Thursday, May 06, 2010

Truth in Advertising? Not With GM

On a day when the news features an unrepentant FCC chairman declaring, in essence, that the internet will be turned into a "public utility" and subject to future regulation much as telephones and power systems have been, and when Drudge features a report of five students sent home for wearing American flag-intensive apparel on Cinco de Mayo, there's already a lot of red flags waving in the face of your typical Constitution-loving patriot.

But I choose instead to discuss truth in advertising, as in, the lack of truth in advertising from spots being aired by Government Motors and the AARP, which I think now stands for the American Association to Re-elect Progressives, for it certainly has little to do with its traditional senior citizen membership.

Let's tackle the GM ad spots. Ed Whitacre, chairman of Government Motors and a shill for the Regime, as Rush says, announced proudly (in radio and TV spots, as well as a Wall Street Journal article headlined, "The GM Bailout: Paid Back in Full") that GM has paid off its $6.7 billion in loans from the taxpayers years ahead of schedule.

Well, hot damn, you may say! It's the "Soggy Bottom Boys!" Well, not so fast. There's more to this story, and I have it thanks to columnist Shikha Dalmia writing at

The GM Bailout, let's remember, included the direct loan of $6.7 billion. It also included $42.8 billion as an equity purchase (stock) of the company by the U.S. government (60.8 percent!) and the Canadian government (11.7 percent!). Together the two governments control 72.5 percent of GM, which is why it is truly Government(s) Motors.

So the Bailout isn't paid back in full. It's not even close.

But the story gets worse. GM has yet to turn a profit under its new management, which is no big surprise. Since when has the U.S. government run anything efficiently? So where did the money come from?

From an escrow account of $13.4 billion of "working capital" that came from the federal bailout!

Now the question is why did this take place at this time. The Forbes article has the answer, which once would've been shocking but it's par-for-the-course in our Obama Nation:
Sean McAlinden, chief economist at the Ann Arbor-based Center for Automotive Research, points out that the company has applied to the Department of Energy for $10 billion in low (5%) interest loan to retool its plants to meet the government's tougher new CAFÉ (Corporate Average Fuel Economy) standards. However, giving GM more taxpayer money on top of the existing bailout would have been a political disaster for the Obama administration and a PR debacle for the company. Paying back the small bailout loan makes the new -- and bigge r-- DOE loan much more feasible.

In short, GM is using government money to pay back government money to get more government money. And at a 2% lower interest rate at that. This is a nifty scheme to refinance GM's government debt--not pay it back!
Sadly, it gets worse still. By incurring more debt, GM will be farther away from the day that it turns a profit and, according to the government's plan, it will not sell its equity (stock) in GM until it is profitable and becomes a publicly traded company again.

As Dalmia puts it:
Mr. Whitacre's bailout payback ploy is a desperate attempt to win back the car-buying public deeply disgusted by the spectacle of GM rattling its tin-cup before Uncle Sam. But the fact of the matter is that the company is still deep in the hole. It might claw its way back – or it might not. But surely it's premature for its media boosters to pop open the champagne bottle without getting their story straight?
When I think of GM I think of the lemon I bought for my son to drive, a 2005 Impala that must be "burped" regularly every couple of months in order not to serially overheat. The first GM product I've owned since a wonderful 1957 Chevy that I never should have sold. Now that was a car!

I also think of my poor mother-in-law who invested heavily in GM stock a few months before the government took it over. She used the time honored "buy low, hold and sell it high" rationale to justify her action. The stock is worth less than she paid for it, substantially less. (Yes, she had professional investment advice; those boys were caught flat-footed, just as we all were.)

I think of all the dealers who lost their GM and Chrysler affiliations across the country, of the lost jobs as weird decisions were made as to who won and who lost in the dealership shuffle.

Then I multiply all this sorrow and suffering by many thousands or millions, and it makes me sad.

Then when I hear Ed Whitacre crowing about GM's accomplishments and asking for us to trust the company again, I want to vomit. This is not America. It is not freedom.

Resolved: if and when conservative-minded, freedom loving people control Congress, they should require the administration to divest itself of 100 percent of its interest in Government Motors and any other private business. Businesses should succeed or fail on their own merits. The taxpayers should not be the lenders -- or owners -- of last resort.

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