The tens of billions of dollars in taxpayer money spent on the auto bailouts did not fix the automakers’ underlying problems, but rather helped mask and perpetuate them (such as inefficient work rules and high labor costs — the Obama administration ripped off GM and Chrysler bondholders and the automakers’ non-union retirees, as well as taxpayers, to enrich the UAW Union in the bailouts). For a short period, the Japanese earthquake and Thai floods so damaged the Japanese automakers that GM once again became the world’s number one automaker, but when the Japanese companies recovered, Toyota once again surpassed GM as the world’s biggest automaker.
At Forbes, Louis Woodhill says “General Motors is headed for bankruptcy — again.” After crunching the numbers and market share trends, and analyzing recent GM models, he says that if President Obama “wins a second term, he is probably going to have to bail GM out again. The company is once again losing market share, and it seems unable to develop products that are truly competitive in the U.S. market.”
The bailouts resulted in new, even more inept and politicized management at GM (which replaced a pre-bailout CEO, Rick Wagoner, who had put in place changes that belatedly resulted in improved product lines coming out shortly after his ouster). Auto industry experts are horrified by GM’s recent mismanagement of its European operations:
General Motors’ plan to displace the venerable and respected Opel brand in Europe with a new Chevrolet “global” brand really is as insane as it seems, according to Keith Crain of Automotive News. “It will take decades for Chevrolet to establish anywhere near the recognition that Opel has,” Crain argues.
GM has concealed the depth of its problems by financing auto sales with risky loans that may never be paid back, resulting in GM’s increasing reliance on selling cars to people who can’t pay for them: “GM Ramps Up Risky Subprime Auto Loans To Drive Sales,” noted Investor’s Business Daily. “The automaker is relying increasingly on subprime loans, 10-Q financial reports shows. Potential borrowers of car loans are rated on FICO scores . . . Anything under 660 is generally deemed subprime. GM Financial auto loans to customers with FICO scores below 660 rose from 87% of total loans in Q4 2010 to 93% in Q1 2012.”
GM’s CEO has also fired or driven away valuable employees and executives at its European branch in what looks like scapegoating for his own bad decisions — and a GM spokesman needlessly trashed a departing employee.
The Obama administration wasted at least $26 billion in unnecessary expenses in the auto bailouts. The auto bailouts might not even have succeeded in propping up the bailed-out automakers had it not been for huge natural disasters that harmed their Japanese competitors. General Motors was aided not only by the massive Japanese earthquake and Tsunami that devastated its rivals, like Toyota, but also the massive Thai floods in 2011, which shut down Japanese car-parts factories in Thailand, crippling Japanese automakers’ global supply chains. On December 8, Toyota “cut its profit forecast by more than half after Thailand’s worst floods in almost 70 years disrupted output of Camry and Prius vehicles.” Later, the World Bank estimated that the Thai floods did $45 billion in damage. The Obama administration’s coddling of the UAW threatens GM with billions in future losses and accrued liabilities.