Obama's crummy car company

Larry Kudlow:

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Instead of putting the failed car enterprise into bankruptcy six months ago -- where Carl Icahn or Wilbur Ross could have bought it -- the Bush administration chose Bailout Nation. Under Team Obama, that bailout has morphed into full-scale government ownership. Twenty-billion dollars of TARP money is already invested in GM, with another $50 billion on the way. And that number could easily double unless GM car sales miraculously climb back to 14 million this year. That’s highly unlikely, with car sales presently hovering around 9 million a year.

In other words, taxpayers are not going to get their money back. Yes, we the people will be left holding the bag for the mistakes of GM’s management and labor leaders over the last four decades.

And with CAFE mileage-standards ratcheting up -- all while GM is going down -- Team Obama’s green vision for the economy will soon be crystal clear. With President Obama in the driver’s seat, we’re going to get little green two-door cars that most folks won’t want to buy.

Even worse, UAW chief Ron Gettelfinger has made it plain that his powerful union won’t let these cars be manufactured in low-cost non-union plants overseas. The result? Obama’s little green cars are going to be unprofitable as well.

But it’s the bigger picture that has me most concerned. What does Government Motors say about the direction of the United States? Historically, we don’t own car companies --or banks or insurance firms. But we do now. Tick them off on your fingers: GM, Citi, AIG. Oh, and let’s not forget Fannie and Freddie, those, big quasi-government, taxpayer-owned housing agencies. California is broke and likely headed to bankruptcy. Will we the taxpayers own that, too?

Altogether, we’re talking about hundreds of billions of taxpayer dollars that will never be repaid. This is the stuff the Italians used to do, and the Brits before Thatcher, and the Soviets a long time ago. But it’s something very new and very different for America.

Is this onslaught of government ownership an attack on free-market capitalism? Yes it is. Call it Bailout Nation or Ownership Nation, it’s an unprecedented degree of government command, control, and planning, all in the name of a tough economic downturn.

I don’t pretend to know all the answers to GM’s problems. Neither do I know all the miscues of the banks and insurance companies. But I do know this: The present level of government control over the economy does not bode well for this great country.

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We should know what will not work and clearly the Obama plan will not work. The company will be required to make vehicles people do not want at prices people are unwilling to pay. The government and the unions have built in conflicts of interests in this deal and in negotiations with other car companies. In the process, Obama has driven up the cost of capital to every unionized company in the country because he has screwed the secured creditors in favor of unsecured union pension plans. The fallout from this has already added a premium to the debt offering of companies with unions.

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