Is there really a Dealergate?

It's now been dubbed "Dealergate" -- Chrysler's closing of dealerships seem to have a twist of political lime in it. Did Obama's Auto Task Force target Republican donors in deciding these closings? Blogger Doug Ross has some statistical insight into the whole matter:

All other factors being equal, what are the odds that RLJ's dealerships would remain open while all other area dealerships would be shuttered? The approximate odds of such an occurrence can be calculated. 789 of the Chrysler's dealerships are closing, which represents 25% of the total (according to MSNBC).

Recall that Chrysler claimed that its formula for determining whether a dealership should close or not included "sales volume, customer service scores, local market share and average household income in the immediate area."

Thus, the odds that any, randomly selected, single dealership would remain open is roughly 75%. The odds that a single dealership would close is roughly 25%.

In the Bentonville, AR territory, the odds that RLJ would remain while its competition gets axed is .75 * .25 * .25 = .046875 (4.6%).

In Huntsville, AL, the odds are .75 * .25 * .25 = .046875.

In Branson, MO, .75 * .25 *.25 *.25 = .01171875.

In Lee's Summit, MO, .75 * .25 *.25 *.25 *.25 = .0029296875.

In Shreveport, LA, .75 * .25 *.75 = .140625.

What are the odds of all of these RLJ dealerships remaining open while their competitors are wiped out? Maybe 1/10,000,000 of 1%. Yes, that's one ten-millionth of one percent.

Is there really an "enemies list" or are Chrysler dealership owners more Republican-leaning anyway as some liberal bloggers have argued?

Let's just say this: for this administration, do not be surprised if such a list exists.

If President Obama and his administration can oust CEOs of major corporations, what's to stop them from targeting specific groups like car dealership owners?

The investigative bloggers are to be applauded for their efforts in researching this possible abuse of government powers. Once again, the mainstread media has fallen behind in uncovering real news.

With Obama in W.H. comes the Chicago way of strong-arm politics?

President Obama's Auto Industry Task Force is fighting off accusations of bullying the Chrysler shareholders and creditors into accepting the government's bankruptcy plan. In the center of the storm is Steve Rattner, the task force's leader with close ties to the Democratic Party. According to Thomas Lauria, the bankruptcy attorney representing the hedge funds and money managers, the administration threatened to use the White House press corp to ruin his firm's reputation if he doesn't go along with the White House plan for the troubled automaker.

These are only allegations and who knows what the real story is. However, personally I will not be surprised if Lauria is telling the truth. Why? Because since Obama's campaign, he's made to be invincible with the help of the media. Once he got elected along with the House and Senate being Democrat-controlled, I'm sure he feels he is unstoppable. That's how this administration sees itself. Look at how the TARP bills were passed without proper scrutiny. Look at how the White House is picking CEOs to run companies. Look at how a tax cheat gets to become Treasury Secretary and shows no sign of grasping the economic crisis.

Remember, too much power always corrupts. Are we starting to see the beginning of abuse and misuse of the federal government?

Latest auto bailout proves TARP is slush fund

President Bush, soon to leave office amid lowest approval ratings, seems to be unconcerned about leaving a bad taste in taxpayers' mouths and is ignoring signals sent from his party members in Congress. Why else would he approve a $17 billion rescue package for G.M. and Chrysler when the Senate killed its version of bailout? Has he lost faith in free market capitalism? And notice that Ford isn't among the list of beggars. Maybe G.M. and Chrysler ought to learn a few things from this competitor. The fact that Ford is doing just fine without government money proves that there is a glimmer of hope for the auto industry, even if it means America is left with just one car company.

The auto bailout will come out of the TARP fund originally set up to relieve "financial institutions." Hans Bader of OpenMarket.org gives us a good idea of the statute:

...The bailout statute defines “financial institutions” eligible for the bailout as ”any institution, including, but not limited to, any bank, savings association, credit union, security broker or dealer, or insurance company.” Never mind that Congress listed as examples of ”financial institutions” only entities that were banks, insurance companies, or financial institutions, not automakers.

Using this money to save a car company is clearly not the intent of this statute. What is Bush thinking? If he is interpreting the bailout bill to include any institution, then TARP is essentially a slush fund for the White House. That would make it unconstitutional. But if the bill is honored as-is, then the auto bailout is illegal.

Would there be lawsuits coming forth about this? Maybe that is what kept Ford away from this package.

And what will Obama's incoming administration do? Billions of dollars in spending money for the White House. I'm sure the lobbyists are already buzzing around for a piece of that diminishing pie.

Bush blinks first in auto bailout

In the high stakes game of "Who blinks first?" it looks like President Bush lost to the UAW. The biggest losers are taxpayers, naturally.

The White House will authorize a $17.4 billion bailout for G.M. and Chrysler LLC which should last them through February 2009. If the automakers cannot show they're worth saving by March 31, 2009, the loans will be called and all funds to be returned.

