GM producing 70% of autos outside US

GM producing 70% of autos outside US

06 June 2012 by Michael Stumo.

Dan Akerson, CEO of GM, says that seven out of 10 GM automobiles are built outside the U.S.  They have 11 joint ventures with Chinese government controlled auto manufacturers.

They are moving R&D to China.

When the federal government bails out an industry or provides tax incentives or subsidies, or when state economic development agencies do the same, there need to be terms that benefit the U.S. in terms of production and job growth.  We can’t subsidize offshoring.  Producing here and selling to our wealth consumer market need to go together.

Vince Wade has the video documenting GM’s actions.

Wall Street’s Failed 1934 Coup

(Usually the last to find out about something, I didn't learn about this until college. I've been fascinated by it again recently because of how close Wall St. came to seeing through their coup. It casts an interesting light on the events of the past decade.--jef)

The American Liberty League vs. Gen. Smedley Butler

by MICHAEL DONNELLY

“In the last few weeks of the committee’s official life it received evidence showing that certain persons had made an attempt to establish a fascist organization in this country…There is no question that these attempts were discussed, were planned, and might have been placed in execution when and if the financial backers deemed it expedient.”

– Report of the McCormack-Dickstein Committee

A Patriot, not the Traitor they wanted
You know the coup plot they teach all young Americans about in 10^th Grade History class?

Oh yeah…

In November 1934, famed double Medal of Honor winner Marine Gen. Smedley Butler gave secret testimony before the McCormack-Dickstein committee – a precursor to the House Committee on Un-American Activities. In it, Butler told of a plot headed by a group of wealthy businessmen (The American Liberty League) to establish a fascist dictatorship in the United States, complete with concentration camps for “Jews and other undesirables.”

Show Me the Money
Butler had been approached by Gerald P. MacGuire of Wall Street’s Grayson M-P Murphy & Co. MacGuire claimed they would assemble an army of 500,000 mostly unemployed WWI veterans and march on DC.  The plutocrats wanted Butler to lead the coup, thinking that, like the Bolsheviks, taking one major city (DC as Petrograd) would lead to the fall of the government.  They promised to put up $3 million as starters and dangled a future $300 million as bait. Butler went along with the plot until he could learn the identities of all the schemers. Not a one of them was ever called to testify or was charged with Treason. Virtually all of them were founding members of the Council on Foreign Relations (CFR).
The League was headed by the DuPont and J.P Morgan cartels and had major support from Andrew Mellon Associates, Pew (Sun Oil), Rockefeller Associates, E.F. Hutton Associates, U.S. Steel, General Motors, Chase, Standard Oil and Goodyear Tires.

Money was funneled thru the Sen. Prescott Bush-led Union Banking Corporation (yes, those Bushes) and the Prescott Bush-led Brown Brothers Harriman (yes, that Harriman) to the League (and to Hitler, but that’s another story). The plotters bragged about Bush’s Hitler connections and even claimed that Germany had promised Bush that it would provide materiel for the coup. This claim was entirely believable: a year earlier, Chevrolet president William S. Knudsen (who himself had donated $10,000 to the League) went to Germany and met with Nazi leaders and declared upon his return that Hitler’s Germany was “the miracle of the twentieth century.” At the time, GM’s wholly-owned Adam-Opal Co. had already begun producing the Nazi’s tanks, trucks and bomber engines. James D. Mooney, GM’s vice-president for foreign operations was joined by Henry Ford and IBM chief Tom Watson in receiving the Grand Cross of the German Eagle from Hitler for their considerable efforts on behalf of the Third Reich.

The Whitewash
While the Committee found that Gen. Butler was telling the truth, discrediting such a stalwart was problematic for the plotters. Quickly, the corporate press weighed in and sought to raise doubts about the war hero, settling on branding him naive. The discredit Knudsen meme was: “it was all idle cocktail party chatter.” This red herring was trumpeted under the Associated Press headline “The Cocktail Putsch.” New York Mayor Fiorello LaGuardia dismissed the plot as “someone at the party had suggested the idea to the ex-Marine as a joke.”

From 1934 through 1936, the League got thirty-five pro-League front page stories in the New York Times. TIME ridiculed Butler in a Dec. 3, 1934 cover story, even though Butler’s story was corroborated by VFW head James E. Van Zandt, who also said he was approached to lead the coup.  Though, TIME did put a footnote on an early 1935 article stating; “Also last week the House Committee on Un-American Activities purported to report that a two-month investigation had convinced it that General Butler’s story of a fascist march on Washington was alarmingly true.”

Solely, the Scripps-Howard papers backed FDR and presented the truth.

Whatever Happened to the “Economic Royalists?”
President Franklin D. Roosevelt labeled the plotters “economic royalists” and survived their, thankfully, ham-handed efforts. Jan. 3, 1936, FDR blasted the American Liberty League before a joint session of Congress where he announced the ban on military exports to Italy.

“Our resplendent economic aristocracy does not want to return to that individualism of which they prate, even thought the advantages under that system went to the ruthless and the strong. They realize that in thirty-four months we have built up new instruments of public power. In the hands of a people’s government this power is wholesome and proper. But, in the hands of political, puppets of an economic aristocracy, such power would provide shackles for the liberties of the people. Give them their way and they will take the course of every aristocracy of the past – power for themselves, enslavement for the public.”

FDR was never able to bring any of the plotters to justice. He wasn’t even able to rein in Prescott Bush until 1942 when the government seized the assets of Bush’s pro-Nazi enterprises – garnering Bush a $1.5 million windfall once the assets were returned in 1951! It’s obvious that the fascist mindset of the “economic royalists” has never gone away and is the driving force behind the modern-day ascent (and the ultimate demise of) of the American Empire, the attacks on worker’s rights and pensions, the attacks on our minimal safety nets, etc.

In its day, the League promoted itself as a bastion of all concerned about “burdensome taxes imposed upon industry for unemployment insurance and old age pension.” The League sought to “combat radicalism” and to “teach respect for the rights of persons and property, and generally to foster free private enterprise.”

J.P. Morgan and Chase are now one. The fortunes of the Mellon, Rockefeller, DuPont, Pitcairn (Pittsburgh Plate Glass) and Pew families have sky-rocketed. Pew and Rockefeller have morphed into a cabal of foundations that fund/neuter progressive grass roots efforts.

1936′s Occupy Movement
William S. Knudsen was the sole inside plotter who turned against the plot, renounced Hitler and is credited with pushing GM into a settlement of the Flint Sit-Down Strike . Underpaid, overworked workers took over and stayed in their plants, starting with Flint’s Fisher Body #3 and fought off attacks by GM-controlled police and hired goons. FDR and Michigan Gov. Frank Murphy called out the National Guard, not to roust the strikers, but to form a cordon between the strikers and the goons. Murphy’s father and grandfather had been hung by the British as Irish revolutionaries and many of the strikers were ethnic Irish laborers, so he as very sympathetic.

After 44 days, Knudsen, now GM vice-president, declared that “Collective Bargaining’s time has come” With his ally, two-time Flint Mayor, life-long civic booster/philanthropist, GM’s top shareholder and fellow board member C. S. Mott assisting; GM settled, leading the way to the 40-hour work week, overtime pay, union organizing rights, pensions, etc. Mott even saw to it that health clinics were set up in the factories for the workers and their families. Coup plotter/GM President and Chairman Alfred P. Sloan, who had wanted to reclaim the plants with guns blazing stepped partly aside as GM head and Knudsen replaced him as president.

