The verdict is in from the National Highway Traffic Safety Administration (NHTSA) on General Motors’ corroding brake line problem. Despite having received thousands of complaints from motorists regarding brake failure due to brake line rust, the agency claims GM does not have higher failure rates than other manufacturers. The clear evidence to the contrary makes this a classic case of what economists call "regulatory capture." First identified by Nobel laureate George Stigler (in photo) in 1971, it's when a government agency tasked with protecting the public interest instead acts to the benefit of an industry or particular company.
In this case, it's a particular union. The ersatz GM bankruptcy and taxpayer bailout were orchestrated by the Obama Administration with the goal of preserving the political power of the United Auto Workers. Since that time the administration has sought to prop up GM in every conceivable way, with NHTSA just one …
The United Auto Workers may have declined in numbers, but its taste for confrontation appears as strong as ever. And its new leader, Dennis Williams, isn’t about to let anyone forget. Last Wednesday, June 4, Williams, the UAW secretary-treasurer these last four years, overwhelmingly was elected president at the union convention in Detroit. Inaugurated the following day, Williams, now 61, replaces one-term President Bob King, who at 67 retired in the face of the union’s mandatory age limit. Williams’ main priority is ending the two-tier wage system to which the union agreed in 2007 as part of a deal to keep General Motors, Ford and Chrysler afloat. He’ll get to test his mettle in contract negotiations next year. The union shouldn’t lack for funds in this or any other endeavor; delegates approved a 25 percent dues hike.
Founded in 1935 amid bitter strife in American labor relations, the United Automobile …
The National Legal and Policy Center (NLPC) announced today the launch of FauxEnterprise.com, a satirical mimic of the U.S. Chamber of Commerce’s Free Enterprise website at www.freeenterprise.com/tour.
The Free Enterprise site chronicles the “Free Enterprise Tour,” which would be a welcome undertaking if not for the sponsorship of bailed-out General Motors. According to NLPC President Peter Flaherty, “I don’t know who looks worse, the Chamber for not appreciating that the GM sponsorship looks silly to many people, or GM for acting like it’s a competitive company operating in a real marketplace.”
Flaherty said, “The auto bailout was not about preserving free enterprise, or even saving jobs. It was about bolstering the political power of the United Auto Workers (UAW). Today’s GM is not a capitalist success story but instead is an example of state-directed crony capitalism.”
“There has been no GM comeback. The U.S. Treasury still owns a significant …
NLPC Associate Fellow Mark Modica was interviewed last night on Fox Business Network’s Willis Report. Here’s a transcript:
Cheryl Casone: Government Motors. Trying to shed its ties to Uncle Sam once and for all, pushing the sale of the U.S. stake in the company altogether. But saying goodbye is hard to do. The government’s digging in its heals, saying taxpayers would have faced a massive multibillion dollar loss. Joining me now with more is Mark Modica, associate fellow for the National Legal and Policy Center. This was a bad deal. I mean this was a bad deal for the taxpayers. Of course, Treasury said no to it.
Mark Modica: Hi, Cheryl, well, they have been saying no. Actually, they could have first sold the stake almost a year and a half ago when share price was over thirty, and we heard the same story. They’re not going to …
Tonight, the Democratic National Convention will reportedly highlight the “success” of the auto bailout. Michelle Malkin comments in a column today, and quotes NLPC Associate Fellow Mark Modica:
The claims that GM paid back its taxpayer-funded loans “in full” – a story peddled in campaign ads narrated by Hollywood actor Tom Hanks – were debunked by the Treasury Department’s TARP watchdog this summer. GM still owes nearly $30 billion of the $50 billion it received, and its lending arm still owes nearly $15 billion of the more than $17 billion it received. Bailout watchdog Mark Modica of the National Legal and Policy Center adds: “In addition to U.S. taxpayers anteing up, Canada put in over $10 billion, and GM was relieved of about $28 billion of bondholder obligations as UAW claims were protected. That’s an improvement of almost $90 billion to the balance sheet, and the company still lags
Three years into their forced marriage with GM, the American taxpayers have seen the value of their investment in GM deteriorate by approximately $24 billion, largely due to continuing European losses. Exposure in Europe has contributed to crushing the value of GM’s stock due to its chaotic and failing Opel unit in Germany. While government, journalists and Wall Street sympathizers have given the Obama Administration and GM leadership an almost incomprehensible pass on this value destruction and massive loss (presumably due to the macro-economic nature of the crisis), it’s time to call for the accountability that this new Board was supposedly going to deliver.
