Auto Bailout Officially Ends and Taxpayers Lost Again
Government should not be in the business of selecting winners and losers in the marketplace by directing cheap financing to favored sectors of the economy. Taxpayer dollars were invested in a sector of the economy that private money was avoiding for good reason. – Hester Peirce, Senior Research Fellow, Mercatus Center
The United States Treasury has announced the official end of the 2009 bailout of General Motors and Chrysler Motors. Presidents George W. Bush and Barack Hussein Obama gave away $79.69 billion in tax dollars through the Troubled Asset Relief Program (TARP) and the Auto Industry Financing Program (AIFP), The federal government used funds to purchase majority shares of the companies in order to nationalize them and allow Obama and fedgov bureaucrats to become the decision makers for the companies. Obama became the defacto CEO of both companies, which resulted in a windfall for the Democrat voting bloc of the United Auto Workers (UAW).
|UAW President, Bob King, with his Savior|
Obama gave $30 billion of your tax dollars to the UAW as payback for campaign contributions and votes. When Obama decided to give the UAW preferential treatment over other unsecured creditors, he funneled $30 billion dollars of your money to the UAW’s Voluntary Employee Beneficiary Association (VEBA) to rescue pensions and health care benefits. Did anyone rescue your 401(k) after the market crashed in 2008?
What did taxpayers get for their money? Taxpayers lost $9.6 billion on the bailout. The Italian automobile manufacturer, Fiat, is now the majority owner of Chrysler. Fiat Chrysler Automobiles N.V. (FCAU) is trading at approximately $13 per share and trending downward. Chrysler is also facing hurdles associated with the recall of 907,000 vehicles due to “alternators that can fail and heated power mirror wiring that can short and cause minor fires.” These problems can cause the entire electrical system to fail, knock out power-assisted steering, and render anti-lock brakes and electronic stability control useless. Good luck with that! General Motors stock is at $37 per share and trending downward. General Motors has much bigger problems than Chrysler because its losses in China and Europe are unsustainable, it owes $20 billion in unfunded pension liabilities, and its recall costs for 1.6 million faulty ignition switches is at $300 million and counting.
It is only a matter of time before General Motors ask for another taxpayer bailout. It is quite possible in the near future that Fiat will ask American taxpayers to assist it in propping up Chrysler. The aforementioned recall costs are going to cost both companies billions of dollars that they don’t have on their balance sheets. Neither company enjoys a competitive advantage over its competitors in any market, so the prospect of earning its way out of trouble is bleak. I assure you that at some point both companies are going to want you to save them again, but it is time to let these distressed companies out of their misery. The market has spoken and it wants them to go away.