GM went on to become the world’s top corporation for 40 years, the country saw the rise of a middle class and wealth disparity was at the lowest levels ever in the US.

It likely was not entirely altruistic of Knudsen, as two years later FDR put Knudsen in charge of the National Defense Advisory Commission. On his watch, some $12 billion in armament contracts were awarded to GM by the U.S. War Production Board, which also was conveniently chaired by Knudsen. At the same time, GM’s Opal factories built most of Hitler’s trucks and bomber engines. This part of the “win-win” did not lead to any charges against Knudsen or GM. Instead, it led to the Danish immigrant Knudsen becoming the first civilian commissioned as a U.S. Army General.

The Lesson
The take-away lesson to never forget is that, as Roosevelt noted, economic royalists have their own decidedly non-populist agenda.  Since they paid no price at all for their coup attempt, they have never wavered from their elitist ideology. They now simply rig elections, set up massive “security” apparatuses and roust anyone who stands up to their dominance.  (NY Mayor Michael Bloomberg, the 12th richest American worth $19.5 billion, recently bragged: “I have my own army in the NYPD, which is the seventh biggest army in the world. I have my own State Department, much to Foggy Bottom’s annoyance.”)

Union busting goes on unabated. The US has a greater percentage of its people incarcerated than any country at any time in history. And, thanks to recent Supreme Court decisions, no one can match the political clout of the financiers. The “royalists” now own the government, as well as the press and their own armies. War profiteering still tops the agenda, followed closely by attacks on workers’ wages, pensions, health care… FDR and the Sit-Downers’ hard-won safety net is under assault.

As the great populist Sen. Robert La Follette, Jr. said at the time, the American Liberty League (and all its following incarnations) cannot “be expected to defend the liberty of the masses of the American people. It speaks for the vested interests.”

The other lesson is: Occupying the Means of Production gets the goods.

America’s Real Industrial Policy: Maximize Profits at All Cost

Wednesday, October 19, 2011 by In These Times

by Roger Bybee 

 

The Occupy Wall Street movement—which has gained the support of 54 percent of Americans, according to a Time poll—has, remarkably, apparently inspired free-marketeer House Majority Leader Eric Cantor to address America’s Pakistan-level inequality in speech on Friday.
 
Cantor intends to explain how to uplift “a single working mom…a small business owner...and how we make sure the people at the top stay there.” (The last category, of course, has seemingly been the entire purpose of Cantor’s political career.)

But despite some Democrats like Nancy Pelosi embracing OWS, it's becoming clear that the movement must also directly challenge the president and leading Democrats on whether they are serious about preserving America’s productive base and raising the incomes of working families who are part of the 99 percent. Will these political leaders support a concerted “industrial policy” to achieve these critical goals, or will they side with Corporate America as jobs disappear, wages keep plunging and inequality reaches new heights?

Unfortunately, the Obama administration has come closer and closer to fully admitting the wrong thing: that it is willing to sacrifice more of the nation’s industrial base. The three  NAFTA-style “free trade” agreements approved last week by Congress at Obama’s urging —illustrate how Obama’s eagerness to promote more off-shoring of jobs and capital at the expense of his working-class constituents. (U.S. corporations’ offshoring of jobs alarms fully 86% of Americans)

Obama's new stance in favor of the deceptively-labeled "free trade" doctrine turns one of his most fundamental appeals in 2008 absolutely counterfeit. "Free" does not accurately describe the repressive anti-labor conditions favored by US firms. Nor does "trade" do justice to the majority of transactions, which actually occur within the same firm, like GE "exporting" machinery and parts to Mexico and "importing" finished products.

AUTO BAILOUT CHAIR ATTACKS INDUSTRIAL POLICY
Even with this disturbing backdrop of the newly inked NAFTA-style deals, it was still stunning to read Sunday's attack on industrial policy by Wall Street tycoon Steven Rattner, whom Obama selected to head up the auto bailout Task Force, which was dominated by fellow financiers. His op-ed was titled "Let's Admit It: Globalization Has Losers."

Rattner’s New York Times commentary was an open admission that a very key Democratic player utterly rejects any systematic effort to save the U.S. industrial base.

First, Rattner’s piece illuminates the mentality that made the GM and Chrysler bailouts so much less constructive than they could have been. Progressives had envisioned the crisis at GM and Chrysler as an opportunity to link Obama’s aim of stimulating the economy with enhanced spending power for workers with building a green economy, by converting some auto factories to the production of high-speed rail vehicles and other non-gasoline powered transportation equipment.

But dominated as it was by Wall Street heavyweights like Rattner (net worth: $188 million to $688 million) and chief economic advisor Lawrence Summers, the Task Force failed even to ensure that the maximum number of jobs possible were retained in the U.S. The final version of GM's recovery plan—closely tailored to the demands of the Task Force—appallingly called for an enormous 98-percent increase in autos produced in Mexico, China, South Korea and Japan for the U.S. market.

Speaking with authority gained from this over-rated “success,” Rattner outlines a strategy for surrendering almost all of what is left of America’s still-considerable manufacturing base and settling instead on an economy built chiefly around financial and computer-based services.

Bizarrely enough, Rattner premises his economic strategy on supposedly trying to aid working families whose incomes have plummeted chiefly, he admits, as a result of corporate “globalization.” But the solution, Rattner insists, is to let go of our "nostalgic" feelings about manufacturing and allow the offshoring of jobs to continue, while focusing our efforts on service industries:

While America still leads in sectors like defense and aviation, our greatest strength, and a source of high-paying jobs, lies in service industries with high intellectual content, like education, entertainment, digital media, and yes, even financial services. Facebook, Google and Microsoft are all American creations, as are the global credit card companies American Express, Visa and MasterCard. ...

We should resist the temptation to plunge deeply into industrial policy. ... Washington is ill-equipped to pick winners and should concentrate its capital on infrastructure and other public investments that the private sector won’t make.

Rattner can imagine a limited role for continued manufacturing here:

We should follow the example of successful high-wage exporters in concentrating on products where we have an advantage, as Germany has done with products like sophisticated machine tools.

Unfortunately, Rattner doesn't know what he's talking about. Milwaukee, for example, was long proudly known as “the Machine Tool Capital of the World.” But with many of the city’s biggest firms—Briggs & Stratton, Johnson Controls, Rockwell International (formerly Allen-Bradley), AO Smith (later Tower) and MasterLock—shifting substantial portions of their production to Mexico, Milwaukee has lost 80 percent of its manufacturing jobs since 1977, according to Marc Levine of the Center on Economic Development at the University of Wisconsin-Milwaukee.

As a result, machine-tool makers requiring highly-skilled workers were no longer located in proximity to the companies they once worked with closely, and they largely went out of business or relocated.

Generally, “the machine tool industry is almost extinct across the US,” says Frank Emspak, professor emeritus at the UW-Madison School for Workers, who serves on a German government commission working on that nation’s industrial policy.

