Saturday, October 13, 2012

Ohio-Obama's Paper|Chicago Tribune-states: Obama's auto fairy tale

Obama's auto fairy tale
Ohio-Obama's Paper|Chicago Tribune-states: Obama's auto fairy tale

There there are ten other companies that make cars in this country, and they got nothing from the feds. If anything, they got hurt by the subsidy extended to their competitors, whom they had outperformed fair and square. Also unmentioned last night is that the bailout will taxpayers more than we were originally told -- $25.1 billion instead of $21.7 billion.

GM and Chrysler may have been in danger of disappearing, but the auto industry was not. Obama can claim all the credit, but the rest of us are paying a high price for their rescue.

In the first place, Obama does not deserve all the credit for the bailout of the automakers. It got started under President George W. Bush, who reaped curiously little praise in Charlotte.

Nor is it necessarily true that had this administration declined to intervene, GM and Chrysler would have promptly disappeared. Plenty of companies continue to operate after filing for bankruptcy, including the one I work for. Airlines, restaurant chains and clothing retailers have all gone into Chapter 11 and lived to tell the tale.
GM and Chrysler had a slightly harder problem because they sell long-lasting products — and customers might have doubted they would be around to honor their warranties. But they could have contracted with independent companies to handle that job. Or the administration could have guaranteed their warranties, as it did, and stopped there, which it didn't.
Saving two companies is not the same thing as saving the U.S. auto industry, which includes a host of other corporations that make cars here. Not only did the others get nothing; they were penalized for prospering. Having kept labor costs down and quality high, companies such as Toyota, Subaru and Honda lost many of the usual benefits of their achievement. Sales and profits they should have reaped, they didn't.

All the administration proved is that if you pump enough federal helium into a sinking business, you can keep it aloft for a while. By the administration's own estimate, taxpayers will lose $25 billion on the deal.

Writing in The Wall Street Journal, Todd Zywicki of George Mason University law school and James Sherk of the Heritage Foundation point out that "GM still has higher labor costs ($56 an hour) than any of its competitors" — something a normal bankruptcy likely would have altered.

Even former Obama auto czar Steven Rattner admitted, "We should have asked the (United Auto Workers) to do a bit more." But if they had done that, the UAW might not be so enthusiastic about re-electing Obama.

These costs are a particular burden to companies that can't charge a premium for superior reliability and design. When Forbes magazine compiled a list of the 10 worst-built vehicles of 2012, eight came from GM or Chrysler. Consumer Reports' five top-ranked brands this year are all Japanese.

GM and Chrysler have the same trouble in the pursuit of top quality. The secrets applied by Japanese rivals remain a mystery to Detroit. By now, McMurtry's character may have overcome his deficiency. But for decades GM and Chrysler have been trying to catch up, and they are still falling short.
They are making money right now, but more because the economy is rebounding than because they have fixed their flaws. The long-term outlook for GM is not bright. Its share of the U.S. market plunged from nearly 29 percent in 2002 to 19.6 percent last year and kept falling, hitting 17.4 in July. Chrysler has boosted its share of sales, but its quality problems don't bode well.
The bailout is the opposite of what is needed to foster general economic vitality, which means its overall effects, immediate and eventual, are bound to exceed the benefits. Eventually, we may arrive at a feeling many an impulsive car shopper knows well: buyer's remorse.
Steve Chapman is a member of the Tribune's editorial board and blogs at

Obama's Solyndra scandal reeks of the Chicago Way

Those of us from Chicago know exactly what the Solyndra scandal smells like. And It doesn't smell fresh and green.

September 18, 2011|John Kass
The Solyndra scandal cost at least a half-billion public dollars. It is plaguing President Barack Obama. And it's being billed as a Washington story.  But back in Obama's political hometown, those of us familiar with the Chicago Way can see something else in Solyndra — something that the Washington crowd calls "optics." In fact, it's not just a Washington saga — it has all the elements of a Chicago City Hall story, except with more zeros.

Plant that got $150M in taxpayer money to make Volt batteries furloughs workers

Ohio and U.S. Tax Payers lose on bailouts.....

President Obama touted it in 2010 as evidence "manufacturing jobs are coming back to the United States,” but two years later, a Michigan hybrid battery plant built with $150 million in taxpayer funds is putting workers on furlough before a single battery has been produced.
“Had it been private investors rather than government bureaucrats making the decision, there either would have been a reality check about the industry."  - Paul Chesser, National Legal and Policy Center
Workers at the Compact Power manufacturing facilities in Holland, Mich., run by LG Chem, have been placed on rotating furloughs, working only three weeks per month based on lack of demand for lithium-ion cells.
The facility, which was opened in July 2010 with a groundbreaking attended by Obama, has yet to produce a single battery for the Chevrolet Volt, the troubled electric car from General Motors. The plant's batteries also were intended to be used in Ford's electric Focus.
Production of the taxpayer-subsidized Volt has been plagued by work stoppages, and the effect has trickled down to companies and plants that build parts for it -- including the batteries.
“Considering the lack of demand for electric vehicles, despite billions of dollars from the Obama administration that were supposed to stimulate it, it’s not surprising what has happened with LG Chem. Just because a ton of money is poured into a product does not mean that people will buy it,” Paul Chesser, an associate fellow with the National Legal and Policy Center, told
The 650,000-square-foot, $300 million facility was slated to produce 15,000 batteries per year, while creating hundreds of new jobs. But to date, only 200 workers are employed at the plant by by the South Korean company. Batteries for the Chevy Volts that have been produced have been made by an LG plant in South Korea.
The factory was partly funded by a $150 million grant from the U.S. Department of Energy. LG also received sizeable tax breaks from the local government, saving nearly $50 million in property taxes over 15 years and another $2.5 million annually in business taxes. Landing the factory was hailed as a coup when shovels first hit the ground.
“You are leading the way in showing how manufacturing jobs are coming right back here to the United States of America,” Obama told workers at the ground-breaking ceremony. “Our goal has never been to create a government program, but rather to unleash private-sector growth. And we're seeing results.”
Randy Boileau, a spokesperson for LG Chem in Holland, told that battery production is expected to pick up once Volt assembly lines in Detroit resume production on Oct. 15. He said the facility has spent the past two years building infrastructure and conducting pre-production “test runs.”
“The market conditions haven’t been as favorable, but this hasn’t slowed down plans one bit,” Boileau said. “LG Chem has repeatedly said that this facility is a critical component for them globally.”
Boileau pointed out the workers who are on furloughs one week a month are eligible to collect unemployment for that week, and he said the company covers the contributions to their individual benefits during the period.
The Volt has been plagued by low sales since it first rolled off the line three years ago. Orders have picked up for 2012 but are still well below projections.
Chesser said no amount of government subsidies can counter the practical problems posed by plug-in cars.
“Electric car batteries do not perform much better than they did 100 years ago," he said. "Research has not conquered the battery storage issue, and therefore the electric transportation ‘stimulus’ did not boost the ‘technology of the future,’ but instead a century-old technology as far as performance and capability goes.”
He added that the LG Chem plant's problems show that the unpopularity of electric cars despite heavy taxpayer subsidies has had more widespread negative effects than most realize.
“Billions of dollars were put into Volt research, and Ford received $5.9 billion in stimulus loans to retrofit plants to produce [electric vehicles]," Chesser said. "The battery companies like LG Chem that were supposed to service them have no customers to speak of. Their existence was solely based on access to taxpayer money.
“Had it been private investors rather than government bureaucrats making the decision, there either would have been a reality check about the industry, or only those who made individual decisions to invest would have lost their money, not taxpayers.”

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