Conservative Conspiracy Theory On Auto Dealership Closings

Yesterday I commented on the ridiculous tactics being employed by the right to smear Sonia Sotomayor. There is another ridiculous attack from the right on another topic:

Evidence appears to be mounting that the Obama administration has systematically targeted for closing Chrysler dealers who contributed to Repubicans. What started earlier this week as mainly a rumbling on the Right side of the Blogosphere has gathered some steam today with revelations that among the dealers being shut down are a GOP congressman and closing of competitors to a dealership chain partly owned by former Clinton White House chief of staff Mack McLarty.

The basic issue raised here is this: How do we account for the fact millions of dollars were contributed to GOP candidates by Chrysler who are being closed by the government, but only one has been found so far that is being closed that contributed to the Obama campaign in 2008?

It seems to me that if there were really politically motivated moves than we wouldn’t be seeing any dealers who contributed to Obama being closed. This basically fits into the conspiracy theory mode which many on the far right think in. They see the result but have failed to really look at the facts, and they think that because the propose one possible theory for the results there is reason to think it is true.

Megan McArdle points out that ” Democratic and Republican dealers are unlikely to be found in the same place, and the rural counties that tend to be red are probably less profitable.”

Nate Silver actually did the leg work to look at the dealerships which were not closed and found that they were overwhelmingly owned by Republicans. If most dealerships were owned by Republicans it only makes sense that most of those which were closed would be owned by Republicans. He also points out:

It shouldn’t be any surprise, by the way, that car dealers tend to vote — and donate — Republican. They are usually male, they are usually older (you don’t own an auto dealership in your 20s), and they have obvious reasons to be pro-business, pro-tax cut, anti-green energy and anti-labor. Car dealerships need quite a bit of space and will tend to be located in suburban or rural areas. I can’t think of too many other occupations that are more natural fits for the Republican Party.

Update: The Auto Prophet reviewed the data and came to the same finding that there was no obvious political bias in the closings, finding “Chrysler dealers (and probably all auto dealers) who donated for the 2008 election cycle overwhelmingly supported the Republicans.”

Be Sociable, Share!

44 Comments

  1. 1
    b-psycho says:

    LOL @ Nate Silver having to explain to Republicans part of their own base…

  2. 2
    Ron Chusid says:

    In their defense, the Republican base has become so small that it has to be examined under a microscope. It is understandable that Republicans don’t understand what their base is. 🙂

  3. 3
    Fritz says:

    It would not surprise me if Chrysler preferentially closed dealerships in Republican areas.  Not because of “Obama made me do it”, though. 

    Chrysler is now in the hands of Congress.
    Congress is controlled by Democrats.
    Congressmen like to have economic activity in their districts.
    You do the math.

    Chrysler will keep dealerships in Democratic Congressional districts for the same reason as military bases (and pointless airports like the John Murtha airport) appear in the districts of powerful congressmen.

    Chrysler is making the transition from being a private corporation to being a Federal facility.

    GM will do the same.

  4. 4
    Ron Chusid says:

    Fritz,

    That is just an exercise in creating conspiracy theories and also lacks evidence. Your conspiracy theory is even more far fetched because the closings weren’t even decided by Congress.

    Closing dealerships based upon political party of the district also wouldn’t explain the accusations being made that it was Republican owners who were hit. There is probably not a good correlation between ownership and the political party dominating a district.  Owners in are overwhelmingly Republican regardless of which Congressional district they are in.

  5. 5
    Teddy_J says:

    I agree, this is probably another wingnut effort to smear the Obama administration. But in the interests of transparency and good government, the Chrysler execs and/or auto task force should release their notes, agendas, leadership structure, etc., as well as the selection criteria/model for making the dealership closure decisions. 

