Pennies On The Dollar

The Dems did a premature victory lap on the economy last week, at Obama’s last speech in Detroit.

The Detroit Money Pit – The Corner – National Review Online.

General Motors and Chrysler are much better off because Bush gave them $24 billion and Obama gave them another $60 billion. Any company would be. Pouring federal dollars into businesses does improve their bottom lines, but that doesn’t mean it helps the overall economy. The real question is: What would have happened to that money if the government had not spent it in Detroit?

The government shouldn’t plan on getting its money back. President Obama concedes that the $24 billion Bush spent — more than NASA’s annual budget — is gone for good. And Obama’s claims to the contrary, the money he spent isn’t coming back, either.

We’ll never know what the private market could have done; that money’s gone.

General Motors would have to command a market value of more than $70 billion for the taxpayers’ stake in the company to be worth what Obama paid for it. Since General Motors’ highest-ever market valuation was $52 billion in 2000, at the peak of the dot-com boom and the SUV craze, that seems improbable — especially since Obama’s new miles-per-gallon regulations won’t let them build as many of those highly profitable SUVs. At the end of the day, the government will still have sunk tens of billions of dollars into GM and Chrysler with no hope of recovering it.

See also – British Leyland.

10 thoughts on “Pennies On The Dollar

  1. Up until the last couple years, the build quality of the vast majority of the GM product line also gave British Leyland a run for the money.

  2. Uh, Mitch’s point, I believe, is that British Leyland is defunct. Sold off piece meal. Primarily due to labor problems, if I recall.

    I was the owner of a 1985 MGB, which was banned for sale in the US due to collision safety concerns.

  3. Although I’ll cop to it that if I hit the lotto, I might buy a Tesla

    …to go along with the F150, the Saab and the CJ7.

  4. I’m sure Mitch wants to plop down $41k on the first coal fired (effectively) vehicle for a LONG time. (charging the Volt at night will by and large pull coal fired plants off spinning reserve and into production) Now that’s environmentalism for you!

    But regarding the bailout, the nicest thing I can say is that by assigning all that equity to the UAW, we may have delayed the phase of “government takeover of GM pension liabilities” by a few months–while ensuring that private investors will do squat to help politically connected companies, knowing that politicians will ignore bankruptcy law to help junior creditors.

  5. Actually, I believe that the reason the bailed out automakers did so well was that they were allowed to file bankruptcy. This allowed them to get out from under the crushing pension burdens and allowed them to slash payroll by cutting their workforce.

  6. Mitch, I agree, Obama’s victory lap was premature…Kinda like Bush’s victory lap in Iraq. Politicians…They all do it!

    Bubbasan, we own two (different) hybrids. They “do it” without coal.
    The coal plant problem is a big one if and when the “plugins” secure a major market share. Simply means we have to continue developing alternative energy sources (solar, wind, and yes, nuclear). I wonder how long it will then take to begin taxing electrics at the plug?

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