A report by the Troubled Asset Relief Program's inspector general, Neil M. Barofsky, underscores the danger of handing control of private enterprise to government bureaucrats. In running General Motors and Chrysler, the Obama administration's Auto Team made decisions based on what its members know best: race and politics.
After taking over the bankrupt carmakers, the administration ordered the immediate termination of one-quarter of existing dealerships - but not for business reasons. "Key members of the Auto Team ... stated that they did not consider cost savings to be a factor in determining the need for dealership closures," Mr. Barofsky wrote in his July 19 report. "Nevertheless, GM officials stated that they developed the cost-savings estimate ... after being 'pressed' during meetings with congressional representatives to explain the cost savings that would result from the dealership terminations."
These after-the-fact justifications were needed after Congress learned that closing 2,243 dealerships would cost nearly 100,000 jobs. GM invented a savings estimate of $2.6 billion, and Chrysler said its closings would save $35.9 million. Insiders reported the numbers were little more than a "math exercise" based on highly questionable assumptions, with one GM official admitting the hasty closure plan "might even cost GM money."
GM set up a scoring system to determine the most valuable dealerships, but affirmative action was used to pick which survived. "Other dealerships were retained because they ... were minority- or woman-owned dealerships," Mr. Barofsky explained. The administration also pressured GM to cut rural dealerships. Mr. Barofsky's office interviewed independent experts who confirmed that domestic automakers "had an advantage over their import competitors" in rural markets and that cutting dealerships in those areas would harm domestic sales. The O Force's disdain for red states and their tendency to "cling to guns or religion" can't be coincidental.
The Obama administration denied that political calculations determined dealership closures, but Mr. Barofsky's investigation confirms that political correctness, not profitability, is Job 1. It's time to take the keys away from an administration that isn't driving the country in the right direction.
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