    So far, I’ve heard a lot of back and forth speculation about some very limited data. Wingnuts say that almost all of the dealers to be closed are Republicans, but do not have data on the dealers to remain open as a point of comparison.  Nate Silver responds that car dealers in general (not just Chrysler dealers) contributed to Republicans in the 2008 election by an 8 to 1 ratio, but that’s like comparing oranges to grapefruit: for all we know, Chrysler dealers are more evenly split between D and R compared to the total dealer “control group.” Besides, if the auto task force decided to save about 10-20 of their friends while singling out 10-20 non-friends for closure, that might not show up as statistically significant, but it would still be an abuse of government power.    
    It’s pretty simple, really: take the model they used, re-run the dealership performance data through that model, print the list of winners and losers, and then compare that list to the list that ultimately designated which dealers were to be closed and which were not. If there is any difference whatsoever between the two lists, then other ulterior factors must have come into play. They could even do this while maintaining confidentiality of sensitive business data by releasing the model and data to a non-partisan review board first. If everything is kosher, no need to release the information publicly. 
    Do we really want the Obama administration to acquire a reputation for praticing crony politics in a similar fashion as the crooked Bush administration? Nancy Pelosi promised us the most ethical Congress ever. If we become just like the Republicans, how are we ever going to make meaningful long-term policy changes?    

  6. 6
    Fritz says:

    Huh?  Who is conspiring with whom?  I’m saying that it makes perfectly good business sense for Chrysler and GM to work to placate their new owners.  And the new owners are Democrats.  That’s not a conspiracy.

    Similarly, I expect that the assembly plants that Chrysler and GM keep open will be in Democratic districts.

    Has anyone done a correlation of closed dealerships by Congressional district?

  7. 7
    Ron Chusid says:

    I’m calling it a conspiracy theory because you are applying arm chair reasoning to claim something happened as opposed to looking at any facts. The decisions were not made by either Congress or by Chrysler.

    The analysis I’ve seen has only been based upon ownership of specific dealerships (based upon political contributions). I haven’t seen any analysis by Congressional district. I would suspect that, independent of any political motives, there might appear to be a trend towards closing dealerships on Republican districts since they tend to be more rural and less populated.

  8. 8
    Ron Chusid says:

    I was saying that, but it looks like I  was wrong on that part. The conservative blogs are screaming that Obama’s task force decided who would be closed (and claim it was based upon their support for Obama). I saw the evidence rejecting political bias as above, but initially didn’t question the claim that it was “Obama’s task force” which made the decisions.

    Looking at some newspaper accounts this doesn’t appear to be the case:

    In a motion filed with the U.S. Bankruptcy Court in New York, Chrysler said many dealers’ sales were too low and said just over 50 percent of the company’s dealers account for about 90 percent of its U.S. sales.

    Chrysler officials said Fiat SpA, which will be partnered with Chrysler if it comes out of Chapter 11 bankruptcy reorganization, made the decisions about which dealers should be closed.

    The U.S. Treasury Department issued a statement, saying that “Consistent with the (president’s Auto) Task Force’s role in the restructuring process, it was not involved in the specific design or implementation of Chrysler’s dealers consolidation plan.”

    This shows the danger in believing anything seen on a conservative blog.  While there is still no evidence that they decided based upon pleasing Congressional Democrats, at least it is plausible to speculate upon what Chrysler (or at least their new owner) was thinking as they did appear to have made the decision.

  9. 9
    Teddy_J says:

    Ron, that’s great news.  Now, all we need is for Fiat SpA to produce their dealership selection model and data and the whole matter will be cleared up and once again the wingnuts will have egg on their faces. Since all that TARP money was given to Chrysler, simply saying that it was Fiat’s decision and then avoiding any transperancy won’t be enough to answer everybody’s questions. But I’m sure Fiat won’t mind coming forward with their selection criteria/model.  

  10. 10
    Ron Chusid says:

    Teddy,

    It is up to Fiat whether they want to pay any attention to this nonsense and reveal more information. As they have satisfied the Treasurey Department they are not legally obligated to.

    While I wouldn’t mind such transparency, it is really futile to waste time trying to satisfy the right wing nuts who spread things like this. Many of them are still claiming Obama hasn’t released his birth certificate after it was released. There are still conservatives claiming Kerry hadn’t released his military records years after it was both released on line and to the media.  No matter what information Fiat gives the right will still make their claims as they have no interest in the facts when making their attacks.

  11. 11
    Christoher Skyi says:

    Well, it’s understandable that some people think Team Obama really has their fingers in GM goings on — because they do! However, there’s no hidden agenda or conspiracy.