“The U.S. also used to be the leader in railroad equipment, from air brakes to signals, and all that is gone. Even in computer chip manufacturing, the U.S. is no longer number one. Steve Jobs' big innovation was not only to develop sophisticated chips, but to produce them in low-wage, high-skill corporations like FoxCom [in China] where a number of workers have committed suicide in response to the conditions there.”

In Emspak’s view, “industrial policy” is crucial to coordinating government efforts on technology, taxation, energy, and training to protect and expand America’s manufacturing base. By stressing the importance of keeping jobs within the U.S., industrial policy not only means preserving the current production jobs, it also permits U.S. engineers to observe the production process closely and make innovations.

“When you have the separation of production from engineering, once you start production of anything sophisticated, then you lose the capacity for innovation,” Emspak said. "So with General Electric moving its medical equipment headquarters from Waukesha [Wis.], Waukesha becomes just a branch plant and the innovations and advances will take place in Shanghai.”

Contrary to conventional wisdom, Emspak says, “We do have a very clear industrial policy: that is the financial industry policy of making the largest profits as quickly as possible, and everything is subordinated to that.The financial people have won the internal debates in both parties.

"The only principle is the maximization of profit, wherever it occurs, and it has little or nothing to do with the needs of the country,” he declared.

Ironically, those like Rattner who claim to be forward-looking are effectively destroying the nation’s capacity to innovate and create new types of jobs when they call for letting manufacturing jobs go offshore.
Moreover, the majority of jobs left behind are low-wage and will contribute only to further income decline, and an even bigger gap between the top 1 percent and the rest of us, says Emspak.

The Deindustrialization of America

Goodbye to Fosteria, Ohio
By JOHN R. MacARTHUR

Pro-North American Free Trade Agreement (Nafta) forces staged on 9 November 1993 what may be remembered as the greatest salesman's trick in televised propaganda. Millions of Americans had just watched CNN's Larry King show, and its "debate" over the ratification of the agreement, between Ross Perot, the anti-Nafta crusader and independent presidential candidate, and then Vice President Al Gore, spokesman for mainstream political and business opinion about free trade and its alleged benefits to the US.

The professional politician Gore had bested the billionaire amateur Perot, but the show wasn't over, and neither was rhetoric about Nafta. CNN followed with a post-debate debate, in which four "experts" argued over the plan of former President George H W Bush and President Bill Clinton for eliminating tariffs and integrating the Mexican, Canadian, and American economies in ways they claimed would bring money and jobs to everybody — a "win-win" scenario. One expert, a soldier for David Ricardo's economic theory of comparative advantage, was Larry Bossidy, leader of the pro-Nafta business lobby and chairman and CEO of Allied Signal, an industrial corporation with worldwide interests, including the Autolite spark plug plant in Fostoria, Ohio.

With many fearing what Perot called the "giant sucking sound" of jobs heading to cheap labour in Mexico if Nafta passed Congress, Bossidy needed to promote the notion that the agreement would bring more work to the Midwestern rust belt, already in steep decline. So, on instructions from Gore's media adviser Carter Eskew, Bossidy held up a plug and pronounced: "I would like to say, about the jobs, this is a spark plug, an Autolite spark plug. It's made in Fostoria, Ohio. We make 18 million of them. We're going to make 25 million of them; the question is, where are we going to make them? Right now you can't sell these in Mexico because there's a 15% tariff... if this Nafta is passed, we'll make these in Fostoria, Ohio... we'll have more jobs... This is a small part of a car. We export 4,000 cars to Mexico today, we'll export 60,000 cars in the first year [of Nafta], that's 15,000 jobs."

As of 1 November 2010 General Motors was a ward of the federal government, the country was in prolonged economic slump, and there were 86 assembly jobs in the Fostoria factory. The remaining Autolite employees were there to make just the ceramic insulators around the plug. The rest of the jobs had moved to a maquilladora in Mexicali, where nearly 600 Mexicans were manufacturing mostly Motorcraft spark plugs, the house brand of Ford Motor Company, healthiest of the Big Three US auto companies.

A very different wage

The crucial difference between Mexicali (just south of the border from Calexico, California, on the Baja peninsula) and Fostoria was the wage scale: in Fostoria, unionised production workers made an average $22 an hour, including benefits, for a 40-hour week; in Mexicali, workers on the first two shifts made 15.5 pesos (about $1.83) an hour for a 48-hour week. Autolite's new owner was Honeywell, dominant partner of a 1999 merger with Allied Signal, and its chairman, Dave Cote, could be pleased with his investment. The maquilladora was not only less costly to operate, it was also protected against expropriation, serious environmental supervision, and strikes by Nafta, the Mexican government and Mexico's corrupt national labour union, the CTM. In 2009 Cole received more than $13m from his board of directors. Somewhat surprising was President Barack Obama's embrace of Cote as a spokesman for American employment and re-industrialisation.

When I went to Fostoria, in September 2009, long freight trains still rumbled through town regularly on the railroad lines that made the city, despite its modest size (population 13,441), such an attractive place to build a factory in the 19th and early 20th centuries. But the trains weren't stopping to pick up much and the chamber of commerce was reduced to promoting its macadvantages for rail photography enthusiasts. No train buffs — or anyone else — were in evidence downtown, where Readmore's Hallmark Books and Gifts was advertising a closing sale. Vast empty parking lots abutting shuttered factories and businesses — Fostoria Industries, a maker of specialty ovens; the Thyssenkrupp Atlas crankshaft plant; the GM dealership — testified to the declining fortunes of what Fostoria's boosters had dubbed "A Small Town in the Middle of Everywhere!"

But while factory after factory had closed down, the Autolite plant seemed impregnable — not just because of Bossidy's pledge in 1993 but also because the plant was churning out vast quantities of spark plugs with stunning efficiency — as many as 1.2m a day on 13 production lines operating over three shifts. It couldn't last with so many plants heading to Mexico and, after passage by Congress of permanent normal trade relations with China in 2000, the even cheaper labour of China. In January 2007 Autolite announced plans to build the plant in Mexicali, and in August said it would begin to lay off 350 of the plant's 650 workers.

Bob Teeple, the president of United Auto Workers Local 533, is the son of an Autolite millwright, and in 1995, at age 32, he followed his father into the plant's skilled trades, the elite of unionised blue-collar workers. There were "close to a thousand" employees at the plant. When I visited union headquarters with Hart Perry, the documentary filmmaker, Teeple was awaiting news from the company of the shutdown of everything but the ceramics section, but he wasn't sure when most of the remaining 271 employees would have to go, since the Mexicali plant was having start-up problems.

Teeple recalled the great Nafta debate and a later visit from Larry Bossidy "who even came to the plant and made it sound like, you know, our business is doing good. But I wasn't super aware of what effect Nafta would have. You know, it's just one of them things that you heard on TV — pros and cons."

Neither, it seems, were any of his co-workers super-aware of Nafta. When I sneaked inside the factory to observe one of the four production lines still in operation, I met Peggy Gillig, who was checking plugs for defects. Gillig had started work 10 years earlier, when she was 46, and she wasn't very politically or union minded. Automation at Autolite had failed to kill her job, but politicians had succeeded: "I'm disappointed in our leaders that they've more or less stabbed us in the backs — sold us out to foreign interests."

