Patterico's Pontifications

7/18/2010

Obama Administration Costs American Jobs

Filed under: Economics,Obama — DRJ @ 3:27 pm



[Guest post by DRJ]

The TARP Inspector General reports the Obama Administration’s handling of the GM and Chrysler car dealership terminations needlessly cost American jobs:

“Treasury made a series of decisions that may have substantially contributed to the accelerated shuttering of thousands of small businesses,” investigators said.

Those decisions resulted in “potentially adding tens of thousands of workers to the already lengthy unemployment rolls – all based on a theory and without sufficient consideration of the decisions’ broader economic impact,” the report said.

Why worry about the lives of bitter, clingy Americans when you have a crisis going to waste?

— DRJ

43 Responses to “Obama Administration Costs American Jobs”

  1. Big O cant manage
    way out of wet paper bag
    no mad skilz for him

    ColonelHaiku (26e9b5)

  2. This post dovetails so very nicely with the earlier one about the ruling class. Sort of like providing additional supporting data to an argument. Did you do that on purpose DRJ? :)

    elissa (a9ef5a)

  3. Why worry about the lives of bitter, clingy Americans when you have a crisis going to waste?

    DRJ, cheap shot. No, I don’t like Obama and no, I didn’t like the government takeover of Chrysler and GM… but I see nothing wrong with either GM or Chrysler reducing – and quickly – the number of dealerships. And since they weren’t in a hurry (2014?), it is great that the ‘owner’ told them to get off their butt and do what was needed.

    Nor do I think either should have taken into account the impact on the overall employment. Their job was/is to get to profitability as fast as possible, not to worry about the ‘broader economic impact’.

    And I’m guessing Barofsky’s complaint was more about the paper trail than the legitimacy of the cuts, as pretty much everybody and their cousin knew the automakers had too many dealerships for the volume they were selling. And keep in mind that the reinstatements had more to do with political pressure than whether the dealerships in question deserved to stick around.

    steve sturm (116925)

  4. I have never understood the rationale of the practice of cutting dealers to save the companies. Have any of these clowns ever heard of Amway ? I can see that subsidies should be phased out but what in hell is the rationale to reduce your sales force which is totally on commission ? It is just one more example of the stupidity of the present governing class. There actually was a rationale for Marie Antoinette saying “Let them eat cake.”

    It had to do with incentives to make bread flour and cake flour, known to be different to this day to anyone who bakes. Plus, of course, the fact that the queen did not say it.

    The present governing class has never done anything as mundane as baking bread so could not be expected to know the difference. Or how car dealers’ business works.

    MIke K (0ef8c3)

  5. A college freshman taking Econ 101 could have predicted this outcome. The army of lawyers running the economy could benefit themselves from enrolling in an Econ class or two. Unlike in the courtroom, economic truths do not depend on which lawyer makes the better argument. Conservative candidates would do well to brush up on Econ themselves before the upcoming elections. Fiscal conservatives have the truth on their side if they can only communicate it to their independent constituents.

    stout77 (c2d8fe)

  6. here’s the part what just kills me

    In a statement, GM said the events described by the report “have since been overtaken by a new GM and a stronger dealer network to match. More than a year since bankruptcy, GM is showing substantial progress.”

    Good for you in the same year I made substantial progress on owning a Toyota. They could make my own mother a dealer and I wouldn’t buy one of their unreliable homomobiles what were produced by illiterate dirty socialist UAW losers.

    happyfeet (71f55e)

  7. DRJ, cheap shot.

    No, it wasn’t.

    We have a committed Marxist utopian in the White House, along with a cadre of Marxist theoreticians who would happily manufacture crises if they did not arise on their own in order to advance their agenda.

    Pointing that out isn’t a cheap shot, when it accurately reflects the sentiments of the cadre in charge.

    EW1(SG) (edc268)

  8. This is a cheapshot. Obviously, GM and Chrysler had to cut radically. If there’d been less government support, they would’ve cut even more radically. I don’t think that we should’ve bailed out the auto companies, but once we did, it was perfectly reasonable to demand that they cut back as well. The GOP should always only attack Obama from the right-no need to parrot leftist attacks to score cheap points, we have enough good arguments.

    jc (bbca08)

  9. The important thing about the dealership revisions is not whether or not they were necessary……it is whose dealerships were revoked and why……..

    gahrie (ed7a50)

  10. jc #8 – instead of doing what Obama’s administration did, they should have sold GM to the Auto Unions for the stocks and shares and assets in the Auto Unions’ pension plans …

    That way, the Auto Union members prosper while the Auto union policies run GM … right ?