Senate kills auto bailout bill

A few moderate Democrats joined forces with Republican senators to kill the $14 billion bailout bill after the UAW refused to cede wage and benefits to match those of foreign carmakers like Toyota and Honda. But now it seems the White House may step in to help Big Auto with TARP funds.

However, fingers are pointing everywhere already...

Democrats are blaming Republicans and the White House for not lining up their ducks, causing wasted energy and time, especially after the House passed the initial plan. Republicans are standing firm on greater concessions by Big Auto and its unions or else Detroit won't see a penny. They also bring up the point that Democrats have been too intimate with UAW and its largess, ultimately causing the downfall of G.M., Ford, and Chrysler.

It's a disturbing fact indeed that UAW and its political action committees have donated millions and millions to Congressional Democrats to lobby for labor benefits. Now look at what's happening. Daniel Howes of the Detroit News says it's Republican payback. That's certainly an oversimplified view of the situation. The bottom line is that the recession is hurting everyone, but not everyone is coming out asking for government handout. Why should taxpayers, many of whom are losing homes and jobs, further thin their wallets for these mismanaged corporations?

It bothers John B. Judis of The New Republic even more:

Here’s what bothers me. Japanese companies, which for years have benefited from one-way deal by which they could sell cars in the U.S. while U.S. companies were stymied in selling cars and trucks in Japan, set up non-union plants in low-wage, low-education, right-to-work states where they can pay less wages and benefits to their workers. Of course, in Japan, these same companies recognize and work with unions, but not here, where they have a chance to undercut American firms that work with unions. Corker and these other great patriots want to allow these Japanese companies to dictate the wages and benefits that American companies pay their workers. It’s despicable. Imagine, for a moment, American companies being allow to operate in this manner in Japan or South Korea. It would not happen.

Yes, that is part of the problem -- unfair trade practices between Japan and the U.S. But keep in mind that the Democrats control the House and the Senate and soon the White House! Why hasn't even one Democrat draft legislation to reverse this unfair trade? All they are thinking about is where and how to give more government handout, filling the media and our heads with images of an unemployment apocalypse triggering Great Depression II. Putting it bluntly, Democrats control the federal government, but they are not leading the nation.

And Judis ends with this:

Put it this way. What we have learned from the economics of the Great Depression is that in order to end the spiral of unemployment, government has to throw money at companies and consumers. It should be trying to raise wages, not lower them. The Wall Street bailout was a fiasco, but it was probably better than nothing. And the auto bailout was considerably better thought-out. Now there is a good prospect that two of the Big Three will fail, jeopardizing, perhaps, as many as a million jobs. That’s exactly the kind of thing that Americans should not be doing. But don’t tell that to those great patriots Corker, DeMint, or Shelby. They know better.

Anyone with basic understanding of capitalism and the fundamental economic principle of supply and demand would know Judis's thinking is flawed. Instead of the government throwing money, how about just not taking as much in taxes to let the companies and consumers decide what to do with it? Instead of trying to legislate acceptable wages, why not just let the market decide? The Great Depression was prolonged because of government intervention. The government should just get out of the way -- Americans have always found a way to recover and thrive without handouts!

Big Auto is desperate, but still arrogant

General Motors CEO Rick Wagoner is now begging the public for support of the bailout package for Big Auto. On cost-cutting he presents these facts:

...we have been streamlining our U.S. operations while simultaneously improving quality and productivity. Since 2000, we have reduced our U.S. hourly workforce by 52%, from 133,000 to 64,000, through buyouts and other programs. During the same period, we have cut our U.S. salaried employment from 44,000 to fewer than 30,000, and reduced our U.S. executive ranks by 45%.

But wait, what about that luxurious corporate jet you took to fly to Washington begging for taxpayer money from Congress? First class airfare on a commercial airline would be much cheaper, considering your company is on the brink of going bust, wouldn't it?

Sorry, Big Auto. Americans do not have deep pockets and have seen through your incompetency. The best solution to your problems isn't more cash, but a "managed bankruptcy" as Mitt Romney puts it. Your executives deserve to join the millions of other unemployed Americans.

Latest bailout saves UAW, not Big Auto

Another bailout package is in the works in Congress, one that's even less popular but that's not stopping the Democrats from pushing for it. House Speaker Nancy Pelosi said a government lifeline would be provided only if the auto industry meet new fuel-efficiency standards and restructure to limit executive compensation. Of course, there is no mention of concessions from the United Auto Workers (UAW) union.

We all know that the Democrats are good buddies with the UAW. This bailout will infuse fresh blood into the dying General Motors, Ford, and Chrysler so that the UAW can drain them some more. Big Auto already knows to make better, fuel-efficient cars. They came late to the green game and are paying the price. But the root of the problem is unionized labor in the auto industry. It's interesting how Jeffrey D. Sachs never mentions this in his Washington Post article. Michael E. Levine, writing for WSJ, is on the right track: Why bankruptcy is the best option for GM.