Where’s The Outrage Over GM & Chrysler?

Closer than you think...

Closer than you think…

In my latest post at BloombergView, I look at Donald Trump and Hillary Clinton’s attempts to tap into the populist anger over the auto industry and am left wondering why neither is willing to attack the automakers who actually received bailout money. Trump has taken on Ford’s decision to double production capacity in Mexico and Clinton has attacked the supplier Johnson Controls for relocating to the UK in an “inversion” deal with Tyco, yet neither of these alleged automotive evildoers come close to matching the perfidy of the two bailed-out automakers. To wit:

General Motors, which received a $50 billion bailout, has received a net federal tax advantage of $52 million over the last three years in spite of billion-dollar profits, thanks to a controversial government decision allowing it to carry tens of billions of dollars in operating-loss credits through bankruptcy. GM is also leading the way on importing vehicles from China, and has focused its global export and R&D strategies around that huge potential market in the years since taxpayers bailed it out. Just like Ford, GM is doubling its Mexican production capacity, spending $5 billion on new assembly jobs south of the border.

Meanwhile, FCA isn’t even based in the U.S., having fled to a U.K. tax domicile after receiving more than $10 billion in bailout funds. Putting Fiat’s Italian plants in front of the line for new production, FCA anticipates that its North American production will remain flat through 2018 while imports from outside North America will expand to more than 10 times 2013 levels

This is at the heart of populist anger over the auto industry: Even if the bailout was necessary as an emergency measure, it’s failed to change the behavior of the firms who benefited from it or to deliver any reversal in the fortune for U.S. workers. Fiat-Chrysler survived to become a foreign firm by every possible metric, and GM became a tax-dodging Trojan horse for Chinese cars. And yet no American politician — Democrat or Republican, establishment or renegade — seems able to even identify these real culprits.

Not convinced that the automakers we bailed out are bad corporate citizens of the US? Read on…

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Behind The Volkswagen Scandal, A “Car Cold War” Simmers

The still-unfolding Volkswagen diesel emissions scandal has earned the largest German automaker more than a week of public opprobrium in the US media, as American owners, regulators and commentators rush to condemn the most blatant case of regulatory evasion in recent automotive history. In Europe, however, the outrage at VW’s emissions manipulation is tempered by a certain amount of realpolitik. French Economy Minister Emmanuel Macron has given voice to European suspicions by suggesting that American automakers are fueling the scandal for competitive purposes, and German officials have made it clear that they intend to “contain” the scandal. Grievances over auto industry issues have long been a source of friction between President Obama and German Chancellor Angela Merkel, and the Volkswagen scandal has brought tensions old and new spilling out into the open.

 

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The Ballad Of Dirty Harry

Go ahead punk, make my day

Go ahead punk, make my day

This week’s news that activist investors are seeking $8 billion in stock buybacks from General Motors has reignited a nearly half century of concerns that the once-dominant automaker continues to prioritize short-term results over long-term strategy. Already behind the competition on global platform rationalization, fuel efficiency, pricing power and luxury-brand margins, GM clearly has better things to do with its cash than give it away to investors. But while analysts and investors wrestle with these issues, taxpayers face an even more troubling question: how is it possible that they lost over $10 billion on GM’s equity only to have Wall Street strip $8 billion in cash from the company with the help of a member of the president’s auto task force?

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