Overlooked is that the value-destroying, cash-sucking disaster that is GM Europe was packaged and ready for sale to new European buyers in 2009 before the new Obama GM Board of Directors slammed the brakes on the deal, throwing GM into its current value free-fall. In fact, the decision to not …
NLPC Associate Fellow Mark Modica was interviewed by Tom Sullivan about GM’s future on Fox Business Network on August 11. Here’s a transcript:
Tom Sullivan: Joining me now is an Associate Fellow at the National Legal and Policy Center, Mark Modica. You follow this GM story carefully.
Mark Modica: I sure do.
Tom Sullivan: Do you agree with the other Mark about the fact that GM is looking pretty good right now?
Mark Modica: I agree with some of the comments. The European situation is a mess, so that is an overhang there. As far as the government getting out – no professional investor would say that you base your exit of owing a stock on what you paid for the stock. The government should have been out of GM. They had the opportunity over a year ago to sell their stake – the taxpayers stake. At …
Last night, NLPC President Peter Flaherty criticized GM’s bonuses to United Auto Workers while the company is stil deep in the hole to taxpayers. He appeared on CNN’s Situation Room. Here’s a transcript:
Candy Crowley: New evidence that General Motors has made a big financial comeback after taxpayers bailed out the auto giant a few years ago. The company proudly announced it has posted record profits, but critics aren’t happy about the way GM is spending that money. Here’s our Lisa Sylvester.
Lisa Sylvester: Hi there, Candy. Well, all three U.S. automakers are back from the brink. GM had a very profitable year in 2011 with its North American operations. Now the question is, though, should those profits be shared with the workers, even though U.S. taxpayers are still on the hook for the company?
Lisa Sylvester (voice-over): November 2008, the CEOs of the big three …
During an appearance on Fox Business Network on Tuesday, NLPC Associate Fellow (and GM bondholder) Mark Modica warned that the GM bankruptcy may provide a model for insolvent states and localities to crush bondholders and taxpayers to protect politically-connected unions. “Follow the Money” host is Eric Bolling. Here’s a transcript:
Eric Bolling: GM’s creative approach to bankruptcy involved a lot of politics and back scratching and it might be just the playbook the states need, who are in financial trouble. Mark Modica, former GM bondholder himself who got hammered by the GM bailout has been all over this. Ok, sir, go ahead, we talked a lot about the GM bankruptcy and what happened. Tell us what happened to the bond holders.
Mark Modica: Hi Eric. Yeah. There was obviously favoritism as politically favored groups like the UAW did very well. I like to call it a wealth redistribution scheme. …
Chrysler’s Jefferson North Assembly Plant in Detroit isn’t the sort of place where one would think party animals hang out. But the camera doesn’t lie. Acting on a tip, WJBK-TV/Fox 2 News in Detroit aired a story this morning showing roughly 15 plant employees, over the course of several consecutive days, chugging beer and smoking marijuana in a park near the company parking lot. Several workers were caught in the act of trekking to a nearby convenience store to buy beer during their lunch hour. What makes this revelation especially embarrassing is that this is the same plant that President Barack Obama visited in July to give a pep talk on the importance of U.S. auto manufacturing. It makes one wonder if such behavior had contributed to the economic woes that led to Chrysler’s bankruptcy and subsequent bailout in 2009.
Chrysler, along with General Motors, has benefited from government largesse that began during the last months of the Bush administration and …