    (And the prior owners of GM would have gotten more back from their might-as-well-have-been-confiscated investments)

    Alasdair (205079)

  11. Not a cheap shot; DRJ was quoting the TARP inspector general, who probably is not a GOP hack.

    And as #9 pointed out, there’s the issue of why certain dealers were selected for closing. If you recall there were claims in early ’09 that those dealers who were Dem contributors maybe were spared; does anyone know how those claims fared under litigation, or further analysis?

    By the way, responding to DRJ’s comment on another thread, please don’t scale back your posts! Probably everyone would like to see Patterico blog more, but I can’t imagine that anyone wants to see you blog less.

    RL in Glendale (b2029f)

  12. of course, the dealership decisions were at least partially political. but they were political because some dealerships were SAVED. is anyone arguing that without a bailout LESS dealerships would’ve been cut? that without gov’t cash, somehow more dealerships would stay open?

    if not, then who cares? more dealerships should’ve closed down. that’s the free market we conservatives claim to support.

    jc (bbca08)

  13. Not a cheap shot; DRJ was quoting the TARP inspector general

    pray tell, where in the IG report is “Why worry about the lives of bitter, clingy Americans when you have a crisis going to waste?

    DRJ, I’m not arguing with your perception of Obama, but what exactly is your beef? You do know that GM and Chrysler were losing billions of dollars, that this wasn’t something Obama invented. Do you object that car czars ordered GM and Chrysler to do what they didn’t want to do but what was necessary? Should they not have cut because of the general economic conditions? And if so, did you support even larger subsidies to GM and Chrysler, to compensate them for the hit they were taking on our behalf?

    #4: the hypothetical rationale for cutting is that close to the same amount of cars would be sold, but by a smaller network, resulting not only in a stronger dealer network but reduced dealer support costs for the manufacturers (i.e., stronger dealers = less need for trunk money).

    steve sturm (116925)

  14. I’m not clear on why a reduction in the number of dealerships was “necessary”. Each dealership pays a franchise fee to the auto manufacturer, so closing dealerships meant a reduction in cash flow to the auto companies.

    Each dealership pays the manufacturer for every new vehicle on their lot, financing them through a bank or the manufacturer, meaning another reduction in revenue to the auto companies.

    The closing of rural dealerships means that some customers must now travel 40 to 60 miles for warranty work on their vehicles. How does this encourage repeat customers?

    Overall, as is the case with most government-inspired decisions, these actions were poorly considered and implemented in a manner that damaged the economy rather than bolstered it.

    navyvet (206534)

  15. A report released Sunday by the special inspector general for the government’s bailout program…

    How much longer will it be before this guy finds himself relieved of his duties as an IG?

    Blacque Jacques Shellacque (cf2f34)

  16. As several commenters mentioned above, I don’t see why an immediate, widespread reduction in dealers was necessary or prudent. It alienated loyal buyers and cost American jobs without any apparent reduction in GM’s/Chryslers’ costs. But you don’t have to take my word for it. Read the IG’s report which questioned the Auto Team’s theory that reduced competition and the European model of limited dealerships would increase sales of GM and Chrysler products. The report also expressed concern regarding the transparency and fairness in how the terminated dealers were selected.

    DRJ (d43dcd)

  17. 14….Each dealership pays a franchise fee to the auto manufacturer, so closing dealerships meant a reduction in cash flow to the auto companies….
    Each dealership pays the manufacturer for every new vehicle on their lot, financing them through a bank or the manufacturer, meaning another reduction in revenue to the auto companies.
    Comment by navyvet —

    Thanks for reminding us of the details, confirming there was no economic reason to trim down the dealerships.

    “The Treasury Department failed to consider the economic fallout …

    Write it large and hang it on the wall. Pointing to it will be the correct response to many questions.

