Obama Announces Socialism!
No, not really. Rather, the Obama Administration held a background briefing to explain what will happen as GM enters bankruptcy tomorrow, a big part of which was designed to calm worries that by owning a huge chunk of GM, we will become a socialist country.
The briefing reviewed the terms of the agreement. And, perhaps most interestingly, they announced "principles of government investment"–rules the government will follow when it takes a significant stake in a company. They did note they’d use it with companies in which they already have huge stakes (AIG). But I got the feeling they thought they might be using these principles in the future. So maybe we really will start nationalizing some companies.
The principles of government investment were basically:
- Install the right kind of management
- End the need for government support as quickly as possible
- Protect taxpayer investment
- Do not interfere with day-to-day operations
- No government employees will serve on the board
- Only participate on core board issues, such as selection of board members, major events, and transactions
It’s a bunch of pablum designed to calm the fears of those worried about socialism, but it doesn’t really add up to protecting the interests of Americans. For example, when asked whether the government would limit executive compensation, they said only that the company had to comply with all laws (they mentioned the Dodd amendment specifically), and otherwise, that the compensation committee would decide executive compensation.
And when asked whether the government would prevent GM from importing cars from China, they said that GM had made a commitment in its renegotiated labor contract for production in North America (note: North America includes Mexico, of course). The press release says,
The new GM will also pursue a commitment to build a new small car in an idled UAW factory, which when in place will increase the share of U.S. production for U.S. sale from its current level of about 66% to over 70%.
Committing one factory to a new small car (which may be the Spark they talked about importing from China) does not rule out also producing them somewhere else–like Mexico.
So the takeaway, I think, is that as of tomorrow we will, indeed, own a big chunk of GM (incidentally, Canada will get a 12% stake). But the only way we’ll get to really influence the policy at GM will be to infiltrate the GM board with socialists.
Socialism, the American way.
You’re the right kind of management, Marcy.
It’s a government principle.
I too have question about the feel good clause of “…GM will also pursue a commitment to build a new small car in an idled UAW factory”. I guess I assume it will be in the US since it says UAW facility, but it presents interesting questions. Is it the Spark? If so, how many compared to other foreign sites? Is this a throwaway gesture? If it is not the Spark, is it a new car that is just going to compete with the Spark that they are already jigged up to produce outside of the country? If so, that seems counterproductive. Probably there is a good answer here to these questions, but I sure have them.
And the answer they would have given last night would be to say–”we;re not managing day to day decisions, you need to talk to the UAW or GM”
THough I understand the Chinese SPark plans were taken out as part of the new labor agreement, though I heard dealers have already been assigning floor space to them.
Yeah, that’s a bit of fuzzy there:
What exactly does “build” mean? GM doesn’t build cars; a substantive part of what they do today is assemble components built by an array of suppliers.
Does this mean the parts will be manufactured overseas and the car assembled here?
TADA motors has a plan to do just that with their compressed air car. They plan to move into “dead” manufacturing facilities in many different regions in the US, import the parts made in India and build them in each region to cut down on supply chain.
In addition to the list in the article, imvho, it should be a Principle of Government Investment that:
If – We the People – own a part of a Company, then that Company will Fund an Independent Blogging Syndicate to Cover it and its Operations.
This would use the People’s ‘Voice’ as a counter-balance to the Board’s Power – the resulting dynamic tension would almost certainly produce a better product, a better product ownership experience and a Greater Chance for Marketplace Success for everyone involved.
The truth is that, just like Our Government, the New GM and every other Company out there needs US as badly as We need them.
And, what We know from Our own daily experience here at emptywheel/FDL over the last couple of years is: Blogging can Unite US in honestly working towards Common Goals.
A Sharp Independent Blogging Team could be one of the Greatest Assets in Re-Building the New GM Brand on the way to a Successful Recovery by Mass Acclaim.
Even if the Bankruptcy re-org doesn’t mandate it, imvho, GM should *do it* on their own as a Smart Play Strategy in the Connected World.
We’re only just beginning to tap into the Power of the Blogging Revolution…
onward comrades .. through the fog …
“Comrades”? Nah, that’s communism.
