Respondents to this week’s RBJ Daily Report Snap Poll were sharply split on the federal government’s year-old, $60 billion rescue of General Motors and Chrysler LLC, with a one-third plurality giving it a failing grade but more than 40 percent saying the bailout deserves an A or B.
Over the last two weeks, President Barack Obama has visited auto factories in Detroit, touting the bailout as a turnaround success story. A new White House report says the U.S. auto industry has added 55,000 jobs after losing 334,000 in the year before GM and Chrysler emerged from bankruptcy under the rescue plan. The report cites estimates that without government intervention, 1.1 million more jobs likely would have been lost.
In the first quarter of 2010, all three Detroit automakers were profitable on an operating basis-for the first time since 2004. Both Chrysler and GM have repaid government loans, and GM is moving toward an initial public offering that would allow the government to begin selling its nearly 61 percent stake in the company, which it received in exchange for some $43 billion pumped into GM.
Critics of the bailout maintain, however, that it was an improper intervention in the private sector and a misuse of public money. "President Obama’s visit to Detroit is nothing more than a public relations pit stop," Republican National Committee spokesman Ryan Tronovitch said. "The Michigan auto industry still has a long way to go, and President Obama’s tax, borrow and spend policies will only prolong Detroit’s recovery."
Nearly 575 readers participated in this week’s poll, which was conducted Aug. 9 and 10.
How would you grade President Obama’s auto industry bailout?
Here are some comments from readers:
Government should not meddle in the private sector. They meddle enough already.
—Daniel Mossien, architect
Leave the open market to sort things out. Bankruptcy via Chapter 11 was a viable option. GM in a matter of time will find itself in trouble again. Labor costs are too high to compete in the long run. Karma greed will revisit. The administration screwed the GM bondholders. Detroit’s unemployment is at 14 percent-plus, and GM just announced a new plant in Mexico. Doing just super.
It was obviously a success. The failure to interfere in the private sector by properly regulating it, instead of deregulating the big boys, is what got us into this mess.
—Jim Bertolone, AFL-CIO
Some things could have been done better, but if we the people did not step in, things may have gone much worse. Now all he needs to do is help the small and midsized companies before it’s too late and we can’t recover that sector.
This is not a turnaround story. What Obama did was force the creditors, bondholders and franchise dealers to walk away with huge losses. It is a no-brainer to turn around a business when it can walk away from its debt and cut out a huge portion of its fix costs.
—Patrick Ho, Rochester Optical
Unfortunately, the bailout was necessary to reverse years of poor business practices and to keep the industry afloat. Allowing these businesses to fail would have created a much larger domino effect, and related industries would have gone under as well. Unemployment numbers would have been much higher had the government not intervened, and the economic growth we are seeing now, although slow, would have been further delayed. Sad but true.
—Jason Marino, Paychex
Such intervention in private industry should be avoided, but it was necessary to avoid a domino effect that would have made the Great Recession last much longer. Now, if only he could get the banks to lend more to small businesses, the primary job-creating engine of our economy.
—Don Adair, Adair Law Firm LLP
While the bailout appears to have put these companies in better position, I believe it was an improper use of public money. These are private corporations, and they succeed or fail based on the products they sell. If the public chooses not to purchase the offerings, the companies (like many others before them) simply cease to exist. While that would no doubt be wrenching for the employees and stockholders, America would survive. All we’ve done here is use our tax dollars to rescue some failing companies while leaving others to perish. It doesn’t make any sense to me.
Here is a good way to measure the auto bailout. Ask the 55,000 families that now have a job/paycheck if they thought the bailout of the auto industry was a good idea. When the country is in this type of crisis, we must help our fellow citizens. It’s been done many times before for the auto industry and the aerospace industry, and it has worked just as it did this time. I hope they continue to help selective industries when they’re in a troubled state, because it helps and keeps people working.
—Ken Pamatat, Creative Images
You can’t successfully subsidize a market economy. GM is an inferior company (both in products and in leadership), and the market decided it’s done. This prop-up has only postponed the inevitable at taxpayer expense.
—Ben Murphy, founder, TheFatherLife.com
In a true free market, they (automakers) should have been allowed to fail, but wisdom forced us to look at the long view and it looks like it may have been the right decision. Time will tell.
—Peter Bonenfant, Fairport
Japan, Korea and Germany would have taken over the U.S. auto market if not for the bailout. We would have lost tens of thousands of jobs. It was the best of two difficult options. In the end, the jobs and auto industry were saved, and the auto companies are paying back.
—Sergio Ruffolo, JR Language Translations
The bondholders were illegally savaged. The taxpayers and their descendants were stuck with another loan from China and Saudi Arabia. The unions were made whole and their excesses perpetuated. The president of GM was fired illegally. The nation was weakened. An orderly bankruptcy would have fixed all the problems. Now we are left with a $41,000 electric car that nobody can afford (even with the $7,000 tax break). Way to go, President Obama!
Can someone tell me why there is no “E”? Obama certainly does not deserve a passing grade, so A, B and C are out. D just means that he passed with a lower “bar” to clear. There were a few good things out of the auto bailout, so an F is too harsh. I want to give him an E. But there is no E.
