Government Motors: Obama’s British Leyland
August 14, 2012
Statism: The president may detest Churchill and British colonialism, but he adores British socialism. In fact, his GM takeover parallels the Brits’ auto nationalization of the ’70s.
This of course is nothing to cheer about. London’s takeover of carmaker British Leyland is a well-documented disaster. Predictably, Obama’s ham-handed meddling in the U.S. auto industry is producing similar results.
Rewind to 1964.
That year, Harold Wilson and the Labor Party took control of the British government from the conservatives. A Fabian socialist, Prime Minister Wilson struck out to gradually nationalize the economy, starting with the car industry.
In 1968, he and his central planners, in their infinite wisdom, decided the automakers should merge into one mega producer.
The resulting creation of conglomerate BLMC — which combined ailing Austin, Morris and Jaguar with relatively healthy Leyland, Triumph and Rover — was the first step in a long and tragic fall for some of the best known names in car manufacturing.
After heavily unionized BLMC collapsed in 1974, unable to weather the OPEC oil embargo, London nationalized it, creating British Leyland.
The new government creation was hamstrung by costly and world-famous union strikes throughout the ’70s. Union bosses would halt production over so much as a shortened tea break. Designers came out with the Allegro and other duds.
As Leyland staggered on into the 1980s, British taxpayers had to prop it up with huge sums of cash.
The socialist experiment bled taxpayers for 15 years before, piece by piece, the monstrosity was mercifully reprivatized beginning in 1989.
Drawing parallels between Obama’s GM saga and the British Leyland nightmare — and attendant socialism — is not hard to do.
Thanks to uncompetitive union contracts, America’s largest automaker couldn’t outlast the financial crisis. Unlike Ford, which renegotiated its labor contracts and survived, GM went bankrupt. And Obama partially nationalized it, effectively appointing its board and directing operations.
And he put taxpayers on the hook for 60% of the failed giant.
Instead of demanding concessions from the UAW, Obama yoked GM even snugger to the union’s artificially inflated wage and benefit contracts.
What he did demand was more eco-friendly cars. So GM ramped up production of the ill-fated Chevy Volt, which is now one of the industry’s worst-selling models.
Starting in March, GM had to suspend Volt production for several weeks to “align production with demand.”
GM’s profits plunged 41% in the latest reported quarter, and it’s struggling to pay back its debt to taxpayers. It still owes more than half the $50 billion in federal bailout funds it received.
But it’s worse than that.
It turns out the administration let GM “repay” more than $6.7 billion “using a portion of the escrow account that had been funded with TARP funds.” So GM is merely paying the government back with government money, not money GM is earning selling cars, as the administration claims.
To help prop up weak sales, the administration is buying up GM cars to add to its government fleet, now at 449,000 and climbing. And as IBD first reported, the automaker is relying increasingly on risky subprime loans underwritten through its financial arm to boost sales.
Bottom line: Taxpayers have not been paid back and are still on the hook as GM continues to require government help.
Bloom played an integral role in managing the process that led to the reorganization of General Motors and Chrysler as they teetered on the edge of bankruptcy. In total, the government spent about $80 billion to bail out the companies.
Throughout the bailout, Republicans regularly criticized Bloom for giving favorable treatment to the United Auto Workers union over investors, who lost billions in the car manufacturers’ bankruptcies.
Coincidentally, the U.A.W. is also dominated by Democratic Socialists of America affiliates, including union president Bob King, who was appointed in February 2011, by President Obama, to the Advisory Committee for Trade Policy and Negotiations.