Tag Archives: crony capitalism

The Big Lie – GM Bailout And The Non-existant 1.5 Million Jobs

For a political junky such as myself, the conventions mark the end of “spring training” for me.  You watch the teams, the trades, the performance before partisan home teams – all to get ready for the real campaign season.  One of the stand out performances for the Democrats at their convention was the speech given by Bill Clinton.  His myth has been written so large that, combined with his charismatic delivery, the speech has taken some of the wind from the terrific convention held by the Republicans in Tampa.

There are a couple of things wrong with this situation though.  First, Bill Clinton isn’t running for President.  Second, the record of statements and actions of the former President are totally at odds with President Obama’s not-so-lite style of socialism.  And finally, Slick Willie can’t can only lie about the so-called achievements of the current administration – those that they will even talk about, that is.

Here is a break down from Ace of Spades HQ rebutting some of Clinton’s bigger whoppers:

  • “Obama didn’t really take $716 billion from Medicare.  Somehow Clinton made this sound as if Obama put more money into Medicare.  He didn’t.  He cut it.  He did not “use the money to close the donut hole” as Clinton claimed (or, rather, only a part of it is used for that; the rest is for the new clients of ObamaCare).”
  • “Clinton also claimed, baffling, that if Romney puts the $716 billion back into Medicare, that makes the system go broke more quickly.  But, the $716 billion being used to “shore up Medicare” has always been a lie. You cannot spend the same dollar twice.”
  • “Clinton fudged facts to suggest that Obama’s Miracle Economy was just around the corner. It was no accident that Clinton fudged dates to claim that people “didn’t feel” the recovery in 94-95, but then suddenly felt it in 1996. He is trying to convince people who Obama’s own economic miracle is just six or nine short months away. In fact, Clinton inherited a growing economy — the Bush recession ended the quarter before the election — and the economy grew far more strongly in Clinton’s first three years than it has in Obama’s. Something like 4% vs. 2%.”

But, the biggest lie of them all was the 1.5 million jobs saved by the nationalization bailing out of General Motors.  National Review Online delivers a scathing, in-depth analysis.

“Admirers of the GM bailout should bear in mind that it was the Bush administration that first decided to intervene at the firm, offering a bridge loan on the condition that it draw up a deeply revised business plan. President Obama’s unique contribution was effectively to nationalize the company, seeing to it that the federal government violated normal bankruptcy processes and legal precedent to protect the defective element at the heart of GM’s troubles: the financial interests of the UAW. It did this by strong-arming GM’s bondholders into taking haircuts in order to sweeten the pot for the UAW… Bill Clinton bizarrely tried to claim that the bailout has been responsible for the addition of 250,000 jobs to the automobile industry since the nadir of the financial crisis. Auto manufacturers and dealerships have indeed added about 236,000 jobs since then, but almost none are at GM, which has added only about 4,500 workers, a number not even close to offsetting the 63,000 workers that its dealerships had to let go when the terms of the bailout unilaterally shut them down.”

The Romney campaign needs to get out in front of this freight train of falsehoods.  They need to rebut point by point the false allegations and false accomplishments of the Obama administration.  Bill Clinton is a former President and due all the respect a holder of that office deserves.  However, no one gets to vote “present” when it come to the truth.

And if Obama’s apologists want to say that none of this could be forseen, check out Death of a Thousand Car Dealerships.  I wrote it in May of 2009.

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I Want To Gow Up And Be A Crony Capitalist

From the mouths of babes we get a perfect understanding of what has infected not just our economy but our political system as well.

Death of a Thousand Car Dealerships

Death of a Thousand Car Dealerships – Posted to MySpace May 16th, 2009 at 8:22 am

I have some friends who have been asking some important questions about what is going on in the car industry. With all the interest, I thought I would just share some of the answers with you all.

“How can the car companies close dealerships? I thought they were separate companies”

They are separate businesses. However, they are licensed outlets. If the company wants to pull your dealership, they just stop selling you cars. You see, cars on a new car lot are owned by the dealership (usually on 90 day financing through their own banks) not the manufacturer. Most financing agreements state that if a particular car (they do this by VIN number) doesn’t sell within 90 days, the dealership must repay the loan and OWN the car. This is NOT good for them as almost no dealership has the cash to own all those cars… especially in a down and competitive sales cycle.

Some cars sell better than others and some colors are more profitable. Dealerships always want those high dollar ones but it was ruled anti-trust years ago to favor one store over another. They had to institute an “allocation” system that supposedly spread those good cars evenly amongst dealers according to sales volume and independent customer satisfaction numbers.

Now that sales of all of their cars are down, big dealers (many of which sell other companies cars as well) have been pressuring for a change. By reducing the number of outlets, the manufacturer can assure that the remaining dealers get the cars they want to meet a decreased demand. Also, it becomes less likely that a particular car “ages” over 90 days and has to be bought.

The manufacturers and the banks constantly monitor the inventory of dealerships for aging. Too much aging inventory and the banks stop lending for more new cars (cause they don’t want to be stuck selling something that the supposed pros couldn’t sell). The manufacturers will stop selling ANY new inventory to a dealer if things get too stale as all the built up inventory causes panic selling that hurts all dealers and the future resale of that car. Resale value is calculated from average selling prices so sales at a loss make the brand look bad in addition to making those cars harder to lease.

Car leases are in effect a way for a person to drive a car for the cost of what they devalue it over time. Add in some interest for the use of the leasing companies funds while they own the car and you have a rudimentary automobile lease. Cars with high resale value percentages are actually more affordable to lease because there is less depreciation over the course of the lease. The bank sees high value retention and doesn’t demand as much depreciation be paid over the term. Pricing gimmicks kill leases for most domestic cars. End of year manufacturer rebates tell the bank that the cars sold early in the year weren’t worth what they were sold for and they reduce the values on subsequent years cars for this practice. Also, huge fleet sales and inventory clearance loss leader sales do this as well.

Now, the manufacturers these days have their own banks. Financing good customers was a way to dupe the depreciation cycle. Subsidized interest and lease rates don’t effectively go into the resale value calculations. However, now that sales have slowed, the car company banks are holding huge portfolios of loans that are in effect costing them money. Dollars loaned out a 0% cost you at least the rate of inflation, not to mention lost opportunity costs and cash flow.

Now to the grist. Dealers are paid incentives on volume, customer satisfaction, warranty performance, and a whole host of other benchmarks. However, as shown with dealer incentives and rebates, the domestic companies have been stupid. Every dealership gets paid incentive money even at their baseline. Sell 1 car, get several bonus bucks for miscellaneous stuff. Some at time of sale. Some if the customer fills out a survey. Some at beginning of financing. Some at end of the model or calendar year. If you can reduce the number of dealerships, you WILL reduce the absolute amount of bonuses paid out on a similar sales volume. And trust me, the manufacturers need the cash.

Ask me again later and I’ll explain why the unions are the scorpion on the manufacturers backs causing the cash-crunch in the first place..