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Back at the end of March David Brooks made a prediction for GM in the New York Times that came due today. I have been waiting to check in on that. He started with this background of the situation as it stood that day:
The Bush advisers decided in December that bankruptcy without preparation would be a disaster. They decided what all administrations decide — that the best time for a bankruptcy filing is a few months from now, and it always will be. In the meantime, restructuring would continue, federally subsidized.
Today, G.M. and Chrysler have once again come up with restructuring plans. By an amazing coincidence, the plans are again insufficient. In an extremely precedented move, the Obama administration has decided that the best time for possible bankruptcy is — a few months from now. The restructuring will continue.
But this, President Obama declares, is G.M.’s last chance. Honestly. Really.
No kidding.
With that background, Mr. Brooks’ reactions was this:
The most likely outcome, sad to say, is some semiserious restructuring plan, with or without court involvement, to be followed by long-term government intervention and backdoor subsidies forever.
Looking at the relevant news today (also from the New York Times) we find that the result is a restructuring plan with court involvement and long-term government intervention including continuing subsidies – initially at least the subsidies are anything but backdoor.
American taxpayers will invest an additional $30 billion in the company, atop $20 billion already spent just to keep it solvent as the company bled cash as quickly as Washington could inject it.
The imagery is all too apropos – like Fannie, Freddie, AIG, and the economy in general GM is and has been addicted to shooting up with public money to feel like a real free-market enterprise. Conveniently too many of our elected leaders are equally addicted to intervening in the markets in order to feel like they are performing a real job for the American tax payer.
Mr. Brooks called the President the “Car Dealer in Chief” in his predictive essay, and now that is more true than before:
Mr. Obama is taking several risks under the plan. None may be bigger than the decision that the United States government will take a 60 percent share of the stock in a new G.M., leaving taxpayers vulnerable if the overhaul is not successful. (Canada, for its part, is taking a 12 percent stake.)
“We don’t think that after this next $30 billion, they will need more money,” one senior administration official said. “But the fact is there are things you don’t know — like when the car market will come back, and how much Toyota and Honda and Volkswagen will benefit from the chaos.”
This is G.M.’s last chance. Honestly. Really. We hope.
