Defrauding GM bondholders to benefit the UAW wasn’t the only scam Obama had pulled during the auto industry collapse. His administration also actively discriminated against white and rural owned dealerships during the politically directed reorganization of GM and Chrysler.
As part of their return to profitability plans submitted to the Secretary of the Treasury, car czar Rattner and White House consultant Ron Bloom in June 2009 called for the closing of 1,454 (30%) GM dealerships while committing Chrysler to shutting down 789 (25%). Even though one industry official claimed that “GM would usually save ‘not one damn cent’ by closing any particular dealership”, it was thought that having fewer, more profitable dealerships would “increase dealer profits, allowing for recruitment and retention for the best retail talent and more effective local marketing initiatives”.
The U.S. Treasury became the world’s largest car maker when it directly asserted itself in the reorganization of GM and Chrysler. Calling for a more “realistic” view of future auto sales, the Treasury ordered GM to “steer the company away from trucks and sport utility vehicles (“SUVs”), which had high margins but were declining in popularity”. As usual the Obama administration got it all wrong when SUV sales powered the auto industry’s return to profitability in 2010. On the other hand the electric powered Chevy Volt, which benefited from $400 million in taxpayer funded development costs, $7,500 in federal tax credits, and extensive promoting by Obama himself sold a total of 125 units in July 2011.
When the administration wasn’t trying to get the car companies to commit suicide, it was busy picking winners and losers in the great dealership sweepstakes. According to TARP Special Inspector General Neal M. Barofsky, Rattner and Bloom admitted “they did not consider cost savings to be a factor in determining the need for dealership closures.” While profitability, the mainstay of American capitalism, played no role in determining who got to keep their multi-million dollar business, “minority- or woman-owned dealerships” were given preferential treatment.
Barofsky also uncovered “that while metro areas were oversaturated with GM and Chrysler dealerships and reductions were needed in these areas, this was not the case in rural areas where GM and Chrysler had an advantage over their import competitors.” Even though there was no economic incentive to do so, “close to half of all of the GM dealerships identified for termination were in rural areas.”
Writing for American Thinker William Tate smelled a rat:
That is where raw, hard, sewage-filled Chicago politics came into play.
Records indicate that in 2008, Obama lost the vote totals in the nation’s 1,300 rural counties by nearly 80%.
The Obama administration’s insistence on radical numbers of closures ended up shuttering dealerships in those rural areas disproportionately, while dealerships and jobs in metro areas — Obama’s geographical base — were left open.
The administration’s use of racially and rurally discriminatory practices ultimately caught the attention of Congress. Even though the House and Senate were under Democrat control, in late 2009 legislation was passed that provided a neutral arbitration process for dealerships who believed they had been unjustly forced to close by the government. The bill was signed into law by Obama in Dec 2009, most likely to save his administration from another embarrassing defeat in court. Over 600 GM and 50 Chrysler dealerships were ultimately allowed to remain open.
It would seem GM learned a lot from its relationship with the Obama administration, most importantly that “all contracts are equal, but some are more equal than others”. During the height of the government’s involvement with GM Obama promised auto buyers “If you buy a car from Chrysler or General Motors, you will be able to get your car serviced and repaired just like always. Your warranty will be safe. In fact, it will be safer than it has ever been. Because starting today, the United States will stand behind your warranty.”
Obama’s word to car buyers turned out to be as solid as his commitment to Rev. Wright when a suspension problem developed on 400,000 Chevy Impalas from model years 2007 and 2008. Following the auto company’s reemergence from bankruptcy in 2011, GM refused to pay for the fix arguing “new GM did not assume responsibility for Old GM’s design choices, conduct, or alleged breaches of liability under the warranty”.