But Gillig didn't blame poor foreigners for taking her job and preventing her from retiring at age 60, which would have been possible under the UAW contract. "It doesn't seem like it's good for the third world countries they [the jobs] are going to. They don't pay those people... a living wage, so how is that good for them? I mean, it's better than not havin' any kind of a job... I don't understand who it is good for other than the big companies."

Other workers, current and former, spoke with me, including Larry Capetillo, a Spanish-speaking Mexican-American whom the company lured out of retirement in 2007 to help train workers in Mexico. Morally conflicted, Capetillo kept a journal about his dilemma. The Honeywell executive who recruited him and three other retirees claimed that the Autolite plant had lost money for the past "four to five years", according to the journal, not so much because of production costs "but because we have 1,200 retirees". However, if the move to Mexicali was successful, the executive had promised that "the goal is to keep 300-and-some jobs here [in Fostoria]". Capetillo thought of Autolite as a family affair — his wife, Fran, had taken a buyout after 29 years, and his daughter, Tracy, was still employed there with her husband.

"We all knew that people were going to dislike us very much for doing this," Capetillo told me. But the executive had been blunt: "Whether you go [to Mexico] or not, they're going to move this. We're going to try to make [the Mexicali plant] go if we can — if we can't, and it goes down... the rest of this is going to close." Capetillo said "We decided, you know, if we can keep the plant here; if we can do something to help there, we're going to go down and try to do it then... Believe me, the four of us were not going to go, but when he said the whole operation would close if the Mexico thing did not make it, we had to make a decision."

In his journal, Capetillo was more candid: "Many of our fellow employees hated us for making this decision." However, "the longer we can keep this plant open the longer my daughter gets to keep her job."

The company had no intention of keeping any plug production in Fostoria. After two years of commuting between Fostoria and Mexicali, Mexicali was ready to manufacture, as Bob Teeple put it, "everything with platinum attached to it". When negotiations began in 2009 for a contract, the company surprised Teeple with a demand: if the union wanted to keep more than 110 jobs in Fostoria, there would be a wage cut to $11 an hour plus big employee contributions to health insurance. "We couldn't do that," Teeple said. Better to negotiate for good severance than to take a humiliating reduction far below the UAW norm.

"I guess I felt totally betrayed by the company," Capetillo said. "It seems they all deal in half-truths... He did tell us that 300 jobs would stay, probably. And not even half of them stayed."

'All of us have to help'

Ordinarily, this story would have ended on 23 December 2009, when the last integrated production line was shut down. I felt obliged to interview Dave Cote, especially since he had appeared with Obama at the White House, just after his inauguration, to promote business-government cooperation in combating severe recession. As Cote told reporters, "The Congress, the American people, all of us as a business community, all of us have to help. Mr President, I can say that for Honeywell you can count on us and all of our employees to be there to help support this."

For months, Cote's PR man at corporate headquarters in Morristown, New Jersey, kept putting me off, not knowing I wanted to talk about Nafta in general and Autolite in particular. It seemed just a matter of time before the remaining 99 workers in the ceramics department in Fostoria lost their jobs.

But on 4 April 2010 a catastrophe occurred — a 7.2 earthquake struck 60km from Mexicali, placing the region in a state of emergency and damaging the new plant. Honeywell's Consumer Products Group had no choice but to move some production back to Fostoria and rehire 70 laid-off workers to satisfy demand. Before long, Teeple said, "they told us we were doing four times the production of the Mexican plant, 130,000 a day, and some days we got as high as 230,000 with two lines running for three shifts." By October operations were back to normal in Mexicali and the 70 rehires were laid off again, for good: "Not one machine is left in department 9," Teeple said. "All of them were shipped to the Mexicali plant."

All Teeple had to look forward to was a 1 November 2011 contract expiration and another round of negotiations on behalf of the 86 survivors in the insulator section. "They're telling us no, they're not setting up kilns in Mexicali," Teeple said in December 2010, but the company had said the same things to Larry Capetillo . The ceramic insulators could easily be made by NGK, a Japanese company with a factory in Irvine, California, much closer to the Mexicali plant. It wouldn't be long before Fostoria's Autolite plant, which opened in 1936, shut forever.

Teeple was demoralised. When he called me in February, he said he wouldn't run for re-election in June as Local 533's president and would take a buyout from the company: "I'm dead in the water. I want to change professions, go into marketing. The more you do, the more you make." His first love, sprint-car racing, wasn't a way to support four kids and a wife. By May, Teeple had changed his mind — a sense of obligation to union members took precedence, — and he was re-elected.

But Teeple had more bad news: on January 28 Honeywell announced that it had agreed to sell its Consumer Products Group (CPG), including Autolite and Fram Filters, to the Rank Group, a New Zealand-based, privately held investment company, for $950m in cash (1). "While CPG is a good business," Dave Cote said in a press release, "it doesn't fit with our portfolio of differentiated, global technologies... we are confident that the Rank Group, with its proven track record of investing in and building established franchises, will be a good home for CPG's consumer brands, customers, and employees."

Rank was owned by the leveraged buyout billionaire Graeme Hart, said to be worth more than $8bn. His method for making money was borrow heavily to buy companies with a healthy cash flow; cut costs and increase profits through layoffs or mergers; then issue more debt or resell the company for more than he paid. His purchase of Alcoa's packaging and consumer group in 2008 was exemplary: after paying $2.7bn for the aluminium foil maker he cut more than 20% of the workforce by closing facilities, including 490 unionised workers at Reynolds Wrap manufacturing plants and a distribution facility in Richmond, Virginia, and by laying off 158 employees at a printing plant, also in Richmond. Under the new corporate entity, Reynolds Group Holdings Limited, Hart has assembled other packaging companies, including SIG and Evergreen Packaging. Bob Teeple was not optimistic about management-labour relations under Rank Group ownership: he predicted that Honeywell's union-staffed Fram Filters plant in Greeneville, Ohio, would fall victim to Hart's cost-cutting after the sale of the company became official, probably this autumn.

Rewarded for investing in the American dream

Over the past 12 years I have heard many stories about the beneficial effects of free trade from its proponents. But the stories recounted by its victims always seemed more persuasive. Among the best storytellers were two Autolite workers who lost their jobs. When I met Jerry Faeth in 2009 he was 52 and considered himself lucky. With 32 years at the plant, he would retire with a full pension, which he had planned to do just before being laid off. Both his daughters were well on their way to graduating from college, and his house in New Riegel, southeast of Fostoria, was fully paid for. He had liked Autolite because after 28 years, "I got into the prototype section of the plant. I loved working [there] because it's something different every day and you're not just using your hands; you're using your mind and you're working with college-graduated individuals who treat me as an equal." Faeth had invested in the American dream and been rewarded: "I was fortunate because of Autolite. We had good wages... and my wife was able to quit work and stay home for eight years with our two children; and I think that's key to some of the issues we're having in society today because the babysitter doesn't raise your kids like Mom or Dad." But now he was embittered.

After the meeting at which the layoffs were announced by a Honeywell executive, Faeth said it "felt like he hit me in the stomach... I wanted five more years [in the plant] and I'm not going to get it... I said, 'You know, you talked about us [needing to be] competitive. I contribute to the 401K in Honeywell and I get this book every year and it says the top five guys in Honeywell last year made $70 million. Sir, is that competitive?"' According to Faeth, the executive replied: "Well, I can't speak for Dave Cote's salary but, you know, that comes out of a different fund anyway." Faeth said: "'Sir, that's not what I asked. You can't tell me that there's not a smart person down there in Mexico that wouldn't do [Cote's] job for a whole lot less. How can he tell you that we're makin' too much money here when those top five guys made $70 million. What's wrong with that picture?' He didn't have an answer for me."

