[I]n case there are still nagging doubts, let me say it as plainly as I can -- 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's ever been. Because starting today, the United States government will stand behind your warranty.
"Expect that same excellent service that you have grown to love from your local DMV," says Gateway Pundit, tongue planted firmly in cheek. Ed Morrissey raced his way to the same gag a few hours later, with even more delicate sarcasm: "This is great news -- for fans of the DMV." (Italics in the original -- in case you missed the joke.) More high quality snark here, here and here.
But I doubt any of these people has actually read the plan.
If they did, they would realize that the warranty program does not put the government in the business of making auto repairs. The program merely creates a cash account to fund future repairs. The accounts will be run through a third-party -- described in the white paper as a "company" -- that has the sole purpose of picking a new warranty service provider for all of a participating automaker's warranties if the company goes bust.
All of this is private industry, avoid-the-government-type stuff. The only thing the government provides is the money. The white paper (pdf) suggests that at no stage in the process will an individual car owner have to interact with, look at, or think about anybody who works for the government.
Which must be disappointing. For fans of the DMV.
Yes, absolutely. And another thing: A recent Rasmussen poll found that about two thirds of respondents said they would never buy a car from an automaker in bankruptcy, partly because of warranty concerns. If we have any interest in even pretending to save our auto industry as it lists toward bankruptcy, guaranteeing warranties seems like a pretty obvious place to start.
Just when you thought there were some things that couldn't be defended, here come the statists! Government in the business of funding car repairs? No problem!
Like any other non-politically connected business would, GM needs to be allowed to fail before it can succeed again.
Thanks for this comment. I don't think I've ever been called a "statist" before, so that's nice.
I actually agree with you that GM et al should be put in bankruptcy or modified bankruptcy. But the post was entirely about the structure of the warranty plan, not the much larger question of what do with the auto industry.
The structure of the plan is basically identical to the structure of the bank plan: the government fronts a large portion of the necessary capital in the form of a loan and assumes the downside risk. There are problems here, of course, but nothing so superficial as "funding car repairs"...
I think the questions about bankruptcy are reasonable. Guaranteeing the warranties before GM has gone through bankruptcy is getting the cart before the horse. Paying the labor costs (including pensions and health care) is bankrupting GM. Those deals have to be renegotiated. The only way to get the unions to negotiate is in a bankruptcy proceeding.
I'm curious what Obama's plan is here. GM is not going to return to profitability any time soon, especially since we are in the middle of a recession. He can only bail out the companies on a continuing basis for so long before it becomes politically dangerous. Better to run GM through a normal bankruptcy proceeding and force everybody (workers, management, bond holders, suppliers, dealers) to take a haircut.
Only after the restructuring that a bankruptcy court will accomplish should the government provide the money for things like warranties. If nothing else, it should be much cheaper to subsidize GM after the banruptcy.
Why is bankruptcy such a big deal? I never knew anyone who was afraid to fly a bankrupt airline, and god knows, there have been plenty of those.
The problem with bankruptcy, from Obama's perspective, is that it is something that the unions are desperate to avoid. If GM goes into bankruptcy, then the bankruptcy court can and will restructure the union's sweet deal. This will affect not only pay but also health care and pensions.
Should we actually be reassured that (1) Obama has promised that US taxpayers should take on the risk of cost cutting, but GM executives and shareholders get the benefit, or (2) that Obama proposes to put warrantee service under a Fannie-Mae style quasi-private entity?
It seems to me that in quibbling with an obvious joke, we're just turning over more areas for concern.