    Edward Harrison of Credit Writedowns lays out the stakes for Obama and the Democrats in what happens to GM: the ultimate ends are political — the economics of the matter are merely the means:

    “General Motors is a monster company employing a quarter million people worldwide. It sells $150 billion in cars – or at least it used to. It is not just a producer of vehicles. It is also a supplier. It has been through several joint ventures and has owned a number of foreign manufacturers, Isuzu and Opel being but two. In short, the company is a very big player, financially, economically and politically.

    The GM bankruptcy is a very big deal and will have wide-ranging implications. Let me review a few of the issues here starting with the politics.

    2010 elections

    In the U.S., we have just witnessed an historic election that some are comparing to the election of Ronald Reagan in 1980 and Franklin Roosevelt in 1932. Indeed, there has been a sea change in the political climate here in Washington since January, with the Democrats and their agenda taking precedence over the Republicans. But, none of that is going to last if we don’t see a recovery that lasts through the mid-term elections in 2010. And that is already very much on the minds of politicians in Washington. Here is the calculus.

    In 2008, the Democrats benefited greatly from Barack Obama’s election as President, taking large majorities in both houses of Congress. Their mandate was to work with the President to fix America’s economic problem. So, Obama’s and Congressional Democrats’ first priority is to end the recession as quickly as possible. I guarantee you there would be hell to pay if this is not done well before November 2010 when the next general election is held.

    From Obama’s perspective, it is crucial that he fix the banks and fix the auto industry as these were the two economic issues front and centre in the election which he said he could tackle. With the banking industry stabilised, the Obama legacy rides crucially on how the Auto Bailout proceeds. Under no circumstances is the Obama Administration going to allow General Motors to do to the economy in 2009 what Lehman Brothers did to it in 2008. They are going to fix GM no matter what it takes. And if this includes heavy-handed tactics (e.g., forcing Waggoner’s resignation), so be it.

    So, be very clear that the GM and Chrysler issue is an existential question for this administration. Handle it well and you get the Roosevelt treatment and ensure a good outcome for your party in 2010. Screw things up and the depression bears down on America and you’re out of office in due course. The key policy decision is how to ensure a favourable outcome. And when I say favourable, I mean one that ensures as many jobs as possible while minimizing any wider economic fallout. Other issues like treating bondholders well, not committing taxpayer monies to the effort, or keeping government out of the auto industry are going to be much less important.

    In sum, while there’s no conspiracy, the stakes are so incredibly high for Team Obama and the Democrats and the scale of intervention into GM is so broad and deep now, they don’t need to hide anything they’re doing — whatever they feel they need to do, they’re going do it. The ends will justifiy the means.

    It’s a hell of a gamble.

    That’s the big picture and the real story — wondering what’s really going on with dealerships is just grasping at a shard.

  12. 12
    Fritz says:

    Teddy — TARP is not the same as the auto bailout money.   Separate bushels of cash.

    However, some of the lenders who have secured loans to Chrysler and also have received TARP money have reported that they are being pressured by the Treasury to forfeit their rights to payment of their loans ahead of the unsecured claims due to the UAW and to the Feds.

    One interesting issue arising from this proposed distortion of standard bankruptcy practice is that lenders will be really reluctant to lend money to other companies that might need Federal buyout.

  13. 13
    Teddy_G says:

    Fritz, my bad, sorry I got the auto bailout money mixed up with the TARP money – thanks for the clarification.

    My point is that the feds gave Chrysler a lot of taxpayer money, without which Fiat probably never agrees to take responsibility for the company. As of now, Fiat is not the owner, I think it’s actually a UAW health insurance entity. Now, Fiat might have told Chrysler/UAW/Treasury that we wanted to see certain dealers pared before the purchase, but it’s not actually their “decision” until they own the company. In the meantime, the taxpayer money must be answered for, can’t just blame it on Fiat.  Otherwise, you have billions of taxpayer money spent, a dubius bankruptcy process, and no transperancy.

    Are we Democrats going to become crony capitalists just like the Republicans? If so, what’s the point? Christopher seems to be suggesting that anything goes – anything that it takes to win in 2010 and 2012.