I’d rather learn a little Swedish, tack så mycket, and be miserable like those morose Nordic people who’ve thrown in the towel and gone socialist.
so we’re not doin the commie thing ???
does that mean we DON’T gotta learn The Internationale ???
cuz I could still cancel the lessons
and I got a shitlaod of red dye I gotta unload on the open market too …
Kinda O/T. After reading this article, I didn’t feel like my concern for what is being planned for US workers had been soothed but more like I’d been schmoozed.
The Future of Manufacturing, GM, and American Workers (Part I)
May 29, 2009, 10:40AM
Robert Reich’s Blog
” First and most broadly, it doesn’t make sense for America to try to maintain or enlarge manufacturing as a portion of the economy. . . . Factory jobs are vanishing all over the world.
. . .
“A century ago, almost 30% of adult Americans worked on a farm. Nowadays, fewer than 5% do. . . . America can generate far larger crops than a century ago with far fewer people. New technologies, more efficient machines, new methods . . . and efficiencies of large scale have all made farming much more productive. [emphasis mine. I guess “efficiencies of large scale” is a euphemism for concentration of agriculture into Big Corpo AG]
. . .
“And stop blaming poor nations whose workers get very low wages. . . . Helping poorer nations [by not erecting tariffs] become more prosperous is not only in the interest of humanity but also wise because it lessens global instability. [who’s blaming poor nations? Why not blame the ease with which corporations are relocating their operations overseas?]
, , ,
“It means only that we have fewer routine jobs, including traditional manufacturing. When the U.S. economy gets back on track, many routine jobs won’t be returning–but new jobs will take their place. . . . A growing percent of every consumer dollar goes to people who analyze, manipulate, innovate and create. [according to his list–which includes “composers, writers and producers . . . lawyers, journalists, doctors and management consultants”–many of us will be professionals] “analyzing, manipulating and communicating through numbers, shapes, words, ideas.”
. . .
“The biggest challenge we face . . . [is] how to improve the earnings of America’s expanding army of low-wage workers who are doing personal service jobs in hotels, hospitals, big-box retail stores, restaurant chains, and all the other businesses that need bodies but not high skills. More on that to come.”
Maybe he’ll convince me in Part 2 that all the corporations who hire these low-wage workers won’t fight tooth and nail to keep them from getting organized and demanding better wages and working conditions.
http://tpmcafe.talkingpointsme…..hp?ref=fpd
In other words; more of the same will be much better this time. Sort of a paraphrase of the definition of stupidity.
Robert Reich:
Yes, this is incontestable. Just look at China. Oh wait… It’s like Reich has been asleep for the last 10 years or reading Thomas Friedman, much the same thing.
Used to argue with my WWII Teamster Archie Bunker father 40 years ago who was always repeating “buy American” back in the 60’s and 70’s. I would always come back with “the fat cats are selling the union workers out” down the pike.
Watched manufacturing jobs leave the Dayton Ohio area by the tens of thousands back in the 70’s.
Follow the money
Reich doesn’t usually lie to this extent. In fact he usually has a lot of cogent ideas. What the hell has gotten into Reich?
Offshored manufacturing, offshored IT, and creative jobs at home sounds like Dubya Bush using adult words. Gooder Service = good or service.
Yes, I thought Reich’s blog comment wildly simplistic and pro-business. His explanation that job losses were a function merely of “new knowledge” and new business models was so facile, I wouldn’t accept it from a freshman.
Factory job losses may be as inevitable as losses on the farm or in dmoestic service. They needn’t be accelerated by tolerance for slash-burn-and-liquidate business models or by government subsidizing them via unenforced labor laws, look the other way “enforcement” of anti-trust laws, and trade policies that do more for global investment managers than those who live and work in this country.
I almost thought I was reading a column by David Brooks, after he’d attended a writing seminar.
Just found out the company I work for is stuck as the largest creditor to a supplier to GM that is filing for bankruptcy. We’re going to be out some portion of $7m.
There goes profit sharing, even though commercial is a separate division. They’ll recoup it somewhere.
Ripples……
Sorry. Let’s see.
