Nationalizing entire industries worked very poorly under dictatorships and communist centralized economies. In fact, they were so dysfunctional, despite grandiose economic five-year plans designed by the communist party apparatchiks who had no idea how to run a lemonade stand, they have all collapsed since 1989, with the exception of Cuba and North Korea, and we know how “well-off” their citizens are and how much individual freedom they have. Communist China had to modify its centralized economic control and adopt successful capitalist models. Managed economies are not the solution, capitalism and entrepreneurship are.
President Obama’s auto bailout cost taxpayers $60,000 per job saved. GM and Chrysler Fiat’s roaring sales are due to subsidized sales, indirect funding by the government, “sub-prime auto loans to inflate their car sales, selling automobiles to people who cannot afford them.” (Michael Savage, Savage Nation, August 9, 2012)
Taxpayers lost $20 to $23 billion in the auto bailout. The Obama Administration redistributed $26.5 more to the union than UAW would have received legally in the bankruptcy proceedings had the rule of law and contract been followed. “Thus the entire loss to the taxpayers from the auto bailout comes from the funds diverted to the UAW.” (Amy Payne, Heritage Foundation, June 13, 2012)
Mismanagement and high union labor costs, $70.51per hour in wages and benefits for GM and $75.86 per hour for Chrysler, contributed heavily to the bankruptcies that necessitated the bailout in the first place.
Secured creditors and investors should have had prior claim, in accordance with the law. Unsecured creditors should have received proportional payouts from the bankruptcy. A special trust fund protected UAW, while other creditors received fractions of what they were owed. UAW received billions and partial ownership, and Fiat, a foreign corporation, received part-ownership of Chrysler. UAW workers continued to receive huge compensations when compared to the much lower compensation of $47 per hour for Nissan and Toyota workers. Stephen Rattner, President Obama’s car czar said, “We should have asked UAW to do a bit more. We did not ask any UAW member to take a cut in their pay.”
According to Amy Payne, the auto bailout was not a bailout of GM and Chrysler but a bailout of the auto union by American taxpayers who make on the average $30 per hour in wages and benefits. (Auto Bailout Was Really Just a UAW Bailout, Heritage Foundation, June 13, 2012)
The issue is more complex. GM did not just become Government Motors, it became China Motors. After $80 billion of taxpayers’ dollars “saved” GM and Chrysler, GM opened a plant in Wuling, China. Research and development for car design was moved to China. Dan Akerson, CEO of GM said in Shanghai, China, in February 2011:
“Seven out of ten automobiles were made outside of the United States. We have 11 joint ventures in China with SAIC and FAW. We operate 11 assembly plants in China, four power train plants in eight cities across the country. We have more than 2,700 dealerships and sales outlets nationwide. We regard our eleven joint ventures as 11 keys to success. Not just in China but globally. Our commitment to working in China, with China, for China remains strong and focused in the future. We are now building out the advanced technology center which will bring our research and development that is centered largely in the U.S.; we are going to diversify that more into China because we think this market is so critically important to the success of our company. GM is a company well established for the future in China.” (May 4, 2012, video clip narrated by Vince Wade, http://www.youtube.com/watch?v=Lvl5Gan69Wo&feature=youtu.be)
I wonder how millions of unemployed Americans feel about their bailout money that is now invested in China with SAIC, the Shanghai Automotive Industry Corporation which is run by the communist government of China who owns and controls most of the manufacturing and with the FAW, another Chinese government owned manufacturer. If Americans truly own GM, should the cars, jobs, and investments not be made in the United States? Why build China from the ground up while our American economy and infrastructure crumbles and turns to “has been” and dust?
Cadillac, a division of GM, sponsored “Birth of a Party,” a propaganda film about the Chinese Communist Party. Chinese leaders love to drive Cadillacs, the ultimate status symbol car. The banner advertising the movie had the hammer and sickle next to the famous Cadillac logo. (http://www.youtube.com/watch?v=Lvl5Gan69Wo&feature=youtu.be)
There is no democracy or free trade in China. The Chinese have demanded American technology with every deal signed since 1990, in exchange for promises of big profits from China’s 1.3 billion people. According to the U.S. Chamber of Commerce, GM’s one billion dollar bid from China was won in exchange for “GM’s willingness to transfer a good deal of state-of-the-art technology.” (Vince Wade)
State-owned corporations of the communist government of China are buying key segments of the U.S economy as well, energy resources, and key industrial plants. The Wall Street Journal reported the purchase of Nexteer Automotive of Saginaw, Michigan, the largest employer in the area, by Pacific Century Motors and an industrial authority for the city of Beijing. Ownership was transferred six months later to AVIC, the Aviation Industry Corporation of China. (Vince Wade)
We now have 257 Chinese Free Trade Zones, presumably to produce goods that will be sold in the U.S. Do we not have enough unemployed Americans and newly-minted college graduates without job prospects who could produce goods and services here in the U.S.? Do we need to insource jobs to imported Chinese workers into the Free Trade Zones, and outsource every manufacturing job and many service industries to China and India?
President Obama’s $3 billion centralized “cash for clunkers” program artificially and temporarily stimulated new car sales while destroying 690,000 good used cars that could have been sold on used car lots to people who were not willing, or able to buy a new car.
To make matters worse, the Obama Administration is planning to increase the new car mileage standards from 35.5 miles per gallon to 54.5 miles per gallon which will cause further pain for Americans. According to the National Highway Traffic Safety Administration (NHTSA) the new mileage requirement will add $3,000 to $4,800 to the average price of new vehicles until 2025. The National Auto Dealers Association (NADA) said that 6-11 million low-income drivers will not be able to afford new cars through 2025. Because of the new “corporate average fleet economy” (CAFÉ) standards, cars will have to be made smaller, less safe, resulting in more potential fatalities with each crash. The Smart Car may be smart in theory.
The idea behind the new standards was driven by the “green” environmentalist agenda who proposed to eliminate the use of fossil fuels and replace them with renewables because fossil fuel burning destroys the planet, and we are running out of oil and gas reserves. That is of course, not the case, the Obama Administration tried to purposefully increase our dependence on foreign oil by imposing moratoriums on drilling in the gulf, refusing the approval of the Keystone XL pipeline, and denying permits for the exploration of domestic shale oil on federal lands. Furthermore, he promised to bankrupt the coal industry and make electricity prices skyrocket.
The President is right that GM is number one again – in China. Nationalizing the auto industry was not necessary. Extending the same business model to all American industries is not a good idea in capitalism, it WILL “drive jobs away, taking root in China” and elsewhere.