But others purported to have an answer to Faeth's question. One of them is the economist R Glen Hubbard, dean of the Columbia University Graduate School of Business, chairman of the Council of Economic Advisors in the first two years of the George W Bush administration and a villain in Inside Job (the Academy Award-winning documentary about the 2008 financial crisis). When I encountered Alison Murray at Local 533, she had read parts of his textbook, Macroeconomics. With a BA, Murray enrolled in night classes at the University of Findlay when layoffs loomed at Autolite. As a single mother, aged 42, with only 17 years in the plant, she couldn't retire with a pension and needed to plan for the future. But her encounter with Findlay's economics department left her troubled about post-industrial Fostoria.

Slapped in the face

"The ironic thing," she said, "was that the very first class that I took when I went back to school was a macroeconomics class. And the whole entire textbook told us how important it was that they move the manufacturing jobs from America to other countries — and that manufacturing in America was a dinosaur and that it should be outsourced to other countries because that was the only way to make money... So it was like getting slapped in the face. I was trying to go back to school... because I'm losing my job and I'm a displaced worker... and the very first class I took, the very first page of the textbook [justifies my layoff]."

Murray argued with her teacher: "I said, 'You know, that's all well and great in theory but I've lived the human side. I've seen the devastation that... is caused by these factories moving out to the other countries...' And the textbook and the teacher say, 'Well, we're not talking about very many jobs.' Well, to me in this town of 15,000, to have 900 jobs [roughly the number lost at Autolite since 1993] leaving, that's a lot... And it's affected every single person's life."

But there's no arguing with Hubbard, or even Obama, who pledged to "renegotiate" Nafta during his battle with Hillary Clinton in the 2008 Ohio primary campaign, then reversed once he entered the White House.

Hubbard's Macroeconomics puts together supposedly irrefutable economic truths turned into clichés in the aftermath of the 2008 financial debacle. In its orthodox advocacy of tax cuts, deregulation, free trade and free markets, it has a tone of bland authority that makes it hard to challenge unless one pays close attention to arguments, alternatives, and facts he omits. His chapter on "Comparative Advantage and the Gains from International Trade" is full of unprovable generalisations: "Some people worry that firms in high-income countries will have to start paying much lower wages to compete with firms in developing countries. This fear is misplaced, however, because free trade actually raises living standards by increasing economic efficiency. When a country practices protectionism and produces goods and services it could obtain more inexpensively from other countries, it reduces its standard of living."

Besides, says Hubbard, child labour isn't such a bad thing, since the "alternatives" (such as prostitution) can be "extremely grim". We can be grateful that the smart rulers of developing countries resist pressure to pay higher wages or impose environmental regulation because "jobs that seem to have very low wages based on high-income country standards are often better than the alternatives available to workers in low-income countries". While the US has a "comparative advantage" with many skilled workers doing "sophisticated" manufacturing, "other countries, such as China, have many unskilled workers and relatively little machinery... China has a comparative advantage in the production of goods... that require unskilled workers and small amounts of simple machinery." Nowhere is mentioned Chinese wages of 50 cents an hour, the government-controlled Chinese national labour union, the absence of a formidable Chinese environmental regulator, or the sophistication of Chinese factories.

In this distorted world, we're all operating on a level playing field: "It is true," the book says, that "jobs are lost" when "more-efficient foreign firms drive less-efficient domestic firms out of business." But the same is true when "more-efficient domestic firms" kill off the competition — we're all playing under the same global rules of free enterprise. One shouldn't worry about the lost jobs because "these job losses are rarely permanent."

While Jerry Faeth, Allison Murray, and Peggy Gillig awaited news of their next place of employment, and at what wage, they could contemplate Larry Bossidy's plug promise versus the Department of Labor's latest report on a programme called the Transitional Adjustment Administration. TAA is supposed to provide money to people who lost jobs directly as a result of Nafta, which became effective on 1 January 1994. TAA does not calculate actual job losses, only petitions made for assistance as a consequence of lost jobs. As of 21 June 2011 its "estimated number of workers covered" — those eligible for government money — stood at 2,491,479. It seemed likely that before long the figure would increase by 86, the total number of UAW members left in Autolite's Fostoria plant.

Obama's Fatal Corporate Addiction

Wednesday, March 30, 2011 by Truthdig.com
by Robert Scheer

If it had been revealed that Jeffrey Immelt once hired an undocumented nanny, or defaulted on his mortgage, he would be forced to resign as head of President Barack Obama’s “Council on Jobs and Competitiveness.” But the fact that General Electric, where Immelt is CEO, didn’t pay taxes on its $14.5 billion profit last year—and indeed is asking for a $3.2 billion tax rebate—has not produced a word of criticism from the president, who in January praised Immelt as a business leader who “understands what it takes for America to compete in the global economy.” [AP Photo/J. Scott Applewhite President Barack Obama applauds GE CEO Jeffrey Immelt, right, before speaking to workers at the GE plant in Schenectady, NY on Jan. 21.] AP Photo/J. Scott Applewhite President Barack Obama applauds GE CEO Jeffrey Immelt, right, before speaking to workers at the GE plant in Schenectady, NY on Jan. 21.

What it takes, evidently, is shifting profit and jobs abroad: Only one out of three GE workers is now based in the U.S., and almost two-thirds of the company’s profit is sheltered in its foreign operations. Thanks to changes in the tax law engineered when another avowedly pro-business Democrat, Bill Clinton, was president, U.S. multinational financial companies can avoid taxes on their international scams. And financial scams are what GE excelled in for decades, when GE Capital, its financial unit, which specialized in credit card, consumer loan and housing mortgage debt, accounted for most of GE’s profits.

That’s right, GE, along with General Motors with its toxic GMAC financial unit, came to look more like an investment bank than a traditional industrial manufacturing giant that once propelled this economy and ultimately it ran into the same sort of difficulties as the Wall Street hustlers. As The New York Times’ David Kocieniewski, who broke the GE profit story, put it: “Because its lending division, GE Capital, has provided more than half of the company’s profit in some recent years, many Wall Street analysts view G.E. not as a manufacturer but as an unregulated lender that also makes dishwashers and M.R.I. machines.”

Maximizing corporate profits at the taxpayer’s expense is what top CEOs are good at, and after all it was Immelt who presided over GE when it got so heavily into the subprime mortgage business that it needed a government bailout to avoid bankruptcy. This was before Obama made him a trusted adviser.

Back at the end of 2008, Bloomberg reported that the U.S. government had agreed to insure an additional $139 billion in GE Capital’s debt holdings, the second such intervention within a month, adding, “The company’s exposure to the deepest financial crisis since the 1930s has cut its market value by more than half this year.” A Washington Post exposé titled “How a Loophole Benefits GE in Bank Rescue” documented the power of Immelt’s lobbying operation in Washington. GE was not initially deemed eligible for the debt guarantee program offered to failing banks, “but regulators soon loosened the eligibility requirements, in part because of behind-the scenes appeals from GE.” And it worked; as the Post reported, “The government’s actions have been `powerful and helpful’ to the company, GE chief executive Jeffrey Immelt acknowledged.” For the next two years, GE would still report enormous profits without paying taxes, adding insult to the injury that financial shenanigans had inflicted on ordinary taxpayers who bailed the company out.