Very sorry to hear that. Some of us have been saying for quite a while now that the effects of the failure of the American automakers would have a much larger impact than UAW and white collar autoworkers losing their jobs.
A supplier with which I am very familiar has only received 2/3rds of payment on a capital equipment project, for which the supplier has already paid all the labor and material costs. They expect to get stiffed for the remainder on this million-dollar project — and now the supplier’s bank is hovering, waiting to yank all credit to them because they’ve broken covenants, meaning they’ve been short on cash to pay down their loans.
There’s been a covenant broken, alright…
[edit: I should have added that the loss on this project alone will likely represent the loss of several jobs since the money to pay off the expenses for this and other projects has to come from somewhere.]
This still looks like a plan to invest public money in private companies, close the public’s eyes and hope for the best. I don’t think those are the investment principles that made Warren Buffett a billionaire.
If you’re not willing to take a seat on the board, set priorities for the spending of your money, demand performance targets from top players and consequences for those who meet and don’t meet them, and be willing to make what you do public to the people who gave you the money – Congress and the American taxpayer – don’t spend the people’s money.
It would be grossly irresponsible to give money to those who will keep doing what they’ve always done, because they’ll get what they always got – a company in such dire straits the taxpayers had to bail it out.
That certainly sounds right to me.
Lookee here Earl, Obama already has pushed Chrysler to sale to Fiat and out of BK within the week. All done and over and Presto! within a month. Chrysler was the fifth largest bankruptcy in history, and the Obama Admin slammed it through BK court in one month; so maybe they can do the same with GM, which will be, by far, the biggest ever. I suppose Obama will also insist on GM also being filed in SDNY instead of in Detroit Michigan, which could use the business and literally begged to have it filed there. Of course, that doesn’t allow for the extra high fees for all the fancy dan private lawyers that govt. has working on everything like SDNY is famous for. No, I am not kidding.
THey say this one will take 60-90 days.
FWIW, those of us in MI are not unhappy the CHrysler thing was pushed through. Remember, every day it is in BK, a great deal of suppliers go hungry. SO the only way to save the supply chain is basically DIP funding for them (even though a lot of them were perfectly healthy, if thin margined, in AUgust), or blow this through quickly.
Oh, I totally understand your point there, and it is clearly helpful to the potential success of the resultant entity. I simply fear that very bad precedents are being set as to the bankruptcy process as far as exertion of executive branch influence and bastardization of the process. It may well be convenient and efficient, I am just not sure it is right procedurally. The biggest BKs ever are also going to be the fastest and with the absolute least ability for interested parties to contest and most secretive as to things being done in backrooms without the time and ability for public notice?? I really do not like the sound of that. Sorry.
I agree with bmaz that it would be irrational not to file this bankruptcy in Detroit. Filing it in the SDNY would reinforce that it’s for show, both for recalcitrant bondholders, who might feel uncomfortable inside the Eight Mile, and for Wall Street, to reinforce the idea that the government actually following taxpayers’ money into private hands is oh, so distasteful and a thing reserved only for those icky industrial companies.
Completing this sort of bankruptcy in 60-90 days would be exceeding light speed. It would mean everything but cramming down bondholders had been decided ahead of time and the poor public, whose money is being spent, will be lucky to see the tip of the iceberg.
Active participating in the companies receiving wads of public money isn’t the same thing as the priority of demands made on them. If the government merely favors one creditor or business plan over another, doesn’t credibly change priorities or top management (if it resorts to a charade of musical chsirs), then it’s improving nothing. The government rightfully has different priorities as an investor than does Kirkorian or the Blackstone Group. Promoting labor’s ongoing contribution (not just its giveaways) to the overall success of a renewed comapny should be one of them.
Absolutely true – there are huge issues with forum shopping in large Chapter 11 bankruptcies. See “Courting Failure: How Competition for Big Cases is Corrupting the Bankruptcy Courts” by Professor Lynn LoPucki of UCLA – he states that competition for the big cases has harmed the bankruptcy system and the economy, transferring wealth from creditors and employees to incumbent management and bankruptcy professionals. Also, that these cases have had poor outcomes, leading to second bankruptcies of “restructured” companies.
