The auto bail out bust

Bill McMorris:

President Barack Obama has made the auto bailout a centerpiece of his reelection campaign, using it to bash Republican nominee Mitt Romney. But the tactic may backfire as the general election heats up, public opinion surveys suggest.

Recent polling from Rasmussen indicates that 59 percent view the bailouts as a “failure” and only 44 percent think the bailouts were “good for America.”

The administration has already written off $7 billion in taxpayer losses in the American takeover of Chrysler and General Motors; those losses are expected to climb as high as $23 billion—27 percent of the $85 billion spent on the bailout.

While the bailout is widely credited with saving the two companies, increasing taxpayer losses have made it nearly as unpopular in 2012 as it was when Obama was elected. More than half of Americans still disapprove of the auto bailout compared with 61 percent in 2008.

That has not stopped Obama from using the bailout as a bludgeon against Romney, who backed bankruptcy measures, in a number of campaign speeches.

... Obama’s job approval ratings among Democrats remain at nearly 85 percent, according to RealClearPolitics. 

That is 20 points higher than the 63 percent of Democrats who support the auto bailout.Obama is using the talking point as a targeted message to interest groups, rather than a broad appeal to his overall base, bailout experts say. 

“The reason Obama likes it is because labor likes it,” one bankruptcy expert said. “The administration went in and took UAW and pulled them up.” 

The administration handed $85 billion to GM and Chrysler and guided them through reorganization. Obama took on the role of bankruptcy court and bumped the unions to the front of the line, handing them control of Chrysler, while preserving pay and benefits at General Motors. 

“They came in and forced these companies into pre-packaged bankruptcy where unions were made whole and creditors were squeezed out,” the expert said. “In normal bankruptcy they don’t rearrange stakeholders rights willy-nilly…there’s no way those union contracts would have been untouched.”...

Obama has also pushed higher fuel mileage standards on the companies.  This drives of the cost of vehicles making them less affordable which means people who can't afford new cars will drive their less efficient cars longer.

Many voters who do not belong to the UAW are still angry about the bailouts.  They were unfair to bond holders and used public money to award Obama voters.  It is unlikely that many of us will ever buy a GM or Chrysler car now.  The administration should have let the companies go through a traditional bankruptcy that would have put them in a position to rework the labor contracts so that they would be more competitive.  They also would have not lost the goodwill of the voters that is needed to make these companies successful.

If the companies and the unions could not have survived a traditional bankruptcy, that still does not endear me to the deal Obama crammed down.