On Feb. 6, 2009, Immelt sent a contrite annual letter to GE shareholders, admitting, “Our Company’s reputation was tarnished because we weren’t the ‘safe and reliable’ growth company that is our aspiration.” While conceding his own culpability in GE’s downturn, Immelt predicted a rosy future: “I accept responsibility for this. But, I think the environment presents an opportunity of a lifetime.”

Not, obviously, for the 50 million Americans who have either lost their homes or are deeply underwater in a housing market that is still in steep decline thanks to the lending practices of companies like GE Capital. Nope, the good times are in the offing only for corporations that know how to make the U.S. government a partner in their scams. As Immelt stated blatantly: “The global economy, and capitalism, will be `reset’ in several important ways. The interaction between government and business will change forever. In a reset economy, the government will be a regulator; and also an industry policy champion, a financier, and a key partner.”

That’s the essential blueprint for Obama’s restructuring of the economy, as the president put it in selecting Immelt to replace Paul Volcker as head of his outside team of economic advisers. Volcker had become increasingly critical of the corporate high rollers. Obama, although noting the suffering of ordinary Americans, clearly believes that such populism is now beside the point. As the president put it in announcing Immelt’s appointment on Jan. 20, 2011: “The past two years was about moving our economy back from the brink. Our job now is putting our economy into overdrive.”

But overdrive, with CEOs like Immelt shifting the gears, is what brought us so close to the brink. Once again Obama seems fatally addicted to the notion that the heavy hitters who got us into this mess are the very folks to be trusted to get us out of it. What he seems incapable of grasping is that while they are personally very good at avoiding the precipice, the rest of us are hardly passengers in their limos.

Welcome to the 2011 American Dream

Bedtime for the Poor and the Middle Class
By SAUL LANDAU

"What’s good for General Motors is good for the country,” was a statement attributed to former GM CEO Charles Wilson in 1953, during hearings before the Senate Armed Services Committee. Could he, as Defense Secretary, make a decision adverse to the interests of General Motors? Wilson assured the Committee such a situation was inconceivable "because for years I thought what was good for the country was good for General Motors and vice versa". Later this statement got reduced.

But the words resonated because, GM employed more workers than the US government – second only to the number on payroll for Soviet state industries. In 1955, General Motors became the first American corporation to pay taxes of over $1 billion. (Wikipedia)

Behind Wilson’s apparent gaffe, however, GM had its gigantic reality base. It did create many millions of jobs, not only in the direct manufacture , shipping and sale of cars, trucks, and other products, but in its peripheral stimulus for rubber, glass, and all the other components required to make a car.

In the 1950s, the United States was the producing mammoth of the world. Banks made loans to companies that then produced goods. That America has evolved into a center for exporting jobs and playing with (gambling) money not investing it in US production.

General Motors executives could claim today “what’s good for their company is good for the country” if they referred to China where it manufactures more autos than in the United States. GM now earns more from foreign sales than it does from US car sales. A skilled welder for GE in Michigan in the 1980s earned $35 an hour; his equivalent in today’s Mexico doesn’t earn that much in a day.

The much heralded – by Bill Clinton, for example – “globalization process” stimulated General Electric, once the company who hired Ronald Reagan as a TV host to represent their “Americanism,” has repeatedly reduced its US staff. Recently, however, it announced plans to hire more than 1,000 Brazilian workers for a new plant it will initiative down there for a cost of over half a billion dollars. GE also plans to invest $2 billion in its Chinese operations.

Corporate headquarters can remain in the United States, but the guts of the old companies – remember “as American as Mom, apple pie and Chevrolet”? – reside in greener pastures for production and sales. US workers became simply too costly, even as the corporations cut their wages and benefits steadily from 1973 on.

When the credit bubble burst along with the inflated housing bubble, the companies looked to India, China, Brazil and Indonesia where economies were growing and wages remained “reasonable.” They could produce and sell their goods more easily there and slice higher US payrolls. That equals profit – or capitalism.

Corporate profits rise, meaning good news for the stock market, and wages drop or stagnate (more productivity per worker). In addition, the large pool of long-term unemployed tends to keep wages down. Without full employment, credit and housing US sales will not make robust comebacks and poor people will not return to their consumer habits quite so easily.

After a decade of depression in the 1930s, US entry into World War II brought a monster-sized surge in government spending, which also translated into massive job creation – and economic boom. As corporate profits rose in manufacturing, the companies hired more workers and expanded, because paid workers bought stuff – even before some genius thought of developing shopping malls.

In 2011 consumers in the consumer society don’t have the money or credit to do what they’ve been conditioned for. They owe money and struggle to pay their rent or mortgage payments and worry about not having a pension; and the now seemingly uncertain future of social security.

The media duly reports the condition of the Dow Jones Industrial Average although most of those who say those words – like their listeners – don’t understand what they mean. Wall Street has risen. The GM that needed our bail-out money makes its products elsewhere; its executives shudder at the notion they had to take money from the hated government.

Investors and traders celebrated the new year, thinking the market will boom in 2011. The tens of millions unemployed, foreclosed or already homeless went to sleep early – to escape the pessimism that has descended on the middle and lower middle classes in much of the country. Their home prices, the basis of their future, have slipped, their jobs if they still have them have grown insecure and their grown kids have moved back in.

The Republicans who control the House will try to cut Social Security and Medicare – they don’t dare tinker with the useless defense budget. Some Democrats will get bought by the usual buyers. Members of both Houses will demand more tax cuts – from which banks, corporations and the disgustingly rich will benefit – on the grounds that this will create jobs; not. The energy lobbies will successfully deter moves to make serious inroads in emissions and our leaders will continue to talk of the American dream – which will still be there for the poor and much of the middle class, when they’re sleeping.

CEO Salaries vs. Company Profits

By Focus Editors

America is still picking up the pieces of the worst financial disaster in decades, and the bulk of the damage struck in the financial market. In a time where you might think banks would be keeping their money internal to repair and rebuild their organizations, we have instead gaped in horror as some of these same executives receive multimillion dollar bonuses year after year. In fact, a study performed by the Associated Press in 2008 found that $1.6 billion of total government bail out money (money provided to fledgling organizations intended to keep them from total collapse) went straight to various executives pockets. Today we explore where some of that morally-questionable money went.

Ken Lewis of Bank Of America
The Huffington Post reports that Bank Of America received $25 billion in bail out money in 2008, and an additional $20 billion in 2009 to cover the loss they took when they acquired Merrill Lynch. This massive infusion of government money came only one year before Ken Lewis stepped down from the office of CEO with $83 million in compensation packages. The bank was more eager than some other bailed out companies to pay back its debts to the government, and succeeded in doing so late last year. But thePost makes clear that this was not out of any moral or ethical dedication to their duty, but mostly so that their executives would not be hindered by government pay restrictions imposed on bailed out companies.