Although after the Chrysler BK and how quickly that worked, they probably wanted to go with the “devil” they knew for GM.
And therein is but one of the concerns I have.
GM Board
If these folks have any say over the future of GM, then the process of reform is likely to fail: for this is Wagoner’s hand-picked fan club, a merry gang of worthy burghers and failed CEOs.
A banker friend, who has spent the last seven years trying to explain some of GM’s problems to this team at its board meetings, says that they were not allowed, ever, to take notes (no pads, no pencils); that he was not allowed to use power-point projections to develop his explanations; and that follow-up questions to his elaborate, complex analyses were never forthcoming. He would look out at an empty table, surrounded by solemn and serious suits wearing empty and clueless faces.
They only started asking questions of any pertinence last November, when it occurred to them that they might be liable for the mess taking shape on their watch.
Not the same board. THey’ve already replaced the CEO and will be changing the majority of it over the next year.
I read somewhere that there are two boards–”old GM” and “new GM”–at work here.
Could it be that the “old GM” board has itself been replaced by a “new old GM” board, to be phased out by the new “new board”? The point being, as I understand it, that the “old board,” however constituted, would have a mandate of sorts to oppose the new one.
Not an easy read!….
Sounds rather similar to rules the CIA used when briefing Congresscritters, doesn’t it?
We need a timeline…
The SUV on Bush’s watch…
http://www.nytimes.com/interac…..NE.html?hp
EW “For example, when asked whether the government would limit executive compensation, they said only that the company had to comply with all laws (they mentioned the Dodd amendment specifically), and otherwise, that the compensation committee would decide executive compensation.”
$$$ so who is on the compensation committee $$
Socialism for the workers
Capitalism for the executives (well except when it comes to sharing the losses)
I never understood the whole “socialism” charge. Socialism as a political ideology is probably the broadest out there. At its root, socialism is about a more equal distribution of wealth and power. Its interpretation, however, varies very widely.
Some socialists want to nationalize a few basic essential services and industries (which even the heartless neoliberal U.S. does). Some want to nationalize nearly the entire state.
There are socialist views that are very much in tune with tolerance and keen awareness of the most vulnerable. There are socialist views that espouse white supremacy.
So, when rednecks and/or idiots start parroting “socialists, socialists”, I just don’t get it. It has no real meaning without clarification.
As Michael Moore says, Obama should use this opportunity to transform the auto industry and instead build bullet trains, buses, windmills, solar panels, etc. Of course it’s just too sensible and Michael Moore is fat, so there’s probably no way in hell it will happen. *sigh*
http://www.michaelmoore.com/wo…..php?id=248
Greg Palast has an interesting take on the takeaway. Linkee link no workee for me, but it is at Greg Palast dot com.
So it all comes down to who exactly is on the board.
So watch, is it stacked with financial types, or are there a few people who know something about engineering, establishing alternative sales channels, broadening the concept of transportation, looking at some of the obscure GM divisions (have they really gotten rid of their transit bus manufacturing operations?), someone who knows something about how to engineer to reduce environmental impacts, strong representatives of labor, and so on.
My guess, given the current Obama fixation – financial types, exactly the guys who ran it into the ground in the first place, just different faces.
Michigan’s future lies in taking GM’s most talented and creating new companies to do new things.
Yep, call me a pessimist, at least for the short-term.
”infiltrate the GM board with socialists”. Now this sounds like a plan..socialists as opposed to the current board packed with anti-social(ists).
Also, for a while I don’t see how we jettison the idea of an industry that makes personal transportation in this country. A large-scale switch to the kinds of mass transit vehicles that Michael Moore spoke of has a lot of preconditions, in terms of developing a large enough U.S. market.
But maybe something could be started now, through incubator projects run within GM and designs that could be adapted to existing foreign markets, that would be ready for domestic primetime in a decade (insh.) or two when our infrastructure and location patterns are ready to sustain real mass transit systems in many metro areas.
Overall, kind of a sad day, eh? Despite some hopeful prospects.
Does anyone else feel the approaching proximity of the North American Union in this?
