A Lemon Under the GM Bailout Hood

From Detroit to Cincinnati, President Obama is hawking his General Motors (GM) bailout like a used car salesman at the end of the month. Trouble is, he rolled the odometer back.

Taxpayers will get a case of sticker shock when they check out the cost and read the fine print.

Hidden deep in the already pricey invoice were billions of dollars in extras to Mr. Obama cronies and special deals for politically connected special interests. Worse yet, taxpayers didn't wind up buying an American model at all: More than two-thirds of the jobs the president "saved" are actually going overseas.

The sticker price for GM was a whopping $67.4 billion ($50.2 billion for GM and another $17.2 billion for its financing arm, GMAC, which now calls itself Ally Financial).

Compared to other models on Mr. Obama's showroom floor, GM was by far the most expensive. Under Obama's bailout scheme, Chrysler and Chrysler Financial were relative economy models, costing taxpayers a combined $12.4 billion, of which $9.5 billion has been paid back. By contrast, Uncle Sam is still on the hook for $41.7 billion to GM, at least $25 billion more than advertised.

The financing terms would have violated the Truth in Lending Act. Taxpayers wound up buying 500 million shares of GM, and when the company made a public offering in 2010, the share price was $33 a share; as of this writing, each share is now worth closer to $25. Regrettably, for taxpayers to break even, the stock will have to hit $53 a share. I hope it does, as I grew up in a GM family but I'm not holding my breath.

As part of his sales pitch, Mr. Obama likes to remind Midwestern voters that Mitt Romney had urged managed reorganization under the bankruptcy laws for GM, but like a salesman using chewing gum to fix a loose bumper -- he conveniently forgets that that's exactly what happened under the deal he cooked up. The only difference is that unlike a bankruptcy judge, Mr. Obama got to play favorites.

During a routine bankruptcy, companies like GM that have saddled themselves with uncompetitive wages are reorganized to bring those costs to market levels so they can succeed. That's exactly what happened with the recent bankruptcy reorganization of American Airlines.

In a handout to his powerful cronies at the United Auto Workers, the bailout resulted in a new, artificial classification of workers in which all the sacrifices were made by new hires, not existing UAW employees, who continue even now to draw salaries and benefits that average $56 per hour.

As the UAW giddily told its members, "For our active members these tentative changes mean no loss in your base hourly pay, no reduction in your healthcare, and no reduction in pensions." In hindsight, even Mr. Obama's auto czar, Steven Rattner, has ruefully acknowledged that that "we should have asked the UAW to do more. We did not ask any UAW member to take a cut in their pay."

Mr. Obama's GM overseers were even more ruthless in their handouts to UAW members who had worked for the company's parts supplier, Delphi, which GM had spun off in 2009. While GM had no obligation in bankruptcy to supplement Delphi workers' pensions, it did so anyway, to the tune of $1 billion of taxpayer money -- but only the pensions of unionized employees. Under new management by the White House, non-unionized Delphi retirees were told that their pensions would not be supplemented.

The biggest whopper by Mr. Obama, however, is that his bailout deal created and saved American jobs.

While Obama's auto czars shuttered hundreds of small GM auto dealerships across the United States, the company is now aggressively opening new ones in China, with 600 new dealerships already planned by the end of this year and more in the offing. So much for skilled American dealership mechanics, parts managers, clerical staff -- not to mention the folks on the sales floor.

Even before the bailout, GM assembled 70 percent of its autos overseas and nearly two out of every three GM workers was employed outside the United States. Those numbers have not changed under the president's management, and for the Delphi workers, the outsourcing is even worse. Today, 95 percent of Delphi employees are overseas, compared with just 86 percent before the president took over the U.S. auto industry in an effort to save their jobs.

When you look under the hood of President Obama's auto bailout and take it for a test drive, you learn it's a lemon.

Sorry, Mr. President. No sale.