World War Car: Send In The Hedge Funds

Masters of the Universe tend to leave a lot of fingerprints...

Masters of the Universe tend to leave a lot of fingerprints…

As information technology made global markets a reality in the 1990s, a wave of thought espousing a liberal-democratic “end of history” became widely popular. Thanks to markets and democracy, it was believed, the patterns of the preceding centuries would be replaced with a new global peace, maintained by transnational business bonds whose mutual benefits would prevent democracies from pursuing antagonistic agendas. In certain ways, the theory has proven more than mere wishful thinking: one can imagine far more friction occurring between China and the US, were these two largest economies in the world not woven so tightly together. And yet, in the auto industry, where the line between free market multinational and “national champion” has often been a thin one, the subtext of geostrategic competition seems to be seeping through more and more of the news.

Bertel’s report on the lawsuit against Ferdinand Piëch and Wolfgang Porsche is a prime example of the suspicion, if nothing else, that the US government’s involvement in the auto industry has aroused. Naturally Der Spiegel, the original reporter on the lawsuit, didn’t assert the involvement of the NSA… but in the post-Snowden and post-bailout world, German commentators can’t help but wonder where Singer’s information comes from. Basic logic suggests precisely what can not be reported: How do you know that Piech and Porsche used hardened cell-phones and unbreakable codes, if you haven’t tried breaking in? Though a vocal proponent of free markets, Singer is no longer living in the 1990s; thanks to an arms race in government support for auto industries, his lawsuit’s implication of secret information about Germany’s national champion automaker forces it into the wider context of  US “geonomic” tactics that appears to  include sending Goldman Sachs into Libya instead of the Marines.

Singer’s major political clout and involvement in the US bailout of Delphi also puts him at the very center of the US effort to refit Detroit’s auto industry. According to extensive reporting in Mother Jones Magazine, Singer’s Elliott Management, along with several other hedge funds, leveraged Delphi’s distressed debt into ownership of the cash-bleeding former GM division. The funds allegedly threatened to stop supplying GM with steering and other parts if it didn’t get access to TARP funding, which it ultimately did, and eliminated all US-based jobs  before taking the company public in 2011 at a 3,000% profit. Though some might wonder how the loss of 25k jobs helped the US auto strategy, the perpetually bankrupt Delphi was an anchor of legacy costs that GM had spun off for a reason. The “vulture fund” attack on Delphi did important dirty work while keeping the governments’ hands (relatively) clean, and conveniently preventing Mitt Romney (whose trust profited from the deal) from too effectively attacking the auto bailout.

Of course, the fact that Singer played an almost-too-perfect role in the GM bailout doesn’t prove that Elliott Management’s lawsuit against Piëch and Porsche is based on information acquired from US clandestine services. Nor does the auto industry’s ongoing struggle between free-market and nationalist motivations mean that every piece of automotive news can be reduced to national agendas. After all, things are rarely what they seem. For example, one of the best pieces of reporting on links between the CIA and the US auto industry come from 1994 (also, Mother Jones), just two years after Francis Fukuyama pronounced the liberal-democratic “End Of History.” It turns out that while intellectuals were most loudly praising the end of national competition, the CIA was just getting serious about the economic intelligence game.

Twenty years later, is it any wonder that the contours of global economic struggle have such mysterious yet familiar shapes?