by Richard H. Frank
Since Barack Obama cannot run on his record of accomplishments as President, he and his minions have chosen to attack Mitt Romney for his record as a venture capitalist while running Bain Capital. This tactic is in furtherance of dividing our nation into the haves and have-nots or the 99% against the 1%. Unfortunately, the average American voter has no concept as to how venture capital works in the free market and thus swallows the lies and distortion spread by Obama during his re-election bid “hook, line and sinker.”
Joe Biden credits Obama and his administration as single-handedly saving the American auto industry with the $80 billion bailout of General Motors and Chrysler in 2009. Examining the facts with regard to General Motors paints a drastically different picture, however, and in fact shows Obama using many of the tools available to venture capitalists in the GM bailout.
In order to set the stage for the events leading up to the Government-forced bankruptcy, it is helpful to understand some facts concerning the world’s once largest corporation.
During the 20th Century General Motors Corporation grew to become the world’s largest successful corporation with 91 manufacturing and assembly plants in the U.S. alone. During the 1980s foreign competition, armed with low-cost labor and in many instances Government subsidies, began to erode GM’s market share which fell steadily from approximately 50% to the low 20% by the end of the century. Efforts by management to curtail costs and reverse the downward trend in market share were met with fierce opposition by labor unions and contractual commitments that hindered increased productivity and cost reduction.
Notwithstanding this opposition GM either sold or closed 43 of its U.S. facilities between 1981 and 2008 reducing its operating locations by 30% while still operating under oppressive legacy costs acquired under previous contract commitments.
By 2008 GM was faced with receiving Government loan guarantees or bankruptcy. Hence, along came Barack Obama and his Government takeover structured to reward labor unions at the expense of creditors, shareholders and bondholders. Under Obama’s Automotive Czar, the Government pumped $50 billion of the taxpayer’s money into the ailing corporation and immediately announced the eventual closing of 14 additional U. S. plants and three parts and service centers resulting in the loss of 20,000 jobs. This action further reduced the number of U. S. facilities by 23% although without the necessity to recognize any previous contractual commitments while operating in the Government-arranged auto bankruptcy.
The consideration given to labor unions was a share in the new General Motors and a seat on the Corporation’s Board of Directors. Up to this point it would appear that Obama and venture capitalists had a lot in common as to how they approached saving a company.
1. They both infused large sums of money while actions to curtail costs were devised.
2. They closed obsolete and unprofitable locations.
3. They fired excess labor and management personnel from closed facilities and reduced remaining workforces as required to increase productivity and achieve consolidation of operations. The major differences, however, between the Government bailout and the acquisition by venture capitalists are stark in comparison:
- Venture capitalists use their own money. The government uses our money from tax revenues and/or borrowing from China to continue to keep GM afloat.
- Venture capitalists are required to follow bankruptcy law and honor creditor claims according to statute. The Government ignored the law and entered into arrangements that benefited organized labor over creditors, shareholders and financial institutions; hence the term “crony capitalism” has been coined to define the bailout.
- Venture capitalists invest to create value and profit by making enterprises successful. Barack Obama spends our money to do whatever he and his administration deem politically expedient to support their agenda without regard to creating value.
In the years following the bailout of GM, what have we learned?
Dan Ackerson, Chairman of the “New General Motors” reported in a speech that 70% of GM vehicles are produced outside of the U.S. I guess that equates to a large portion of the $50 billion bailout going to create jobs outside the U.S. Does Obama count those jobs as either being saved or created?
While 14 plants and three parts and service centers were closed in the U.S. as part of the Government bailout, 11 assembly plants and 4 powertrain plants have been opened by GM in joint ventures in China, along with 2700 dealerships. Where did the money come from to make these investments? Certainly not from operating profits from the “New General Motors.” More of our tax dollars to creat jobs in China with SAIE and FAN?
Ackerson also stated in 2011 that a new “Advanced Technology Center” was being built to assure the company’s success in China. More alarming is the transfer of advanced technology from the U.S. to China under the joint venture arrangement between GM and the Communist Chinese Government.
Saginaw Steering Gear was acquired by Pacific Century Motors and became Nexteer. Under the Obama Administration oversight ownership of Nexteer was quietly transferred to AVIC, a Chinese Communist Government association. Another example of Obama’s crony capitalism.
As the campaign rhetoric heats up over the coming months and Obama mounts his vicious attack on Mitt Romney and Bain Capital for destroying jobs in the quest for profits and moving jobs overseas, keep the story of the “New GM” in mind and it will expose Obama for the hypocrite he and his administration really are.
Filed under: 2012 Presidential Vote, Budget and Taxes, Free enterprise system, Jobs, Presidential Candidates, The Economy, The President | Tagged: 2012 Presidential elections, Bain, capitalism, China, General Motors, GM, GOP, jobs, Obama, recovery, Romney, venture capitalist | Leave a comment »