    MD in Philly (3d3f72)

  18. I think the problem was that so many dealers meant there was more inventory than was necessary hence more left over at the end of season to be marked down. That was the thinking anyway as I remember it. Personally I don’t care if you have a chevy or cadillac or ford or chrysler or whatever else kind of crappy dealership with cars built by UAW pansies good luck loser I will never darken your door.

    happyfeet (19c1da)

  19. remember every year the loser Americans have less market share than the year before

    happyfeet (19c1da)

  20. Happy, the point we are trying to make is that excess inventory had been purchased by the dealers. The manufacturers could merely have reduced or ended the subsidies and all the incentive programs. It did not make economic sense but the politics were not difficult to figure out. Car dealers tend to vote Republican. I will never buy another GM or Chrysler car. And I have bought a number of them.

    MIke K (0ef8c3)

  21. oh I have no opinion on # or dealerships I just thought that was their thinking is all I could be totally wrong

    happyfeet (19c1da)

  22. *of* dealerships

    happyfeet (19c1da)

  23. steve sturm and jc: it is a lie that cutting dealerships was necessary. The problem with GM wasn’t the number of cars sold. In fact, GM was selling more cars than Toyota.

    The problem with GM was that its fixed costs from labor were so high that they would have to sell twice as many cars as any other auto maker to break even.

    So where should the costs have been cut: At the dealers, which were making the sales? Or at the unions, which were bloating the overhead?

    Some chump (e84e27)

  24. Wrong-way Barry strikes again!

    Icy Texan (84a5bb)

  25. Legal professionals should take a voluntary 50% pay cut to show those UAW workers how to do it. Just TELLING them isn’t enough. You have to SHOW them. What do you all think about that? We all know legal professionals are way overpaid, not to mention that lawyers are costing this country billions in frivolous lawsuits. It always amazes me how you guys want the normal working stiffs to get paid less and less and less, but all the professionals should get more and more and more. Who, exactly, ends up paying the professionals? It’s the poor working Joes who are seeing their incomes and benefits become less and less and less.

    Chris Hooten (f690bb)

  26. Great!! I guess this didn’t make the mainstream media either. Thanks for the information so I can spread it around to other who want to know the facts & not the latest on some dumb celebrity in Hollywood.

    MorningStar (72856e)

  27. Well, I will repeat what I have said for a while. Obama said that if we did nothing, no stimulus, nothing, unemployment would not go higher than 9%. It’s a good quarter when we stay below 10% and that’s only because of apparently large number of American giving up on seeking legal employment (maybe they are giving up on employment; maybe some or all of them are engaged in illegal professions, like drug dealing or prostitution).

    So in other words, the situation is now worse than their worst case scenario if they had done nothing. There are only two logical explanations. Either:

    1) they suck at predictions, or
    2) they are making it worse.

    This news here supports the second hypothesis. But really no matter which is the truth, the answer is they need to stop intervening in our economy. The justification for that conclusion is easy if the answer is they are making it worse, but its also correct if it is the first hypothesis, because if they can’t predict what will happen, how could they hope to intervene effectively?

    In short, Mr. President, stop spending, stop regulating, and repeal every single bill you have passed that will impact the economy (which I believe is all of them), and don’t let the Bush tax cuts lapse. Then we will presumably do better, or at least not worse.

    Of course we all know he will never do any of them, except, ironically the thing with the Bush tax cuts. But that’s the right answer, nonetheless.

    Aaron Worthing (A.W.) (e7d72e)

  28. Chris Hooten is too dumb to insult. Were it not for strawpeople, he would have exactly nothing to add.

    JD (047c15)

  29. The money automakers got from their dealerships was a function of the number of cars and spare parts sold. Spreading this number over a smaller number of dealers wouldn’t lead to a decrease in revenue to the automakers.

    The money automakers spent on dealerships tended to be a function of the number of dealerships (promotional support, subsidies, training, etc.), thus reducing the number would cut costs for the automakers.

    In any event, I come back to my original questions: given that industry analysts have said for years that the domestic automakers had too many dealerships, how do you saddle Obama with responsibility for this? And if the automakers were supposed to take the general economic climate into account, do you feel the same should have been done with every other company that reduced staff during the recession? Should they have continued to pay people they couldn’t afford to have in order to not prevent the unemployment rate from going higher?

    steve (369bc6)

  30. It was Mr. Barovsky, who as IG over the TARP program has detailed how the money has been wasted,
    on amy number of occasions, and it’s more the pattern of the Auto Task force, run by investment
    bankers, Ratner, and Alinskyite activists

    ian cormac (d28167)

  31. The automakers weren’t “paying” the dealers. They were not employees. This may have decreased costs on the margins, but pales in comparison to their structural financial issues.

