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All Da King's Men

Auto Industry Running On Empty

By Da King Published: March 31, 2009

Let me be clear: "The United States government has no interest or intention of running GM." - President Barack Obama

And then Obama forced GM CEO Rick Wagoner to resign, told Chrysler it has to merge with Fiat or go into bankruptcy, and told GM it better restructure or it will go into bankruptcy too. link

The government IS running GM, and Chrysler too. Here is what the government wants it's auto companies to do:

"I am absolutely committed to working with Congress and the auto companies to meet one goal: The United States of America will lead the world in building the next generation of clean cars." - President Obama

By "clean cars," Obama means cars like GM's Chevrolet Volt, an electric car with a small internal combustion engine that will be used only to recharge the Volt's battery. There's one tiny problem with the Volt - the compact four seater will cost an estimated $40,000, pricing itself out of the market. There is one way for the Volt to be competitive, however. If gas prices skyrocket far beyond the current level of $2.00 per gallon, the Volt becomes a more attractive option. If gas prices stay low, well, India is producing the Nano, a car that will sell for $2,900. Which car do you think will sell more if gas is two bucks ? If Obama truly wants to revolutionize the auto industry, he has to force gas prices through the roof. Wait for that to happen. It won't be long.

Obama says neither GM nor Chrysler currently have viable business plans. He's probably right about that. Obama has given GM 60 days to come up with a new business plan that requires concessions from all involved. He's given Chrylser 30 days to work out it's merger with Fiat. The White House has sent government teams in to assist in formulating the new plans (but the government isn't running the auto companies. Right).

Also, guess who's paying for GM and Chrysler's warranties during this indefinite restructuring period ? YOU are, Mr. and Mrs. American Taxpayer:

A fund will be set up equal to 125 percent of the total cost to pay for warranty service. The automakers will contribute 15 percent while the government will provide 110 percent, with the money coming from the economic stabilization funds. A separate company will hold the funds and pay the claims even if one of the auto manufacturers goes into bankruptcy or goes out of business.

It sounds to me like GM and Chrysler are probably going into bankruptcy. Why else would the government need to back their warranties ? If this is the case, we could have saved the taxpayers over $20 billion in auto bailouts by putting the companies into bankruptcy last fall. Oh, well. What's $20 billion these days ? Chicken feed. We talk in trillions now. Our government is very adept at running businesses.

Finally, word is that when GM's outgoing CEO Wagoner was forced to resign, his retirement plan kicked in to the tune of $20 million. Sweet. Wagoner gets $20 million after his company lost $80 billion over the last four years. I don't know if I'm supposed to be outraged about this or not. I'm outraged about so much these days that outrage seems like the normal state. Maybe I'll call Rep. Barney Frank (D-MA) so he can tell me how I should feel. Frank has already threatened AIG workers, so he seems like the guy to ask. My pitchfork is sharpened and ready for action. I'll try to get Rick Wagoner's home address so we can form a mob to foment violence against his family, like that ACORN group did to the AIG people. It's the new American way.



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