This is a long-term story; time for a review.
In 2009, General Motors made itself the fourth-largest Chapter 11 re-org in U.S. history. The U.S. Treasury was heavily involved with bailout money. President Obama made speeches and saw to it that the terms were harsh for people who had supported GM by loaning or investing their money, and not-so-harsh for labor unions and GM retirees (who can vote).
The new GM repaid government loans ahead of schedule – after shuffling around some bailout monies. But it all still cost the taxpayer at least $10 billion in the end (Treasury direct losses on GM stock as they re-privatized the company).
I would argue that the intangible costs go beyond $10 billion. GM bailout advocates like to emphasize the many jobs “saved”. But if the government had stayed out (doing nothing), the jobs would exist – at more efficient companies. GM’s productive assets would have been re-organized in bankruptcy anyway; probably taken over by startup companies or other competitors who are more efficient.
So, cars would still be manufactured in America – on better terms for the consumer. It’s a general principle that doing it the government-backed way is cronyism and always rewards incompetence on some level (at the expense of consumers, investors & taxpayers). There is no reason to consider GM an exception.
Which brings us to GM’s scandal with faulty ignition switches, which have caused at least 13 deaths.
The problem goes back for years. GM, which became a famously bureaucratic company under decades of Big Government backing, has been slow to react:
GM first learned of a problem with its ignition switches on Chevrolet Cobalts, Saturn Ions and other models in 2001, documents have shown, but took no steps to recall any cars until this past February.
Lawmakers are investigating why GM and regulators missed or ignored numerous red flags that faulty ignition switches could unexpectedly turn off engines during operation and leave airbags, power steering and power brakes inoperable.
The unflappable [GM CEO] Barra…announced that GM had retained Kenneth Feinberg, who recently oversaw the BP oil spill fund, as a consultant…
The drama inside the packed hearing room – named the “John D. Dingell” room after the Michigan Democrat with a long history of advocating for GM – was heightened by photos of victims, which were displayed against one of the walls.
crony capitalism/ Venture Socialism at work, folks.
By the way:
- Did those famous Government Regulators help the problem? No, although they have plenty of excuses. (Prediction: the Left will surely claim that the solution is…more regulators.)
- Did CEO Barra just tell Congress the truth, when she claimed to have only learned about the ignition switch problem recently (Jan 31)? No again.
- Did GM commit fraud, when it didn’t reveal the problem *during its bankruptcy* proceedings? Was escaping liability one of the motives for doing the 2009 bankruptcy? Perhaps, yes.
Which is why the new, refreshed, taxpayer-revived GM now faces multiple criminal probes.