Soccer Dad

About that ... uh ... endorsement ... - central planning edition

From the Washington Post's endorsement of Barack Obama for President:

Mr. Obama is a man of supple intelligence, with a nuanced grasp of complex issues and evident skill at conciliation and consensus-building. At home, we believe, he would respond to the economic crisis with a healthy respect for markets tempered by justified dismay over rising inequality and an understanding of the need for focused regulation.

(empahases mine)

An editorial at the Truth about Cars writes this about the Presidential Task Force on Automobiles prescription to cut dealerships. (h/t Instapundit)

The grand poobahs at the PTFOA are Wall Street bankers and political insiders. None of them have built or run real businesses designing, marketing, selling and supporting high priced consumer products. Everything they think they know they learned from books and lectures, not from actually doing stuff. The old story goes: "When your only tool is a hammer, every problem looks like a nail." To the Wall Street types, slash and burn is the hammer they know. Even President Hope has taken to using their favorite motto "Lean and Mean." Surely we need lean, productive companies, but who needs mean?

GM and Chrysler, under orders from the PTFOA, are decimating their dealer network in the perverse expectation that doing so will lead to higher sales and/or profits. The word decimate comes from the Romans' practice of showing displeasure with the soldiers by randomly killing one-in-ten of them. While the famously brutal Romans capped their ritual slaughters at 10%, GM and Chrysler are killing off more like 30% of these formerly loyal partners.

The problem is:

The dealerships are in fact the customers of the factory. No manufacturer of any product in history has successfully maintained or increased its sales volume or profitability by decimating its customer base and sales channel. Surely it makes sense to get rid of crooked and/or financial weak dealerships. The speed with which the recent slaughter has been carried out demonstrates simple minded meanness and not smart management.

That's not to say that some dealers aren't trying to fight the administration. In fact, they are.

Attorneys representing a group of Chrysler dealers filed an objection Tuesday in New York opposing the sale of the automaker's assets, citing the company's plans to terminate franchise agreements of 789 dealers as part of the deal.

The Committee of Chrysler Affected Dealers, which claims to represent nearly 300 dealers in 45 states, also wants the judge overseeing Chrysler bankruptcy case to delay hearings that would approve the sale and the termination of the dealers' agreements in order to give those affected more time to respond.

"Chrysler's proposed asset sale and request for immediate termination of dealer franchises will destroy several hundred independent businesses, ruin the livelihoods of their owners, cause the loss of thousands of jobs and precipitate inevitable personal and business bankruptcies flowing from the closing of the affected dealers," Stephen Lerner, the lead attorney for the group, said in a statement.

Worse, it's looking like the decision may be a partisan taint to the decision to terminate franchises. (More here.) In other words, the decision is not only ill-considered and likely counterproductive, it's also blatantly unfair.

But hey, it's not only car dealers who are getting a raw deal from the administration, so to are GM's bondholders.

But in its aggressive dealings with U.S. automakers, most recently General Motors, the Obama administration is coming dangerously close to engaging in financial engineering that ignores basic principles of fairness and economic realities to further political goals.

It is now clear that there is no real difference between the government and the entity that identifies itself as GM. For all intents and purposes, the government, which is set to assume a 50 percent equity stake in the company, is GM, and it has been calling the shots in negotiations with creditors. While the Obama administration has been playing hardball with bondholders, it has been more than happy to play nice with the United Auto Workers. How else to explain why a retiree health-care fund controlled by the UAW is slated to get a 39 percent equity stake in GM for its remaining $10 billion in claims while bondholders are being pressured to take a 10 percent stake for their $27 billion? It's highly unlikely that the auto industry professionals at GM would have cut such a deal had the government not been standing over them -- or providing the steady stream of taxpayer dollars needed to keep the factory doors open.

The source? The same folks who praised candidate Obama for his "healthy respect for markets," the editors of the Washington Post.

Jennifer Rubin adds:

But this, of course, is nothing new. Have we already forgotten the AIG bonus flap? Has Tim Geithner let the banks pay back their TARP money yet? This is what comes, inevitably, from an administration with a vast social and economic agenda, which has used an economic crisis as an "opportunity" to alter the relationship between the public and private sectors.

The Obama administration's policy agenda on labor and climate control, to name just two items, is going to clash with the profit motives of car companies. Guess which side will prevail. Similarly, when the banks took the cash (or had it foisted upon them) they should not have expected the freedom to continue to operate as they did before they became wards of the state. Statism or crony capitalism, or whatever we call it, is about the sheer exercise of government power over what used to be private decisions regulated by the marketplace and the rule of law.

In its endorsement of Barack Obama, the editors of the Washington Post concluded:

But Mr. Obama's temperament is unlike anything we've seen on the national stage in many years. He is deliberate but not indecisive; eloquent but a master of substance and detail; preternaturally confident but eager to hear opposing points of view. He has inspired millions of voters of diverse ages and races, no small thing in our often divided and cynical country. We think he is the right man for a perilous moment.

(emphasis mine, again)

The government's strong arm tactics with the private sector will likely leave the electorate more divided and more cynical. What did the editors of the Washington Post see in Barack Obama's record to suggest that he wouldn't just as he is acting? Or did they just hope that they saw something?

Previously: About that ... uh ... endorsement.