"[W]hat we did with the auto industry," President Obama told a crowd in Colorado Springs, Colo., last week, "we can do it in manufacturing across America. Let's make sure advanced, high-tech manufacturing jobs take root here, not in China."
For anyone who understands the nature of GM's "success," and of Obama's previous attempts to prop up American companies like Solyndra against Chinese competitors, this campaign rhetoric is somewhat dispiriting. It serves as a troubling confirmation that Obama has learned absolutely nothing from three and a half years of trying unsuccessfully to reshape and reinvigorate the American economy through bailouts and subsidies. Obama's industrial plan continues apace, oblivious to the losses and failures it has created so far.
Within days of Obama's statement came the news that taxpayers are now expected to lose $25 billion on the automotive industry's $85 billion rescue. This represents an upward revision from the previous estimate of $22 billion, yet it nonetheless assumes that GM is valued at $22 per share as it was in late May. GM has since suffered a 40 percent decline in profits year-over-year, a 3 percentage point loss of U.S. market share year-over-year for the month of July and brutal press for its flailing attempts to expand in Europe. The current GM share price is just above $20, so the latest estimate is almost certainly too low already.
The true lesson of the GM and Chrysler bailouts is not that they succeeded, but that one can force even the worst company or industry to succeed temporarily by dedicating enough of taxpayers' hard-earned money to the task.
Obama failed also to learn this lesson in the case of Solyndra, the solar panel manufacturer whose bankruptcy cost taxpayers more than $500 million in stimulus cash. In the spring of 2010, shortly after Solyndra was approved for a federal loan guarantee, PricewaterhouseCoopers found the company had already burned through $558 million in private investors' cash without ever turning a profit. The loans were made despite this record of failure. Yet even with all of this government help, Solyndra could not keep up with its Chinese competitors.
It cost taxpayers half a billion dollars for Obama to save a relatively small company from the reaper for a few months. It has became a great political embarrassment for Obama already but, as his remarks from last week suggest, not a great enough embarrassment to teach him that propping up companies that cannot succeed on their own is always a losing proposition.