  14. 14
    Teddy_G says:

    Something similar happened under Bush’s watch with the Wells Fargo takeover of Wachovia. Right before the takeover, Wachovia received a bunch of TARP money, making them even more attractive to Wells Fargo (in this case, it turns out that Wachovia was actually financially stable all along, which made this deal even sweeter). Again, no transperancy, crony capitalism. Now is it okay if we do the same thing? No, that’s why it is essential that we have accountability and transparency – and not hide behond European skirts and elude all responsibilty – otherwise, we’re all just suckers.  

  15. 15
    Christoher Skyi says:

    “Are we Democrats going to become crony capitalists just like the Republicans? If so, what’s the point? Christopher seems to be suggesting that anything goes – anything that it takes to win in 2010 and 2012.”

    The short answer is probably — yes!

    It’s not really that team Obama is going to do anything to “win” in the usual connotation of that word. Think if it as them suddenly finding themselves on a tightrope much longer than they thought, up much, Much, MUCH higher than they though —  and there’s no safety net. There’s only two outcomes: getting to the other side — or falling.  Just getting to the other side is “winning.”

  16. 16
    Robert L. www.neolibertarian.com says:

    The “dealergate” story you link to is alleging favoritism for a couple specific Obama supporting dealers and thus is not rebutted by general statistical analysis.

    The idea that a couple specific people got preferential treatment based on political connections doesn’t seem unreasonable or even unlikely.  Even if RLJ-McLarty-Landers did not ask for any special treatment and even if the government was not involved at all do you really think Chrysler is going to look at closing the dealerships of the head of BET and a well connected Obama campaigner the same way they look at closing some average Joe’s car lot?  Nothing is proved but suspicision in this particular case hardly seems unreasonable.

    In fact the Megan McArdle article you link to acknowledge’s this, saying  ” I would be less surprised to find out that the administration rescued specific donors from the hit list than to find that they deliberately closed Republican dealerships.”  Your own reference is raising the same issue as the Doug Ross Journal you linked to as an example of conservative paranoia and lack of analysis: special treatment for RLJ-McLarty-Landers.

    As for the general argument of the widespread use of political criteria in the closings, or the targeting of Republican dealerships,  that seems unlikely as is acknowledged by conservative blog sites like Just One Minute and Hot Air

  17. 17
    Fritz says:

    The Obama administration and the Democratic Congress are setting up a form of crony capitalism.   Or crony unionism.

    A lot of the massive Federal spending on borrowed money in the “stimulus” package is not going to stimulus (i.e. short term, quick outlay, terminating) spending, but to set up long-term new Federal programs that will increase the number of unionized workers and especially government workers — Obama’s core political base and a major backbone of the Democratic Party.  

    You can also see this with the government efforts to put the unsecured claims of the UAW ahead of the secured claims of bondholders in the cases of GM and Chrysler.

  18. 18
    Ron Chusid says:

    Robert,

    Statistical analysis does not totally debunk this story but as the claims are purely based upon bogus statistical analysis on the part of the right, this does pretty much eliminate it. The burden of proof is on those making the charges. Their “proof” came down to statistical analysis but when the data is looked at rationally it does not prove what is claimed. All we have now are accusations with zero evidence against Obama.

  19. 19
    Ron Chusid says:

    There is a tremendous difference between the institutionalized crony capitalism of the Republican Party and Obama’s response, whether right or wrong, to a crisis situation.

  20. 20
    Fritz says:

    Never let a serious crisis go to waste. — Rahm Emanuel

  21. 21
    Teddy_G says:

    Ron, I don’t understand, in the first place, why billions upon billions of taxpayer money is being used on various bailouts with limited or no transperancy and overview. 

    I said from the begining that there is probably nothing to these wild accusations, but why are we so defensive about this if there is nothing hide? What is the harm in revealing the process and criteria that were used to make the selections, as long as the sensitive data can be flagged for confidentiality (but still reviewed)? That’s how public money is spent – transparently, right? I’ve now heard three different versions of who made the decisions – Chrysler, the auto task force, and Fiat. Forget the conspiracy theories about Obama targeting Republican donors, that’s silly. But there’s a lot of questions about this affair that go well beyond that one accusation.  

