditors to make certain "concessions" to
Chrysler. With this clause to exploit and with Treasury Department officials,
including then-Secretary William Miller, pressuring its creditors, Chrysler was
able to pay off more than $600 million in debts at just 30 cents on the dollar.
In addition, the company was allowed to convert nearly $700 million in debts
into a special class of preferred stock—paper relatively worthless in the
financial markets because the shares earned no dividends and were to be
unredeemable for several years. In early 1983, Chrysler reached a tentative
agreement with its creditors to trade this preferred stock for Chrysler's
regularly traded common stock. However, the creditors still get the short end
of the financial stick: the face value of the common stock to be received will
almost certainly be less than the face value of the original debt.”
Is this deja vu or what? The only difference today is that
we are dealing in billions of dollars and not millions. What of the jobs? Well,
in Chrysler’s 1979 bailout, nearly half of the company’s employees lost their jobs.
The loan guarantee package that Congress approved was specifically meant to
protect the company’s workers. However, even after the approval, Chrysler still
cut its white collar work force by 20,000 and laid off 42,600 of its hourly
employees. It was suggested that a true Chapter 11 bankruptcy filing would have
been safer and more effective in the restructuring and reorganizing of the
corporation without the realized risks and consequences to taxpayers, employees
and investors.
The point here is that we are seeing the same type of
government intervention, only on a grander scale. The results are looking very
similar to history as GM and Chrysler lay off tens of thousands of employees
with even more layoffs projected. Only this time, because of these two
companies selling out many of its component manufacturing operations to private
entities of the years, the layoffs will and have spread to more than their own corporate
holdings.
And, what of the administration’s strong-arm tactics and
interference within private business? This practice of growing the federal government
and its control has been evolving for decades, from administration to
administration. For most part it has been subtle with few radical level bumps
in the road, until now. The Obama administration has taken the “Power Grab” to
new heights. Our Constitution limits the power of the federal government over
her citizens, citizens also referring to private business entities. The level
of control that is being built by this administration over the private sector
is not only astonishing, it IS unconstitutional.
We have seen the beginning of the “Change” Obama spoke of
during his presidential campaign. Only, in his campaign change was not defined
by him as “Socialism”, but Socialism it is.
Socialism:
1.
Any of various theories or systems of social organization in which the means of
producing and distributing goods is owned collectively or by a centralized
government that often plans and controls the economy.
2.
The stage in Marxist-Leninist theory intermediate between capitalism and
communism, in which collective ownership of the economy under the dictatorship
of the proletariat has not yet been successfully achieved.
The American
Heritage® Dictionary of the English Language, Fourth Edition
Wall Street and the financial industry, the insurance
industry and now the auto industry are being controlled by the administration.
They have now set their sights on the healthcare and energy industries and
education. They strive to make Americans more and more dependent on government
through the addition and expansion of social programs, programs that will have
to be funded at the state level even when the bailout funding disappears in a
couple of years. This, in turn, will force more taxes at the state level to
maintain the programs mandated by the bailout package, in addition to all of
the increased and added federal taxes we will be subject to and are already
feeling. “If you make less than $250 thousand dollars a year, your taxes will
not increase one dime!” These were the words of The One as he campaigned for
your vote. We have already seen these increases in many ways, increases that affect
everyone under that mark.
To the Obama sheep who blindly threw their vote his way, how
are you feeling now? If you still believe in his way of governing and that
Socialism/Communism is the way to go, shame on you! Real Americans don’t sit
around waiting for handouts; they roll up their sleeves and work hard for a
better tomorrow for themselves, their family and their country. If you now feel
as though you have been duped and mislead by the Obama political rhetoric and
the thought of a Socialist America scares the hell out of you, know that you
are not alone.
The time is now, to take back this great nation and again
make it the nation of “We The People”.