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Obama too early in declaring bailed-out automakers saved

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Obama too early in declaring bailed-out automakers saved

The biggest risk with declaring victory too soon is not actually knowing how everything will end.

Yet President Barack Obama is set to swoop into Detroit today to tout his administration's rescue of the beleaguered auto industry, as if recently bankrupt General Motors Co. and Chrysler Group LLC are unmistakably back, in the black and ready to grow. As much as each are making steady progress, their comebacks aren't even close to being complete.

Which isn't deterring the president and his allies from planning to use the visit to declare the revival of Detroit finished, as his aides and the president himself have signaled. On ABC's "The View" Thursday, he said American taxpayers will "get back all the money" spent to keep GM and Chrysler alive, adding that "all those U.S. companies (are) showing a profit."

In a curiously worded press release Thursday, United Auto Workers President Bob King said: "Thanks to the Obama administration and leaders who understand how vital auto manufacturing jobs are to every community in this country, these companies and UAW workers can and will continue to succeed."

It doesn't take a Ph.D. in political messaging to see what's going on here. Facing the specter of his party getting drubbed in mid-term elections, partly in frustration over bailouts for banks and Detroit's automakers, the president and his proxies are claiming credit for saving Detroit when no one else would.

They're right, actually, if a bit too early with the celebration. The relative success of GM and Chrysler -- forget Ford Motor Co., whose privately funded turnaround began two years before Team Obama was elected -- are evinced by encouraging operating profits and surprising retention of market share in tough economic times.

In fact, according to Comerica Inc.'s chief economist, Dana Johnson, 2010 could be the first year in many that Detroit's automakers close the year with a higher share of the U.S. market than they began the year. In this business, that's huge -- and partial vindication of the political risk Team Obama took on Detroit, its metal and its people.

But it's more complicated than that. Here's what you probably won't hear from the president today or from the UAW or, for that matter, from the CEOs expected to greet arguably the most consequential president for this industry in a generation or more:

That the bailouts, some $60 billion worth industrywide, came at the expense of secured bondholders whose claims were trashed by the political necessity to complete the bankruptcies of GM and, especially, Chrysler. The impact on existing securities laws? More than trivial.

That the sanctity of contracts, including labor contracts, can be sacrificed for political expedience. Yes, the UAW's health care trusts ended up with stakes in both companies (a controlling stake in Chrysler, actually), but the trade-offs included a forced contract renegotiation that formalized lower wages for new hourly hires and revoked the right of GM and Chrysler union members to strike, except over specific grievances.

That Team Obama's auto bailout used public money to pick winners (union members at GM, Chrysler and then-bankrupt Delphi Corp.) and to punish losers (22,000 of Delphi's white-collar retirees) to speed the bankruptcies by dumping Delphi's salaried pension plan on the feds. The moral equivalence is indefensible, which is why the Obama administration continues to evade questions about it.

That the long-awaited arrival of GM's Chevrolet Volt hybrid, a particular darling of the enviro-correct, is a $41,000 compact car that would be priced out of its would-be market but for massive government subsidies to consumers. How would it do absent taxpayer-backed credits and surging oil prices?

And, finally, that the gathering resurgence of Detroit -- the top quality of its vehicles, the critical acclaim, the fuel efficiency, the profitability of models -- wouldn't have been possible without the technical savvy, the manufacturing know-how and the grit of people who worked for these companies long before Team Obama landed in Detroit.

From The Detroit News: http://detnews.com/article/20100730/OPINION03/7300343/1148/AUTO01/Obama-too-early-in-declaring-bailed-out-automakers-saved#ixzz0vAXSxirb

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A typical politically-motivated article with an anti-Obama agenda. The fact that Howes calls the administration "Team Obama" is all you need to read to know reading the rest of it is a waste of time. Beyond that, the article lacks substance, and the entire argument boils down to this: The government helped, but it was the "manufacturing know-how and the grit" of the workers who were the main cause in the resurgence. That message is disguised in every possible jab against Obama that could be made related to the topic. In fact, you could read the final two sentences and ignore the entire article.

Spending all his time trying to dig up dirt, Howes apparently forgot that Obama is annoyingly the biggest cautious optimist around. He isn't going to "declare victory". No Mission Accomplished banner on the side of a Tahoe. Here's what Obama has to say about the automaker bail-out: "That progress is significant, but we've still got a long way to go before we're all the way back."

Howes says that even if all the money is returned to tax payers, the damage to the sanctity of contracts is irreparable, since workers were forced to renegotiate wage contracts and not allowed to strike. Oh boohoo, they can quit if they don't like it.

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Companies renegotiate contracts ALL THE TIME.

The entire bankruptcy process, for corporations or private individuals, is ALWAYS about breaking contracts!!!

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