    JD (047c15)

  32. DRJ used to post links to the chart showing projections with and without the stimulus, with the actual data proving to be even worse.

    I see that Biden is getting called out on dailycaller for lying lying lying about the stimulus, in using the “I blame Republicans” defense of their actions.

    JD (047c15)

  33. Over here in Red County, it got even worse. The GMC/Caddy/Hummer dealership closed in 2006 (or so)l leaving GM with a Chevy one. When that closed, it left Klamath County (population 60,000, with a lot of use for 4WD heavy pickups with the nearest Chevy dealership about 110 miles away. This also hurts the installed base, who have to go through hoops for major repairs…

    The Dodge dealership was luckier, largely because it was owned by Lithia (big Dem donor here, too). Local resentment seems to have effected business, because neither the Dodge or the Toyota arms are doing well…

    Guess my next pickup will be a Ford.

    Red County Pete (17637b)

  34. Red County Pete,

    I was a Chevy fan for many years. They just make a prettier pickup. Until I actually owned an F-150, I didn’t understand what I was missing. I can assure you that once you use a Ford you won’t be going back to GM and certainly not Dodge. I guess there’s a reason Ford could survive in a world where the competition could not.

    That there is even a whiff of politics in the dealership closings has created a generation of bad blood in red states. Not that the way GM and Chrysler were otherwise saved was popular either, but I just don’t feel comfortable dealing with the surviving dealerships.

    Dustin (b54cdc)

  35. I recall the saying ‘I’d rather push a Chevy than drive a Ford’. Well, that’s exactly the choice you’re going to have to make if you have to go 110 miles to get service on your glued together Chevy while my ugly Ford keeps doing work.

    Dustin (b54cdc)

  36. Actually owned a Ford Ranger for 150,000 miles, and my wife has a ’98 still running strong. The GM was the right truck at the right time (we needed a 4WD truck) and the Ford incentives were out. Going back won’t hurt. Now, if the Ford dealership people weren’t jerks…

    Red County Pete (17637b)

  37. If only, Red.

    My wife refuses to drive anything that doesn’t have an H on the hood, but those Honda dealers can be something else, too. It’s like the dealers understand the cars are selling themselves, and they want to give them a little challenge by being awful at their job.

    Dustin (b54cdc)

  38. “The TARP Inspector General reports the Obama Administration’s handling of the GM and Chrysler car dealership terminations needlessly cost American jobs”

    But they weren’t UNION jobs, which is the key to the entire sham.

    Tully (4dce1a)

  39. I don’t know if the choice of dealerships to be closed as politically motivated, but anectodally, the administration seemed to close them in a haphazard manner which suggested they weren’t really paying attention to why the dealerships should be closed.

    In Albuquerque, Dodge and Chrysler customers were told to go to Zangara Dodge because Quality Jeep/Chrysler was going to lose its dealership franchise.

    Just one problem–Zangara Dodge closed in Feb 2009 thanks to the economy and legal troubles. So these car owners were basically told to take their vehicles to a shuttered dealership while the dealer that was doing just fine would be shut down. Chrysler had to scramble to get Larry Miller to buy the Zangara lot, but the damage was done by that point.

    Another Chris (2d8013)

  40. Spot on with post #38, Tully.

    GeneralMalaise (26e9b5)

  41. State by state Obama approval

    I started to get a little scared when I noticed that Obama’s ahead in battlegrounds like Florida, Penn, Colorado, Virginia, New Mexico, Ohio…

    And then I realized he’s approximately the same amount ahead in Texas (where Mccain won by I think 12 points). So hopefully it’s just the poll.

    Amusing to see how far ahead he is in DC, though. Kinda drives that ‘ruling vs country’ thing home.

    Dustin (b54cdc)

  42. We got lucky for some cars in the area. The (former) Chevy dealership also sells Honda and Subaru, and they have a good reputation. One of the perks is oil changes (free, for the cost of waiting or if you can schedule) for as long as you own the car.

    I’ve had OK luck with parts at the Ford dealership, but one of my neighbors will tell anybody and everybody how they planned to charge for a valve adjustment that they managed to do without disturbing the nail polish on the valve cover nuts. Oops.

    FWIW, there are no Nissan dealerships in the area, and you see almost as many Hummers as Nissan pickups. The miles count…

    Red County Pete (f08ebc)

  43. very creative post, keep up to dated

    Gulf Jobs Vacancies (9720d7)


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