Vikram Pandit of Citigroup

In 2008, the same year that Citigroup accepted a $45 billion government bailout, MarketWatch reports that former CEO Vikram Pandit took home a benefits package worth $38.2 million. This package consisted mostly of stocks and options, combined with a $958,333 annual salary. Interestingly enough, Pandit declined the opportunity to be considered for huge bonuses, and committed to working for $1.00 in base pay until the company was back to profitability. Additionally, the CEO reimbursed Citigroup over $170,000 for personal use of the company aircraft.

Martin Sullivan of AIG
CNBC reported that Martin Sullivan retired from the collapsing offices of AIG, but not before pocketing a $47 million stock and benefits package. Only a few months later AIG was approved for $85 billion in government bailout funds. Slate.com reports that this king's ransom was raised from selling off federal securities, bringing the fed down below $200 billion in reserves.

Being the world's largest insurance company, the US government saved AIG to avoid the disastrous outcome on the financial market that would have occurred if the company collapsed. If AIG was allowed to go under, NPR reports that it would have resulted in $185 billion worth of damage to the world financial market, a blow that would have resulted in "substantially higher borrowing costs, reduced household wealth, and a materially weaker economic performance."

Richard Wagoner of General Motors

According to the New York Times, former General Motors CEO Richard Wagoner received a $14.4 million dollar "goodbye" package in 2008. That same year, the US government appropriated $50 billion in bailout money to save the auto manufacturer from tanking. CommonCause.org reports that the majority of this money came from pension and stock benefits, along with a $1.55 million salary.

Daniel Akerson was brought in as Wagoner's replacement, and has gone on record saying that he took the job because he believes in the government's decision to save General Motors. "[The bailout] was absolutely the right decision for this company, for this region, for the manufacturing base of the United Sates," Akerson told the Washington Post. "I wouldn't have agreed to go on the board...if I hadn't agreed with that decision."

Frederick Waddell of Northern Trust
Northern Trust received one of the smallest government bailout appropriations of 2008, totaling just $1.6 billion. This is why it was so shocking to see CEO Frederick Waddell recieve a compensation package of over $6 million that same year. As reported By CommonCause.org, this money came mostly in the form of stock, options, and salary. Under Waddell's leadership, Northern Trust succeeded in paying the off the government bail out in full in under a year. In 2009, the institution issued a press release proudly announcing this accomplishment, and that same year Forbes reported that Waddell's compensation has nearly doubled, increasing to $11.89 million. The raise was no doubt justified by his quick action in repaying the debt.

Lloyd Blankfein of Goldman Sachs

Lloyd Blankfein, CEO of the recently indicted Goldman Sachs, reportedly took home over $70 million in 2008 alone. That same year, Goldman Sachs was bailed out to the tune of $10 billion, leading many to question the rationale behind Blankfein's massive compensation. The Huffington Post claims that that this compensation makes over $125 million over the past 10 years.

In 2009, the company was brought up on charges of sub prime mortgage fraud by the Securities and Exchange Commission, who claimed that the organization deliberately marketed bad loans in a deceptive manner. The Post reports that Blankfein settled with the SEC in July to the tune of $550 million.

Jamie Dimon of JPMorgan Chase

In what feels like a total slap in the face, JPMorgan Chase CEO Jamie Dimon somehow found the budget room to snag a $28 million bonus package in late 2007 despite JPMorgan Chase being in such poor financial shape that they needed a $25 billion government bail out a mere year later. As if this wasn't bad enough, CNN reports that 2009 brought about another round of bonuses for Dimon, this time in the amount of $16 million.

BusinessWeek announced that President Obama was having dinner with Jamie Dimon to dinner to discuss financial reform at the White House. Since the meeting, no official reports have been released disclosing what was discussed.

The Predicament of ShoreBank

Hopes Dimming
By RALPH NADER

The Obama Administration’s treatment of its current majority ownership of bailed out General Motors and its standoffishness toward the pioneering but troubled ShoreBank, a community bank based in Chicago, are lessons in how the Big/Bad fare in Washington, D.C., as compared with the Good/Small.

Having shed its bad assets and abandoned its common shareholders, the new GM emerged from bankruptcy in 2009 with a clean balance sheet and lots of taxpayer cash. For the first two quarters of 2010, it has signaled a comeback by reporting over $2 billion in profits.

In return for a federal infusion of well over $50 billion, the government took a 61 percent ownership stake. The Canadian government received 10 percent ownership for its financial assistance, and the United Auto Workers received 17.5 percent ownership in return for major concessions and a two-tier salary scale starting at $14 an hour.

The Obama administration exercises its trust duties on behalf of the taxpayers by repeatedly saying it would not use any powers of majority ownership at all. The Obama administration is urging GM is issue stock sooner than later so that the government can sell its stock and get out of the company completely.

GM’s CEO Edward E. Whitacre Jr., former CEO of AT&T, agrees. In recent weeks, he has been telling the press that GM is losing sales because of its moniker “Government Motors.” Not known for his graciousness, he did not add that without the government a bankrupt General Motors would not have any sales at all.

There are serious consequences for Obama’s absentee management style. First, he did not prohibit GM from lobbying, as was required for the bailouts of Fannie Mae and Freddie Mac. As a major member of the Alliance of Automobile Manufacturers, GM has been part of a lobbying force that seeks to weaken auto safety legislation now moving through the House and the Senate. Historically, GM has been the most strident in its opposition to mandatory pollution control, fuel efficiency and safety standards. The company’s strategy for decades has been to defeat, delay or weaken efforts to clean your air, safeguard your motor vehicle and get you more miles per gallon of gasoline.

Now, when the government, as a majority owner, can at last tell GM to support long established national policies in these three areas, Obama is hands off. The new GM is free to return to its old obstructive ways.

Moreover, GM’s recovery is just beginning. It has cut its costs very significantly so that its breakeven mark is at a low production volume by historical standards. Starting from nearly rock bottom sales volume, GM is making money in the U.S. and booming in China. So why would Obama want to sell the government’s share so early when waiting a couple of years will make a nice profit for the taxpayers and, in the meantime, restrain GM’s opposition to innovation-driven regulations for the health, safety and economic well-being of consumers?

Now, consider ShoreBank’s predicament. This bank broke ground since its founding in 1973 by providing loans for lower-income homebuyers, apartment building owners and small businesses. Year after year, this community bank proved it could make money by opening up markets that the big banks chose to red-line in Chicago and later in Detroit and Cleveland. Hundreds of articles and news reports heralded its success.

Then the Wall Street-produced recession struck the country. Through little fault of its own, many of its hard-pressed lower-income debtors began to miss or default on their loans. ShoreBank started to register losses--$119 million in 2009. Unlike the big banks, ShoreBank did not deal in risky speculative derivatives—like credit default swaps, collaterized debt obligations or subprime mortgage lending.

Washington is drawn irresistibly to bail out the big banks’ wildly speculative, toxic paper investments with no redeeming social value. George W. Bush took the taxpayers to levels of corporate welfare beyond the dreams of corporate avarice.

Neil M. Barofsky, the valiant special inspector general for the Treasury Department’s Troubled Asset Relief Program (TARP) reported that the giant AIG bailout ($182 billion) gave its trading partners—bonus-rich Goldman Sachs, Merrill Lynch, Societe Generale and other banks—100 cents on the dollar for their notorious credit default swaps. Had AIG defaulted, it would have been a fraction of that sum.

