Green Room

Bad Weather Saved GM, Not Big Government

posted at 4:06 pm on October 20, 2012 by

Last September, I wrote a post about the auto bailout which read in part:

if I have to hear left-wingers touting the “success” of the auto bailout one more time, I might as well toss a chair through my window.  It’s patently false to say that the auto bailout was a success.  Furthermore, it was more of an United Auto Workers union bailout than it was for the auto industry.  As Amy Payne of Heritage wrote back in June:

The Treasury Department estimates that taxpayers will lose $23 billion on the auto bailout. Sherk and co-author Todd Zywicki [both are economists for Heritage] find that none of these losses came from saving jobs, but instead went to prop up the compensation of some of the most highly paid workers in America. They write:

We estimate that the Administration redistributed $26.5 billion more to the UAW than it would have received had it been treated as it usually would in bankruptcy proceedings. Taxpayers lost between $20 billion and $23 billion on the auto programs. Thus, the entire loss to the taxpayers from the auto bailout comes from the funds diverted to the UAW.

Now, Hans Bader, from the Competitive Enterprise Institute, wrote on October 15 that the weather also had a part in “saving” GM.  In fact, Bader wrote that “General Motors never would have recovered as it did if not for the massive Japanese earthquake and Tsunami that devastated its rivals, such as Toyota.  The tsunami so crippled Toyota that GM could regain market share despite the Obama administration leaving GM’s uncompetitive, inefficient work rules and high labor costs largely intact.”  As a result of these disasters, GM was able to become the number one carmaker in the world.

Furthermore, the massive recalls Toyota had to execute in 2010, “helped move Ford and GM move forward at a time when overall auto sales were rising rapidly.”  In the end, it cost the Japanese automaker 18,000 sales in the United States during the month of February of that year.

Also, it helps when the “massive Thai floods in 2011… inundated and shut down Japanese car-parts factories in Thailand for many months, crippling Japanese automakers’ global supply chains. On Dec. 8, Toyota “cut its profit forecast by more than half after Thailand’s worst floods in almost 70 years disrupted output of Camry and Prius vehicles.” The World Bank estimates the floods did $45 billion in damage to the Thai economy and left half its factories under water for substantial periods.”  Hence,  ”by harming Japanese automakers, the Thai floods gave a huge boost to their competitor, General Motors, enabling it to survive despite the Obama administration’s costly coddling of the UAW union in the bailout, which threatens the automaker with future losses in the billions,” said Bader.

However, Bader notes that “GM now is concealing the depth of its problems by financing auto sales with risky loans that may never be paid back, resulting in GM’s increasing reliance on selling cars to people who can’t pay for them.”  Investors Business Daily’s GM Ramps Up Risky Subprime Auto Loans To Drive Sales noted thatthe automaker is relying increasingly on subprime loans, 10-Q financial reports shows. Potential borrowers of car loans are rated on FICO scores . . . Anything less than 660 is generally deemed subprime. GM Financial auto loans to customers with FICO scores below 660 rose from 87 percent of total loans in Q4 2010 to 93 percent in Q1 2012.”

Lastly, as the Obama administration seeks to increase CAFE standards on American cars, which hurts us more in the global market  than it does our competitors, Bader said he expects 50-100,000 autoworker jobs to vanish in the coming years.  Bin laden may be dead, but GM is about to go on life support.

Recently in the Green Room:

Blowback

Note from Hot Air management: This section is for comments from Hot Air's community of registered readers. Please don't assume that Hot Air management agrees with or otherwise endorses any particular comment just because we let it stand. A reminder: Anyone who fails to comply with our terms of use may lose their posting privilege.

Trackbacks/Pings

Trackback URL

Comments

And the Repo-Man did much rejoicing!

FlatFoot on October 20, 2012 at 4:28 PM

How absolutely stupid some people can be….. wonder if he gets paid for this kind of stupidity.

ultracon on October 20, 2012 at 4:45 PM

How absolutely stupid some people can be….. wonder if he gets paid for this kind of stupidity.

ultracon on October 20, 2012 at 4:45 PM

He does.
About 400k a year.
I agree the people were stupid to elect him.

Mimzey on October 20, 2012 at 5:13 PM

They lose money on every sale, but they make up for it in volume! I always liked the Camaro. Sad I will never buy one again. Although, I might not feel so bad if I find a nice 60′s SS for a low price.

astonerii on October 20, 2012 at 5:17 PM

However, Bader notes that “GM now is concealing the depth of its problems by financing auto sales with risky loans that may never be paid back, resulting in GM’s increasing reliance on selling cars to people who can’t pay for them.” Investors Business Daily’s GM Ramps Up Risky Subprime Auto Loans To Drive Sales noted that “the automaker is relying increasingly on subprime loans, 10-Q financial reports shows. Potential borrowers of car loans are rated on FICO scores . . . Anything less than 660 is generally deemed subprime. GM Financial auto loans to customers with FICO scores below 660 rose from 87 percent of total loans in Q4 2010 to 93 percent in Q1 2012.”

I’m torn between “That sounds familiar” and “What could go wrong?”

Count to 10 on October 20, 2012 at 10:31 PM

There’s all kinds of private entities that buy good companies that had a bad break or need more capital. Just ask Sprint. No one thought GM or Chrysler could make money except maybe the community organizer-in-chief. That would depend on if he is incompetent or just thought tax money should prop up his union cronies.

I love my new German-built Volkswagen personally.

Transpo on October 20, 2012 at 11:08 PM

I currently drive an ’04 Chevy Malibu that’s paid for long ago. It’s the best car I ever owned, and the last GM product I’ll ever own.
When the capital strike ends after the election and I can find work I’m going to replace it with something from a foreign carmaker. There are a lot of non union car plants in the South. I’ve always been a Ford man but I refuse to support the UAW any longer.

single stack on October 21, 2012 at 7:06 AM

A bankruptcy now and then is a good thing.

Seriously.

Bankruptcy doesn’t mean the company disappears and everything is gone forever.

Simply means that under court supervision, according to law, the entity is re-structured, reorganized, creditors paid, everything streamlined, fat cut to the bone, the entity managed until a new buyer or group of investors comes along and takes charge….then, allowing the market to work…life goes on.

GM…not a bankruptcy…should have been allowed to.

But Obama, Biden, Reid and the unions prevailed using our money to pay off the unions so they’d support Obama whenever he needed a little muscle.

Sound about right?

coldwarrior on October 21, 2012 at 8:38 AM