Here’s a pithy comment from Greg Palast about the whole thing:
Grand Theft Auto: How Stevie the Rat bankrupted GM
>>>>>>>
On the Rehm show now
10:00U.S. Transportation Secretary Ray LaHood
The Obama Administration allocated $48 billion in stimulus funds to the Department of Transportation. Diane and her guest, Secretary Ray LaHood, discuss how the funds are being spent and his agency’s other top priorities.
Guests
Secretary Ray LaHood, U.S. Secretary of Transportation and former Republican member of the United States House of Representatives.
http://wamu.org/programs/dr/
If Sheila Bair followed these guidelines when FDIC takes over a bankrupt bank, she’d be fired and there would be bank runs all over the country.
But it’s great to know that what’s good for GM is good for America again.
Jane has a spanking new post up on the front page: “Mourning and Organizing in the Wake of Tiller’s Murder”
BTW the NYT has this story: The 31-Year-Old in Charge of Dismantling G.M.
http://www.nytimes.com/2009/06…..1&hpw
Brian Deese is described as not having any background in the auto industry. He has not finished his law degree but at least according to the article has been influential in structuring the GM bankruptcy. Now maybe this guy is the real deal. I don’t know. But what does it say about the competency of Obama’s senior staff that a junior aide is playing this kind of role?
It’s not possible for him to be the real deal. It’s a signal that machinations on paper that look good and comport with political objectives are all that matter. GM has made many bad decisions, but it’s not because they haven’t hired the smartes B school and law school grads available.
The failure of US auto making interests to consider themselves part of a Darwinian world in their aristocratic situation ethics has spelled their demise. Now in spite of years of warnings and little action, we all pay the price for absurd protectionist policies and abject greed bought and paid for by campaign contributions!! I often wonder if the creative nature of man if not limited by many interests, could have made Detroit and the like vibrant and competitive? If 70% percent of our consumed energy as humans was wasted….. we would be extinct also…………….
To bad our brainwashed conditioned minds perpetuate an energy delivery system and transportation modes which extracts vast sums of liberty from our quality of life into the hands of ???? The King of England during America’s colonial times would have been proud of this racket! Now Political will comes along to foster change and all the protected interests can do is act like Digital Equipment Corp, now dead an buried……
N. Tesla if still alive would have a field day with this one…. We are dumber than dumb! Corporate servitude enabled by unconstitutional law is slavery and tyranny by definition. Jefferson got it right!!!
Corporate aristocrats usurping constitutional law in the lust for endless profit enabled law and by private banks lending uncollected “taxpayermoney,” our liberty and freedoms earned, to hand down to future genenrations…. to the very corporations who have gutted America!
Yes Jefferson is correct! Now mandate health care at the federal level under fear of income tax penalty if you don’t hand your liberty to a tax exempt health insurance corporation??? De facto corporate servitude under the color of law. Lets all be slaves???????????
Mr. Deese was not the only one favoring the Fiat deal, but his lengthy memorandum on how liquidation would increase Medicaid costs, unemployment insurance and municipal bankruptcies ended the debate.
Apparently, it required the genius of this young dynamo to figure out this complicated Einsteinian data. /s
Heh, no kidding.
I’m going to vote with my wallet. I’m buying Ford, since they didn’t declare bankruptcy and are not at the mercy of the feds.
I’m getting a Mustang, eco-alarmists be damned.
It is scary how clueless Obama and his staff seem to be about the consequences of their actions. Reminds me of W.
Taxpayer bailout for the banks. Dust for us.
Banks run Congress, top Democrat says
BY JOHN BYRNE Published: June 1, 2009 Updated 2 hours ago
“Wells Fargo, Citigroup and JP Morgan Chase each got bailouts of $25 billion in government bailouts last year. Morgan Stanley and Goldman Sachs got $10 billion apiece. And AIG, the mammoth insurer that lost billions in bad derivatives bets, has sucked in more than $170 billion.
“Meanwhile, President Barack Obama is reticent about bailing out an American state — California.