    You say that the “burden of proof” is on those making charges to prove that Chrysler and/or the feds did something worng. Huh? Is that how were spending billions of taxpayer dollars now – the party in power can do whatever it wants with public money, regardless of the laws, with no oversight? And screw the taxpayers if they cannot prove that government officials did anything wrong . . . oh, and sorry if we stonewall, cover our tracks, fail to disclose the data, etc., that’s your problem. 

    Then you hedge your bets by saying that it was a “crisis situation” possibly warranting some crony capitalism but that, hey, we are amateurs compared to the Republicans. That there’s a recession would not excuse government corruption and using the old excuse that “they do it too” is truly the last refuge of scoundrels.     

  22. 22
    Ron Chusid says:

    Teddy,

    There is a tremendous difference between legitimate oversight and having to disclose information in response to accusations of this type.  I don’t know the specifics of the legislation but I would hope that there is oversight included of how taxpayer money is being used.

    The right wing accusations are a totally different matter from oversight. The company apparently was required to submit a plan to reduce number of dealerships with this being reviewed by the Auto Task Force. They have supplied a plan and there is absolutely no reason to believe that there were political motivations. For right wing bloggers to make such claims, the burden of proof is on them to show there is cause for investigating this.  We don’t assume that anyone is guilty just because some bloggers make some claims which lack any evidence.

    I am not in any way excusing government corruption because “they do it too.”  The crisis situation justifies increased government involvement in the economy than I would (and Obama) would normally support. It does not excuse corruption.

  23. 23
    b-psycho says:

    Ron: while I wouldn’t consider this specifically to be an example of corruption, the idea that government intervention is even possible without it is one I’m — obviously — skeptical of.  The incentive is always there, and who’s to do anything about it when it DOES occur? 

    It’s even worse when you expand to systemic perverse incentives.  There’s numerous policies that go unchallenged every day that, in practice, are just wasteful interest group horse-trading.

  24. 24
    Mike says:

    Crony Capitalism- I’m glad after a day that I wasn’t prudent and lost my cool, that Ron lightened things up with this laughable issue.  Whereas some democrats, (Blagojevich) could be suspected of cronyism. As of yet, I don’t think even he has been convicted of anything. The last thing I would ever accuse a democrate of being is a capitalist!

  25. 25
    Fritz says:

    Ron, do you assume that there are political considerations when the Pentagon draws up a list of proposed military base closures?  Or is the burden of proof on those who would suggest such considerations and you will assume that everyone is dispassionate and apolitical unless it is proven otherwise?

  26. 26
    Robert L. www.neolibertarian.com says:

    Ron you’re flipping between two different issues.   The statistical evidence against any general bias against republican contributing dealerships has been acknowledged by myself, Hot Air, and Just One Minute among others.  I agree that the “analysis” for this claim is deeply flawed for pretty much the same reasons you talk about.  Statistical evidence for this claim is bogus.

    The specific evidence about favorable treatment for RLJ-McLarty-Landers is a whole different thing and is not debunked at all by the general statistical analysis.  If you want to argue against this you are saying that Megan McArdle is somehow right when she talks about the general case (systematic bias against all Republicans) being unfounded and then she is completely wrong a couple sentences later when she says (about RLJ-McLarty-Landers)  “Still the administration should answer this; it gives the appearance of Chicago-style corruption that is going to further taint a Chrysler takeover which has already left a number of people in the business and finance community wondering how firm the rule of business law is these days.”

    The statistical evidence for favoritism for RLJ-McLarty-Landers is completely different from the bogus claims about bias against all republicans and makes a strong case that something is going on.  It could just be that RLJ-McLarty-Landers is much better at running dealerships than most people are or it could be that Chrysler chose to favor them for political reasons, both of which are reasonable explanations that do not involve wrong doing, but the analysis clearly indicates that something non-random is going on. 

    The “proof” you link to at auto-prophet is for a small sample that does not involve any of the dealerships mentioned in the RLJ-McLarty-Landers issue.  Even if I grant you it’s applicability in the general case (i.e. it proves no general bias against Republicans) it has no applicability whatsoever in the specific allegations of favoritism for RLJ-McLarty-Landers.

  27. 27
    Ron Chusid says:

    Fritz, Sure I assume there are political considerations in the military base decisions, but this is a quite different situation. I would think that Fiat’s primary motivation would be to make Chrysler profitable. There are no such market considerations with military bases (and there is no need to go into all the political considerations there).