Barofsky’s report denounced the Federal Reserve for not negotiating strongly with the banks. Incredibly, the Fed gave the banks $27 billion in taxpayer cash and let them keep $35 billion more in collateral already posted by AIG. Barofsky declared that these vastly overpaid sums were way “above [these contracts’] market value at the time.”

Compare these amounts to what ShoreBank needs in additional investment to provide liquidity and adequate capital reserves to ride out the recession. It projects losses of about $200 million before returning to black ink and another $300 million or so to support future operations.

The community bank has raised $150 million in pledges from several Wall Street firms—a little p.r. redemption here—and it needs $75 million in TARP funds from the Obama administration.

At this writing, Washington is balking and the Bank, willing to shink down further, finds its hopes dimming.

The Chicago Tribune editorial “Still Worth Saving” put it well: “ShoreBank, for many years, showed that operating honorably in low-income neighborhoods could pay off for everybody. One way or another, we can’t let its shining example disappear.”

GM's Shell Game

What's Good for GM is Bad the America
By SAUL LANDAU

Joe, whose business has gone bad, borrows $100 from Mike. The next day he borrows another $100. Some months later, he pays Mike $100 and says: “Business has picked up. I really needed that $100.”

On April 21, the Wall Street Journal published an op ed by Ed Whitacre, CEO of General Motors, claiming GM had paid back the money it had borrowed from the government -- plus interest. GM ads boasted of their rapid repayment of the company’s TARP loan debts. (The GM Bailout: Paid Back in Full)

“Today, General Motors is announcing that it has made a payment of $5.8 billion to the U.S. Treasury and Export Development Canada,” wrote Whitacre. “We're paying back-- in full, with interest, years ahead of schedule-- loans made to help fund the new GM.”

Wow, I said to no one, “I can’t believe this.” GM paying back loans, as the ad says, “less than a year after emerging from bankruptcy.”

Even President Obama agreed. “Many believed this was a fool's errand. Many feared we would be throwing good money after bad: that taxpayers would lose most of their investment and that these companies would soon fail regardless,” said Obama. (Presidential address, May 1)

Maybe what’s good for General Motors really is good for the country, I thought for a mili-second, referring to the apocryphal statement issued by GM President Charles E. Wilson in 1953. After all, Whitacre reassured us that “the industry is recovering at a pace few thought possible.” (Wilson actually said: “I thought what was good for the country was good for General Motors and vice versa.”)

Wait! Did this mean Americans are back to their old habit, buying cars in large numbers? Whitacre insisted the pay back “is a sign that our plan for building a new GM is working.” A crisis emerging from making lousy, gas guzzling cars that only fools and government agencies bought, GM had turned around and taken “an important step toward eventually reducing the amount of equity the governments of the U.S., Canada and Ontario hold in our company. Combined, these governments hold a majority of GM's equity, and we want citizens to know how their governments' money is being put to work.”

Indeed, Whitacre concluded, “You can feel a renewed energy and commitment at GM. Our new vehicles are generating sales, and these sales are allowing us to make investments and create jobs.”

Treasury Secretary Tim Geithner also supported GM’s claims. “We are encouraged that GM has repaid its debt well ahead of schedule and confident that the company is on a strong path to viability.” He mentioned nothing of the escrow account.

Then, Republican Senator Chuck Grassley (IA) pointed out what everyone should have known. “Whitacre was just shuffling TARP (Trouble Asset Relief Program) money from one account to another.” (NYT, May 2)

Indeed, Treasury knew of this unpublicized account from which GM drew the funds to make the payment. GM didn’t use the profits from sales of Chevys and Buicks, but, according to assistant secretary for financial stability Herbert M. Allison, Jr., “the money GM used to repay its bailout loan had come from a tax-payer financed escrow account held for the automaker at the Treasury.” (Morgenstern, NYT, May 2)

Grassley laid out the problem. “The public would know nothing of the TARP escrow being the source of the supposed repayment from simply watching GM’s TV commercials or reading Treasury’s press release.”

Above and beyond the spin used by GM and Treasury to convince taxpayers that GM had used its own profits to repay a public loan, the larger questions remain, ones not raised since the famous equation of GM’s interest with those of America.

How can auto and truck sales be good for the country at a time of history when the greenhouse gas effect threatens the future of the world? The massive bailouts of the auto giants saved some jobs at a terrible economic time. But crisis situations -- life or death -- often dictate less than healthy solutions.

Beyond getting fooled by GM and Treasury propaganda over loans, we, the public, continue our course of denial about the automobile as a central instrument of the US economy and our daily lives, No matter how many hybrids replace the old gas guzzlers, this country and the world cannot continue to rely on this 20th Century polluting industry to guide our future. And we leave it to government officials and GM executives to run our affairs?

Lawmakers Accuse General Motors of misleading the public

Perhaps you've seen this commercial:



video link

Turns out, many congressmen are saying it's bullshit.

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Lawmakers Accuse GM, Administration of Misleading Public Over Loan Repayment

A handful of lawmakers are accusing General Motors of misleading the public by continuing to claim as part of its advertising blitz that the auto giant has repaid its government loans "in full."

A handful of lawmakers are accusing General Motors of misleading the public by continuing to claim as part of its advertising blitz that the auto giant has repaid its government loans "in full."

General Motors has been running ads on all the major networks claiming the company repaid its $6.7 billion U.S. government loan "with interest five years ahead of the original schedule." General Motors Company CEO Ed Whitacre can be seen in the ad walking through an auto plant as he touts the company's progress.

But lawmakers, and even the inspector general for the bailout fund GM borrowed from, point out that General Motors only repaid the bailout money by dipping into a separate pot of bailout money. They say the company did not actually use its own earnings to make the early payment and are questioning why executives are making such a big deal out of it.

"The hype is not the reality," Sen. Charles Grassley, R-Iowa, wrote in a column on FoxNews.com over the weekend. "It is far from clear how GM and the Obama administration could honestly say, much less trumpet in prime time television ads, that GM repaid its TARP (Troubled Asset Relief Program) loans in any meaningful way."

Grassley wrote a letter last week to Treasury Secretary Timothy Geithner expressing his concerns and asking for more information about why the company was allowed to use bailout money to repay bailout money.

The $6.7 billion is also just a fraction of the $52 billion General Motors received in government aid. Grassley said lawmakers are being told government losses on GM are expected to exceed $30 billion.

The TARP inspector general, Neil Barofsky, bluntly told the Senate Finance Committee during a hearing last week that the repayment "is just other TARP money" and lawmakers should not "exaggerate" the feat.

"It sounds like they're kind of like taking money out of one pocket and putting it in the other to do that," Sen. Tom Carper, D-Del., said at the hearing.

Sen. Richard Shelby, R-Ala., expressed similar concerns Sunday on NBC's "Meet the Press," saying it's "misleading" for the administration to claim the company has paid back its loans.

The GM ad could potentially land the company in trouble with the Federal Trade Commission over its truth-in-advertising laws, which prohibit ads that are "likely to mislead consumers."

The FTC would not comment on the specific GM ad.

General Motors admits that the company is repaying the loan with other government money, but says a year ago "nobody thought we'd be able to pay this back."