Have you heard? Congress is now considering giving out cash for clunkers. That is, they are considering the idea, of giving buyers up to $4500.00 for their old, gas guzzling clunkers, toward the purchase of a new, fuel-efficient vehicle.
Now things are beginning to make sense. As you know by now, the Government is the proud new owner of approximately 60% of General Motors (GM). The United Auto Workers Union (UAW) has partnered with the Government, and purchased approximately 15% of GM. This is ironic when you think of how much of the Auto Bailout money was ultimately received by the UAW, as “legitimate expenses” paid by GM and Chrysler, before the takeover.
But first, let’s look at the business aspects of what is going on here. No matter your social viewpoint, the whole idea for a company to be in existence in a capitalist, free market system is to make profits. The auto industry is no exception to this ideology; they must continuously develop their products, to appeal to the buyers, and thus maintain marketability. Like it or not, without profits, they cannot pay the overhead, or maintain the research and development necessary to sustaining the business. The only way this joint venture can be profitable is to lure people to buy their newly acquired product.
Up until now, auto manufacturers used factory rebates as a sales tool. Now that the Government is in the auto industry, they are legislating the use tax rebates. If you think about this for a moment, the entire auto bailout fiasco could have been avoided, if the Government had used tax incentives toward new car purchases, of American made cars, as proposed by Andrew Wilkow. Mr. Wilkow argued that the money was going to originate with the people regardless, and that using a tax incentive would entice people into purchasing new, American made vehicles, thwarting the need of a Government bailout, and at least allowing the people to have something to show for the money they spent. Now they have legislated the use of tax incentives, but as an unfair advantage to compete for market share.
Has anyone thought to ask where the money is coming from to pay for the incentives being offered? You can bet its coming from the same place as all the funding for all the other Government programs, your pocket.
This takeover is looking more, and more, like an attempt to monopolize the auto industry, with the exception of Ford Motor Company, who has refused to give in to government ownership. Do you think the Government would adopt new ecological or economical standards for the auto industry, and then give their “Government Entity”, GM, exclusion? Of course, the exclusion would extend to foreign auto manufacturers. That would teach Ford; they would soon wish they had accepted money from the bailout.
As a side note, most of the testing for automotive research and development takes place on the racetrack. I can just imagine, Team POTUS. Look out NASCAR; you could be the next step.
No way! The Government in auto racing? Why not? Besides money, NASCAR already has something that the Government envies, fan loyalty. The Government sees NASCAR Fans the same way they view any other demographic group, a voting block; typical, conservative, “good ole boy” types, loyal to a common interest. You think?
The GM takeover takes place on the heels of the Government supporting a deal for a foreign auto company to purchase Chrysler, who went bankrupt after the bailout. The support is in the form of the Supreme Court allowing the “merger” of Chrysler and FIAT, and at the same time, the forced closure of auto dealerships, thereby allowing the new owners to escape the dealer’s contracts with Chrysler. So much for the promise of saving American jobs. Did I mention the UAW received money from Chrysler as a “legitimate expense” as well?
I wonder if the money received by the UAW, from the manufacturers, as a result of the bailout, was ultimately used as purchasing capitol in this latest scheme. If so, I wonder if the Taxpayers now technically own part of the UAW, as the bailout was paid from tax dollars.
To compound the issue, it seems the UAW will still have labor agreements with FIAT, who bought out Chrysler. FIAT is tied to the Italian Government, in as much as, to offset American taxes paid for the sales of their automobiles here in the U.S., FIAT is subsidized, thus completing the loop.
The U.S. Government, the UAW, and the Italian Government, all members of one big, happy, global, auto industry family, and you and I, the Taxpayers, are on the hook to pay for the wedding. Gee, we didn’t even get a piece of cake. I almost forgot, the Chinese are going to be our new “Dutch Uncle”, because they bought the Hummer line from GM. That should work to throw a monkey wrench in the SUV Market.
As to financing, the Government is already controlling several financial institutions. It is only a matter of timing until the announcement of a special, low interest auto-financing program. I bet it will have full Government backing, just like Fannie Mea and Freddie Mac. Wow, how about that?
No matter how you serve it up, President Obama is leading our nation down a road to failed ideologies and policies. Keep watching, if you dare, for where I think it could lead us.
(Check out my follow-up to this article in Globalization of Our Nation)