We can all remember how the administration forced GM and Chrysler to close a significant portion of its dealer network so as to be able to "save" those companies.
Only the government's convoluted and misunderstood logic could be used to explain how closing dealerships, which cost GM and Chrysler nothing, would save those companies.
Both GM and Chrysler were arm twisted to close forever dealerships which often were in business faithfully representing those auto brands for 30, 40 and even 70 years!!!
The sheer stupidity of telling the manufacturers that having less representation and providing less service to the buyers of those vehicles will somehow help them, is just nonsense, and proved to be so.
In a nearby suburb, this insanity played out strangely as a local long established Chrysler dealership was canceled by Chrysler and a Cadillac dealership was canceled by GM.
Immediately after this happened, the Chrysler dealership was awarded to the former Cadillac dealership, so it took off the Cadillac sign, and put on the Chrysler sign,...these dealers were one block apart! The result, about 50 lost jobs.
These dealer networks took decades and often more to build up, as local businessmen invested usually their life savings, and often their family's and investor's savings to get them started, paying the franchise fees, and acquiring buildings to meet the manufacturer's guidelines.
Each such dealer would then be an outlet for NEW cars of that manufacturer, often being forced though arm twisting by the manufacturer to stock and take in as much inventory as he could handle, due to a threat next year of not getting his "allocation" of new vehicles, especially if they were "hot" vehicles, big sellers.
Often the manufacturers would come up with models that sold badly, looked out of style or were strange colors, yet the dealer network would deliver, stocking the hard to sell cars which the manufacturer could report as SOLD!
The manufacturers then further forced the dealers to accept so called floor plan financing, which provided for the vehicles to be financed by a subsidiary of the manufacturer, and charged ongoing interest on the inventory that was on the dealer's "floor", making more profits for the manufacturer.
You may recall how it was usually this financing arm of the manufacturer which provided most of the profitability of the manufacturer, and not the actual autos, and thus the reason it was crammed down the throats of the dealer network!
Think about it, the manufacturer starts to make its money on the cars, while they are sitting on the dealers' lots, even before they are actually sold to a consumer, yet they are booked and shown as a sale for the manufacturer.
Now a report has discovered that these mandated closings, in effect, had no real benefit and instead caused the losses of jobs in the industry that the government was attempting to save.
I do not know about you, but I will only support the manufacturers who did not shaft their dealer networks, who did not take any taxpayer money to bail out its union pension plans, and who survived as businesses should; on their own ingenuity and with a strong competitive spirit, not taking my tax money!!!
Neither GM or Chrysler will get my money, and over the years I have had all types of GM products, as well as several Chryslers, which I stopped buying eventually as their quality became atrocious.
The Treasury Department failed to consider the economic fallout when it told General Motors and Chrysler to quickly shutter many dealerships as part of government-led bankruptcies, a federal watchdog found ( are we surprised by this revelation, or just knew deep down in our heart of hearts that another fiasco would follow a government intervention in private business?).
The report released by the special inspector general for the government's bailout program raised questions about whether the Obama administration's auto task force considered the job losses from the closings while pressuring the companies to reduce costs. That would be very strange since 95% of the "Obamans" appointed to office by president Obama, never worked in a business or private industry. They never met a payroll, never had to learn the tough conditions that exist in running a business.
Treasury didn't show why the cuts were "either necessary for the sake of the companies' economic survival or prudent for the sake of the nation's economic recovery," said the audit by Neil Barofsky, the special inspector general for the Troubled Asset Relief Program, the $787 billion stimulus program known as TARP.
"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.
Obama administration officials said they strongly disagreed with the findings and said the audit focused solely on one element of a painful restructuring. Without the shared sacrifices of workers, dealers, retirees, suppliers and creditors, they said, the companies may not have rebounded. What stupidity is this?
Herbert M. Allison Jr., Treasury's assistant secretary for financial stability, said the administration's actions "not only avoided a potentially catastrophic collapse and brought needed stability to the entire auto industry, but they also saved hundreds of thousands of American jobs and gave GM and Chrysler a chance to re-emerge as viable, competitive American businesses."
The audit also found that General Motors "did not consistently follow its stated criteria" for reducing its dealer network and noted that Chrysler failed to offer an appeals process.
The report, sought by lawmakers critical of the dealership closings, was seized upon by Republicans who have questioned the administration's dealings with private industry during the economic downturn.
Rep. Darrell Issa, R-Calif., said the audit "should serve as a wake-up call as to the implications of politically orchestrated bailouts and how putting decisions about private enterprise in the hands of political appointees and bureaucrats can lead to costly and unintended consequences."
GM's initial plan submitted to the government in February 2009 called for the gradual reduction of 1,650 of its 5,750 dealers by the end of 2014. Chrysler pointed to plans to trim its network from 3,181 dealers to about 2,000 dealers by 2014.
After Treasury rejected those earlier plans, the two companies released accelerated efforts to cut their dealership ranks. Chrysler said it would quickly close 789 dealers by June 2009 and GM said it would slash its dealer ranks by 1,454 by October 2010.
Following a fierce lobbying campaign by car dealers, Congress approved legislation last year requiring arbitration for closed dealers. GM said it would reinstate more than 660 dealers it had threatened with closure, reducing the number of dealers planning to appeal. Chrysler also agreed to restore about 80 franchises.
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." Chrysler did not immediately comment on the report, ( apparently caught by surprise that it had to make a comment).
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