    It certainly is possible that there is corruption in any deal involving the government and private business but we need some sort of evidence before assuming this is going on. The conservatives tried to provide evidence and it totally fell flat on this.

  28. 28
    Ron Chusid says:

    Robert,

    No, I am not flipping between two issues at all. You fail to understand the relationship.

    Conservatives made two arguments which caught the attention of many people, such as Megan, initially causing them to think there might be something there. They used a statistical argument and they used accusations that the decisions were made by someone with political ties to Obama. Both arguments fell flat after examination of the evidence.

    While Megan McArdle’s view is hardly the decisive point here, your quotation from her is before her update on Nate Silver’s data. Once that data came out the story was dead. Megan also started by saying, “My operating assumption is that this story is a red herring.” The later data confirmed this. While an accusation might be seen as worth investigating at first, when your two top arguments both fall apart you are not going to be taken seriously when you then try to come up with another argument without evidence.

    I am not linking to any “proof” as you say but simply arguments which show that the accusations lack any credibility. There is no proof to present for a negative. I would not attempt to prove that nothing wrong went on. It is also possible that there could be corruption involved in any deal involving business and the government. Before making accusations in any specific case we need some sort of evidence.

    The conservatives made their accusations and their supposed evidence fell flat, making it difficult to take their claims seriously. On top of this we have the fact that conservative bloggers regularly make unsubstantiated claims for political reasons, making the logical default position to ignore them in the absence of any evidence to back up their claims.

  29. 29
    Ron Chusid says:

    Mike,

    You do realize, don’t you, that we are speaking of a different form of cronyism here than with Blagojevich? More importantly, that when Democrats and others speak of Republican crony capitalism the point is that it is the Republicans, not the Democrats, which vary the greatest from supporting capitalism. Capitalism is like freedom and small government–Republicans talk about it while simultaneously undermining it and promoting something quite different.

  30. 30
    Fritz says:

    I would say that most Republicans and most Democrats are so far from promoting any sort of free market (with the risks that go with it) that arguing which is further away is rather pointless.

  31. 31
    Fritz says:

    Ron, after thinking about it, I will retain my suspicions more for when GM closes dealerships, since GM will now be owned by the Feds while Chrysler will be sold off.

    I would definitely predict that dealership closings for GM will be as political a process as base closings for the military.  Both the Pentagon and GM need to please their owners.

  32. 32
    Teddy_J says:

    Ron, I just cannot agree with your idea that the burden of proof is on the taxpayer in this case – but I do appreciate your thoughts.
    Why is it be okay to have the federal government transfer billions of dollars to Chrysler, keeping it viable just long enough to be purchased by Fiat, all the while concealing the process from the taxpayers? Again, forget about the wingnut conspiracy theories: Do you favor open government? Do you think when the government spends billions of dollars that there should be transperancy about how that money impacts thousands of jobs, communities, and private property?

    I ALWAYS want to know how billions of taxpayer dollars are being spent, not only when we have a Republican administration. Simply disproving or discrediting one particular accusation does not prove that no other improper actions could have taken place. Why not expose the process to the light of day? It’s a very consequential matter involving large amounts of taxpayer dollars: it should be out in the open as a matter of course! Behaving otherwise invites distrust in government, encourages corruption, and sets dangerous precents.          
    The Democratic Party is in charge of the House and Senate as well as the Executive branch. I know that’s unlikely, but what if the government really did violate the people’s trust in the matter of the Chrysler reorganization? The Democratic Party will do everything in its power to conceal the truth, so does might make right? We’re better than that.       

  33. 33
    Ron Chusid says:

    Teddy,

    I am not saying the burden of proof is on the taxpayer. I am supporting oversight. What I am not supporting is paying attention to claims from right wing bloggers just because they are making an accusation. They have too long a history of raising bogus accusations for politically-motivated reasons.

    While there are obvious problems with spending money without appropriate oversight, there are also problems with the tactics of the Republicans of constantly making accusations which lack any proof. We do not need a replay of the Clinton years in which multiple claims of financial impropriety were made and investigated without proof of any of them being found.

    The right wing bloggers have a long history of dishonest accusations. The burden of proof is on them, in light of their history, to show that we should take their claims seriously.