—Bill Lanigan, Chamberlin Rubber Co 427-7780
I’ve been a big supporter of the American car industry. Over the past 36 years my family has purchased many new cars. All of them have been American because we feel it’s important to buy American and support the American worker. However, President Obama has once again instituted flawed policy. The auto industry bailout is another policy failure. President Bush stated the bailout of GM and Chrysler was supposed to stabilize them. After the initial crisis was averted, President Bush thought that the next administration would let the private sector recapitalize both GM and Chrysler along with some minor government subsidies. Instead, President Obama decided to punish the private sector by substantially discounting some of the bonds. Many bondholders were financially devastated. Yet President Obama substantially made whole union interests as a payback to his election at the expense of the overwhelming majority of working families in the United States. From the statistics I have seen, the total bailout far exceeds the value of these two car companies at their historical peaks. GM will never be able to repay the entire debt to the taxpayers.
—John Rynne, president, Rynne, Murphy & Associates Inc.
Get out of the way and let free market economy principles work.
—Randy White, president & CEO, JN White Designs
Obama and his advisors have the advantage of the media basically protecting them from the truth. What if McCain were president and he bailed out GM and Chrysler, but Ford made out just fine without one? Think about it. He claims he saved the auto industry! Who saved Ford? Where did our money go? What will be the residual effects of the union ownership put in place by our government, with our money? This is the American way? Please pay attention and vote in November.
It’s just one more O’Blah Blah scam to get the lemmings to side with him. All GM did was to move monies from the line of credit (secured by us) and take those monies to pay down on their loan. It’s a glorified shell game that no media in the States (will) publish. You have to go to Canada, Europe, or even the Brits to get the real news in your own country. Very sad indeed.
—James Duke, Victor
This question can best be answered by asking which of the Big 3 did NOT take any bailout money and which of the Big 3 is experiencing the best (although tepid) recovery. Answer: FORD.
The government had no business supporting the unions with this bailout who were the initial cause and largest contributor to the D party. The stockholders and bondholders had their wealth redistributed. Ford saw this coming and did well by not bowing down to this socialist-based redistribution.
Pure capitalism does not work anymore. There is market-driven economy, and then there is national interest, which should prevail in any circumstances. An economy driven only by profits is not a viable solution for a society in the 21st Century anymore. It is as simple as that. You either care about the guy near you first, or you care about profit no matter what. You cannot take care of both with the same efficiency. So President Obama did the right thing, no doubts about that. If you want to retain a portion of the market share in tomorrow’s global auto industry, which should be a strategic goal for US, then you do not have a choice. At the same time, taking care of the workers who built their life around those companies was the right thing to do. In addition, if we would not have done that, the burden of having them on unemployment, medical care, etc, will still be carried by our society as a whole.
Think of the government intervention of U.S. automakers GM and Chrysler as a “bridge loan” rather than a bailout. Automobiles are the quintessential “American” product with myriad connections to suppliers, subcontractors, dealers and even financial institutions. There is no doubt that failure of these two manufacturing giants would have been catastrophic to the entire economy. GM, especially, was on the cusp of introducing high-quality and innovative new products, which the loans allowed it to bring to market at a crucial time. Although no one foresaw the meltdown of Toyota quality and safety systems, the Big Three had good products ready to go and many Americans turned to them for new cars. Investment in the auto industry was a far safer, secure and shrewd investment than bailing out the financial and mortgage industries.
—Frank Orienter, Rochester
I would give an A, but it wasn’t tough enough on Chrysler and GM. Otherwise, it worked! They are still in business!
—Hutch Hutchison, IN T’Hutch Ltd.
Your poll question would indicate that Obama, the King, bailed out GM and Chrysler with his own money. (George) Soros has scammed the man to the top and made him wealthy but even he doesn’t have that kind of cash. Actually, he took my money and that of a whole bunch of other people’s money and invested it in a loser. That, coupled with the attempted destruction of Toyota, will not save GM. Making an electric car that goes 40 miles on a charge at $41,000 is a joke. If my alternator goes on my Accord, I can go 30 miles on my Diehard battery. The natural forces of failure should have been allowed to run its course. Healthier companies would have come out. All that will happen is he staved off the inevitable as he allowed his appointed minions to throw good money down the rat hole that is the UAW. It was just a payoff. I have been a GM owner my entire life. I am a Ford man now.
The impending auto crash required a quick and steady emergency control. The crash has been avoided and now the drivers can move ahead. Hopefully, they, the workers, the government, and the people have learned that we must improve the quality, cost, and environmental value of cars manufactured in the U.S.
—Mike Bleeg, Strategic Results
I think it’s great! Now we just need to bailout the financial industry … oops did that; the housing market … oops that one too; the insurance industry … yepper; the ‘green energy’ market … there you go again; the “energy start” appliance market; the free golf cart … sorry, “electric vehicle” market; the agricultural market … wow, we’ve been in bed with (I mean we’ve been assisting) that one since FDR’s New Deal. Why haven’t we gotten to the news market that all of a sudden can’t make it? Maybe we can save the poor people in Hollywood and hand them a little cash. But, hey, don’t worry about it. You don’t have to pay for it. Your kids will … but what the heck, no biggie.
—Devin Michaels Chili
This was actually a bailout of the autoworkers unions. The stockholders and debt holders got screwed while the unions ended up owning a high percentage of the GM and Chrysler stock.
—Dennis Ditch, Delta Square Inc.
Obama’s bailout of GM (Government Motors) and Chrysler LLC, now owned by a non-U.S. company, was a great success for the unions. Obama’s deal was payback for union support of Obama in the election. GM and Chrysler LLC should have been allowed to fail, just as the major airlines have been allowed to fail. The failure of GM and Chrysler would have allowed for a renegotiation of the disastrous union contracts. As now configured, the unionized U.S. automakers have to compete with the non-unionized foreign automakers making cars in the U.S. True capitalism has sharp teeth. The unions got their golden parachute.
—Clifford Jacobson, WebHomeUSA.com
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