Wednesday, July 21, 2010

Tales from Bailout Nation Pt. XXVI (UPDATED)

(please scroll down to bottom of post for update. Thanks.)

Now, would these be jobs created or saved?

The Treasury Department encouraged automakers seeking TARP funds to rapidly close their dealerships, even though the plan contributed no specific savings to the companies and caused job losses at a time of mounting unemployment, according to a scathing new audit published Monday.

The report focuses on the plans by Chrysler LLC and General Motors Corp. to rapidly reduce their number of dealerships by about 25 percent each, and the role that Treasury played in encouraging the automakers to do so quickly instead of over the course of five years.

The audit was prepared by Neil Barofsky, a former federal prosecutor who now serves as special inspector general for the $700 billion Troubled Asset Relief Program.
Chrysler eliminated 789 dealerships in June 2009, and GM plans to wind down 1,454 dealerships by October of this year. The rationale behind those moves was that the old dealership network was too big, and that by closing some of the dealerships, the remaining ones would be more profitable and better positioned to re-invest in their businesses.

Chrysler and GM , part of the $81 billion auto industry bailout, were told by Treasury that their plans to spread out those closures was not acceptable, largely because the agency thought that the companies should take advantage of their bankruptcies and close their dealerships as quickly as possible, to avoid state franchise laws that would have made the gradual closing more difficult and more costly.

But Barofsky's report said that Treasury should have taken further steps to ensure that the speedy closures were truly necessary to save the automakers. It added that the agency should have considered whether the benefits to Chrysler and GM outweighed the cost to the economy of potentially tens of thousands of job losses.

And later from same article:

The report said the accelerated closures were encouraged even though they afforded no particular cost savings to the automakers and instead provided "amorphous" benefits, such as reduced incentive payments to dealerships and better customer service at the surviving sales outlets. Estimates of how much the closing would save the automakers were only developed after the decision to close them had been made.

The report also reveals that there wasn't widespread agreement on the plan. Some experts consulted by Treasury's auto team noted that the strategy of having fewer dealerships and concentrating on metro areas - the so-called "Toyota model" - wouldn't work for Chrysler and GM, which appeal to customers in rural areas where foreign cars are less popular.

(italics, ours)

Awesome. Among other sins, first the Feds screwed over the secured creditors in the bankruptcy cram down, then GM flat out lies about the repayment of their TARP loan which was doubled-down by Steve Rattner, former head of the Treasury's auto task force, double-talking his own way around the source of the TARP re-payments and now we find out Team O effectively axed thousands of jobs before they really even had a plan to move forward with dealership closures.

(UPDATE #1): We had seen her piece earlier in the day and in the comments B-Daddy reminded us of yet another egregious transgression in Team O's handling of the Chrysler and GM dealership shut-downs (goodness. it's like some sort of right-wing Journolist cabal). Michelle Malkin dug into Inspector General Barofsky's report and came up with this:

“no one from Treasury, the manufacturers or from anywhere else indicated that implementing a smaller or more gradual dealership termination plan would have resulted in the cataclysmic scenario spelled out in Treasury’s response; indeed, when asked explicitly whether the Auto Team could have left the dealerships out of the restructurings, Mr. Bloom, the current head of the Auto Team, confirmed that the Auto Team ‘could have left any one component (of the restructuring plan) alone,’ but that doing so would have been inconsistent with the President’s mandate for ‘shared sacrifice.’

(italics, ours)

There it is, again. That whole equality of outcome thing.

They knew they could've kept dealerships open but that did not square with the narrative of this administration. Jobs were lost because of a narrow-minded and bankrupt ideology.

This is the exact same philosophy that will dictate how ObamaCare will operate. It matters not if the product or service being provided is substandard or that its delivery makes no earthly sense, as long as it's portioned out by the ruling class in equal amounts, success will have been achieved.

Jobs, health, lives... mere objects to be tinkered with in making America a better place.


B-Daddy said...

Michelle Malkin points out the most outrageous part of the report on page 33 of the report:

Mr. Bloom, the current head of the Auto Team, confirmed that the Auto Team "could have left any one component [of the restructuring plan] alone," but that doing so would have been inconsistent with the President's mandate for "shared sacrifice."

In other words, concerns over social justice, rather than the most economically viable plan to allow the companies to recover guided decision making. This will play itself out in the health care arena as all manner of insurance companies and hospitals will be harmed in the name of "shared sacrifice" as Obamacare is implemented. This is more than mere justicialism, it puts squarely on the road to socialism as the economic basis of free enterprise is destroyed.

SarahB said...

Are you F-ing kidding me? They are AGAIN going to decide who is and isn't a successful business? I'm sure all those families invested to the teeth in those dealerships appreciate the "better good" strategy of this sick regime (yes, I'm finally going to start calling it a regime...with moves like this I this it is only appropriate). Sharing.