Friday, January 02, 2009

GM, Chrysler and Treasury v. Ford

When I heard about the GMAC bailout, I didn’t connect the dots. Per the WSJ, what a slap in Ford’s face:

When the Bush Treasury decided to bail out Detroit, GM and Chrysler quickly said yes to the taxpayer cash, but Ford Motor Co. said it didn't need the money and declined. Ford's reward for this show of self-reliance? Treasury is now helping GM again by giving it a credit pricing advantage against Ford in the marketplace.

That's one little-noted result of Treasury's action earlier this week to rescue GMAC, the GM credit arm that, as it happens, is 51% owned by the Cerberus private-equity shop that also owns Chrysler. With $5 billion in taxpayer cash in its pocket, GMAC quickly decided to offer 0% financing on several of its models. "I think it would be fair to say that without this change . . . we would not be able to do this today," explained GM Vice President Mark LaNeve in a conference call with reporters this week.

This is always what happens when politicians decide to muck around in private industry. Even when made with the best intentions, their policy decisions have unintended consequences that help some companies at the expense of others. Meanwhile, your neighbor who buys a GM SUV this weekend with 0% financing should thank you when he pulls into the driveway. He did it with your money.

1 comment:

Stephanie said...

Stunning. And probably only the first of many stories to come of unintended consequences from the bailouts.