“The banks run the place,” [Colin] Peterson [Dem, Chair of the Agriculture Committee[ told the New York Times in Monday’s editions. “I will tell you what the problem is — they give three times more money than the next biggest group. It’s huge the amount of money they put into politics.”
“All told, according to the New York Times, financial sector employees gave $152 million in political donations from 2007 to 2008. Goldman Sachs, Citigroup, JP Morgan Chase, Bank of America and Credit Suisse gave $22.7 million and spent a combined total of $25 million on lobbying activities — in a single year.”
Also this article goes into how a bill Peterson introduced to regulate derivatives trading is being opposed. Gee, I wonder who’ll win?
http://rawstory.com/08/news/20…..-congress/
Let me ask a question:
How many of you who have commented in this thread have worked for the auto industry, whether for an automaker, for a supplier, or for a dealer?
Family used to own dealership.
Reich neglected to mention that Giant Agribusiness is also an unsustainable system/business model. We cannot continue to poison the earth at the current rate. Skirting unenforced or weak environmental laws, Giant Agribiz is apparently greasing the right palms in Latin America, Canada and elsewhere around the globe – replacing rain forest with genetically modified, round-up resistant plants. The chemical run-off kills indigenous plant life – poisoning surrounding land, water, people and all life forms. Small farmers and idigenous peoples eventually are left with no choice but to surrender their land to the Corporation.
For Reich to cite Agribiz as a successful biz model in such a way is intellectually dishonest and abbhorent.
“But the only way we’ll get to really influence the policy at GM will be to infiltrate the GM board with socialists.”
I disagree with this use of the term “socialists”. US corporate boards are already packed with socialite socialists–the sort of apparatchniks and parasites that wrecked the USSR, but without the hammer and sickle.
We need to infiltrate the GM board with some actual businessmen for a change.
Corporations need people that understand that you make money by hiring, training, and retaining the best workers to design and build the best products, not by beancounting, laying people off, and playing games with the books.
Too many of our so-called private-sector pundits forget that capitalism started as a movement for redistributing wealth equitably and creating the greatest good for the greatest number.
GM has 254 million shares traded. Why would some one buy GM stock the last day it is traded?
The Future of Manufacturing, GM, and American Workers (Part II)
Robert Reich
May 31, 2009, 9:37PM
His Part 2 is now up. Nice plug for education so that the symbolic-analytic workforce “will have the highest standard of living and be the most competitive internationally.” And, according to him, there will be “no finite amount of symbolic-analytic work to be parceled out around the globe.” But what about those who will not be able to function in the “symbolic-analytic workforce”?
“More and more of our working people finds themselves in the local service economy — in hotels, hospitals, restaurant chains, and big-box retailers — earning low wages with little or no benefits. Unions could help raise their wages by giving them more bargaining leverage. A higher minimum wage and larger Earned Income Tax Credit could help as well.
. . .
“Some argue that even if I’m correct about all this, the erosion of traditional manufacturing impedes the capacity of Americans to learn important symbolic-analytic tasks, because such learning depends on an intimate understanding of the manufacturing process. . . . But most symbolic analysts do not. Whatever they need to learn about manufacturing can usually be discovered online.
[So, the internet will deliver knowledge necessary for successful symbolic-analysts in the workforce and the unions will make everything ok for those in the service sector. But make no mistake about it–manufacturing in the US is a lost cause:]
” . . . that’s exactly where I depart from those who believe we need to protect or bring back traditional manufacturing in the United States. To do so would be enormously costly. I just don’t get how those costs can possibly be justified.”
http://tpmcafe.talkingpointsme…..hp?ref=fpd
What is going on here?
This is Annalisa Bluhm w/GM. Simply wanted to reiterate we don’t foresee the US Government will play a role in day-to-day operations of our company. Today, GM filed for Chapter 11 protection and will seek 363 process to quickly emerge as a new, viable company supported by our strongest brands and assets that will provide value as an investment.
Above all, I personally want to thank Marcy, and this community, for the support you’ve given us over the past six months. Clearly, GM is in a difficult situation, however, it’s great to know there are people out there providing thoughtful, intelligent commentary on the state of the industry. I will continue to enjoy the debate and discourse!