Does it matter that Romney hasn’t worked for Bain & Company in nearly 20 years or are the optics of this one bad enough to make it newsworthy regardless?
The car dealership episode was one of the most controversial of the auto bailout — as many dealers across the country complained they were being put out of business by government fiat. A special inspector general looking into the matter concluded that the decision to slash dealerships resulted in the loss of thousands of jobs. But the Obama administration argued at the time that there were too many dealerships chasing too few customers and streamlining them was an important piece to getting GM and Chrysler back on their feet…
A 2010 report by the Special Inspector General for the Troubled Asset Relief Program reveals that Bain — referred to as “Bain Consulting” — was one of several private sector firms the Obama auto team turned to for advice as it wrestled with what to do about the dealerships. (Romney spent years at Bain Capital, a spin-off of Bain & Company, and also served as interim chief executive of Bain & Company during a turnaround effort.)…
“An expert from Bain Consulting also stated many dealerships have too much inventory relative to their market area, particularly in smaller markets or markets where there are more dealers than necessary, because they have to have sufficient diversity in their inventory to cover the manufacturer’s entire portfolio and to meet varied customer needs,” the inspector general’s report said.
“This leads to higher floor plan financing costs per vehicle. In addition, because it is difficult for a smaller dealership to match its mix of inventory with actual customer demand, they end up with higher quantities of slow moving inventory that can lead to a need for increased customer and dealer incentives to sell their vehicles.”
CNBC speculates that this might explain why Obama’s “car czar,” Steve Rattner, ended up slobbering all over Bain in a surprising op-ed in Politico today. Rattner purported to offer “full disclosure” in that piece by acknowledging that he’d worked with Bain Capital “on several projects” after Romney left, but he didn’t mention that the White House had been advised by its sister firm, Bain & Company (which Romney led briefly during the early 90s), on closing down dealerships as part of the GM restructuring. Maybe he figured Bain’s role in that was bound to come out sooner rather than later and decided to go on record as being a fan before reporters demanded to know why he accepted advice from those darned job-killing corporate vultures so despised by Democrats. An interesting quote given what happened with the dealerships: “While no one likes seeing jobs disappear, eliminating unnecessary overhead and even entire divisions if they cannot be made sufficiently profitable is at the heart of a successful economy — the process Joseph Schumpeter famously described as ‘creative destruction.’ How strange for conservatives like Newt Gingrich and Perry to be questioning the core of free market economics.”
The notion that closing the independent businesses of car dealerships, helps GM survive in any material way, just magnifies the ignorance of those uninvolved with this whole business. True, it helped those remaining dealerships become more profitable due to sudden lack of competition, but those profits belong to the independent business that owns the dealership – not GM. When GM made the decision to close Pontiac, Saturn and Hummer, there was already going to be fewer dealerships and less competition. The flooring expense mentioned is on the back of the independent – not GM. This whole episode was created to save the UAW by stealing capital of the investors, the savings of the non-union retirees who owned stock, the private investors who owned stock and bonds, and the bailout of taxpayers. The bankruptcy should have included obligations owed to the UAW members, especially considering those obligations are what caused the need for the bridge loan to begin with, and what caused GM to not be able to compete with foreign competitors. Closing dealerships was a side show that should never have existed, putting thousands on the unemployment roles, and a chill down the spine of every single independent businessman in America, suddenly stripping them of all confidence or desire to risk their capital while Obama is in office. If our government can fire CEO’s (Rick Wagner of GM), and close dealerships, who is next?