  34. 34
    Ron Chusid says:

    Fritz,

    There are obviously greater concerns with regards to GM than Chrysler. You are assuming that GM is to become a government operation but the goal remains to get it back up as a viable private company.

    With that goal in mind, there are real questions as to how intrusive government oversight should be of day to day operations. Obviously they cannot be given a blank check. On the other hand, if the goal is to get them functional we cannot go overboard with regards to questioning every business decision as this could hamper their chances of becoming profitable.  I don’t think there is an easy answer here as to how much oversight there should be over each decision, such as which dealerships to close.

  35. 35
    Fritz says:

    Ron, GM as a government operation is not an assumption, it’s the plan: 

    http://finance.yahoo.com/news/GM-makes-new-bondholder-offer-rb-15370745.html?.v=8

    The U.S. Treasury would own 72.5 percent of the new GM coming out of a bankruptcy sale process while a trust affiliated with the United Auto Workers union would own 17.5 percent, GM said in a filing with securities regulators.

  36. 36
    Ron Chusid says:

    It is the plan short term to keep them operating. The long term plan is for them to become a private company again. Therefore it would be counterproductive to make oversight overly restrictive if it prevents them from being able to get back on their feet.

  37. 37
    Fritz says:

    Ron — we should work out a date for a side bet on “government selling its 3/4 of GM”.

    I think you are right that that is the nominal plan that everyone will give lip service to, but other considerations, like “Don’t hurt the UAW” and “Don’t close plants in politically important states” and “Design cars that really appeal to environmentalists but nobody else” will keep that from happening.

  38. 38
    b-psycho says:

    Fritz: I’d hardly classify protecting the UAW as one of the considerations taken seriously, when their proposed share of GM has been cut by more than half while production is being shifted to Mexico & China — on our money, no less.

  39. 39
    Ron Chusid says:

    Fritz,

    They may or may not be successful, but I think that is really the plan. I don’t think Obama really wants to get bogged down with running GM.

  40. 40
    Fritz says:

    Psycho — the ownership plan hasn’t been finalized.  I think the UAW is waiting on that.   Once the Feds own 3/4 of the company, I think there will be lots of political pressure on issues like plant closures.

  41. 41
    b-psycho says:

    I know it hasn’t been finalized, I’ve been watching the story unfold. 

    Outcry over the closures wouldn’t surprise me.  These days, more people are asking themselves “if there’s going to be all this intervention, then where’s MY bailout?”, and this’ll just feed into it.

  42. 42
    Fritz says:

    This is going to be so much fun.

    http://online.wsj.com/article/SB124416281882387463.html

    President Obama may have “no interest” in running General Motors, as he averred Monday. But even if that’s true, we are already discovering that he shares Washington with 535 Members of Congress, many of whom have other ideas.
    The latest self-appointed car czar is Massachusetts’s own Barney Frank, who intervened this week to save a GM distribution center in Norton, Mass. The warehouse, which employs some 90 people, was slated for closure by the end of the year under GM’s restructuring plan. But Mr. Frank put in a call to GM CEO Fritz Henderson and secured a new lease on life for the facility.

  43. 43
    b-psycho says:

    Fritz, if Ron doesn’t mind (since apparently you don’t have a blog yet), I’d like to pick your brain on something (though Ron should feel free to chime in on it if he wants, since it is his blog & this is on topic):

    Last November I threw out a bit of a mind exercise w/r/t an alternate fate for GM.  What would you have said if that is what had instead happened?

  44. 44
    Fritz says:

    I don’t have the time to manage a blog.  I don’t know how Ron does it. 

    It’s a good point.  Chapter 7 would certainly have been horribly ugly.  I would not have squawked if the government had made a public DIP system available to get it through the transition in Chapter 11.  Better than government ownership (what we have now). 

    My point is that any notion that the government has or is going to keep its hands off of GM’s operations in order to speed a hypothetical retransition to private ownership is, well, not well grounded in how DC reacts to the ability to wield power.   Even if Obama personally means well (and figuring out a politician’s personal feelings is like trying to figure out what is going on inside the event horizon of a black hole), the institutional realities of government are not to be denied.  GM is now a government jobs program.  A big government jobs program.

Leave a comment