The fallout from Barack Obama’s absolute incompetence as an “investor” continues to descend into farce, as we learn that Government Motors – touted as some kind of “success” by Obama, even though taxpayers lost $26 billion on it – is now on the hook for the junk-bond degeneration of French automaker PSA Peugeot Citroen. Jonathan Karl of ABC News reports:
Attention U.S. taxpayers: You now own a piece of a French car company that is drowning in red ink.
That’s right. In a move little noticed outside of the business pages, General Motors last week bought more than $400 million in shares of PSA Peugeot Citroen – a 7 percent stake in the company.
Because U.S. taxpayers still own roughly one-quarter of GM, they now own a piece of Peugeot.
Wonderful! How bad are things over at Le Peu?
Last year, Peugeot’s auto making division lost $123 million. And on March 1 – just a day after the deal with GM was announced – Moody’s downgraded Peugeot’s credit rating to junk status with a negative outlook, citing “severe deterioration” of its finances.
In other words, General Motors essentially just dumped more than $400 million of taxpayer assets on junk bonds.
Sacre bleu! Why would the auto company that every single American was compelled to subsidize do such a thing?
GM has said the deal is designed to give GM access to Peugeot’s expertise in small car and hybrid vehicle technology and ultimately allow both GM and Peugeot to save money by pooling their resources. But auto industry analysts find the deal mystifying.
An analysis by auto industry consultants IHS said it is “somewhat baffling that GM is willing to get involved in an alliance that it frankly does not need for size or complexity, while still avoiding any public plan to rationalise its European production, cut costs, or deal with labour rates.”
(Emphasis mine.) “Green technology” – is there any business it can’t kill?
Meanwhile, another brilliant Obama investment has already learned to surrender without any help from the French. Fisker, the company Obama gave $529 million American taxpayer dollars to create jobs in Finland, produces a $100,000 electric toy car for rich liberals called the Karma. It’s already suffered a few product recalls, despite having only four hundred sedans on the road in the United States.
Consumer Reports decided to take one of these Obamamobiles out for a test drive, and the damn thing just dropped dead, for “reasons that are still unknown,” according to Automotive News:
“It is a little disconcerting that you pay that amount of money for a car and it lasts basically 180 miles before going wrong,” David Champion, senior director for the magazine’s automotive test center, told Reuters.
Fisker has benefited from the publicity generated when actor Leonardo DiCaprio was handed the first Karma last summer and pop idol Justin Bieber received one as a gift this month.
The breakdown of the Consumer Reports car is more bad news for a company that already recalled some Karmas. Fisker also has changed its CEO and halted production over the past month as it seeks to renegotiate the terms of a $529 million loan from the U.S. Department of Energy.
Champion said since the magazine buys the cars it tests anonymously the company may not know.
In a statement, Fisker said it was assessing the source of the problem that caused its Karma plug-in hybrid to fail. Fisker dispatched two engineers Wednesday night to examine the car.
One of the previous Karma recalls was due to defective batteries supplied by A123 Systems – another Obama “stimulus” failure, which got $390 million of your dollars, and just laid off 125 employees, even as its executives scarfed down fat raises and bonuses. From the Washington Examiner:
“[T]he company has laid off 125 employees and had a net loss of $172 million through the first three quarters of 2011,” the Mackinac Center for Public Policy reports, observing that the company’s primary customer, Fisker Automotive, is also struggling financially. “Yet, this month A123’s Compensation Committee approved a $30,000 raise for [Chief Financial Officer David] Prystash just days after Fisker Automotive announced the U.S. Energy Department had cut off what was left of its $528.7 million loan it had previously received.”
This month has seen significant pay boosts for other A123 executives, as well: Robert Johnson, vice president of the energy solutions group, got a 20.7 percent pay increase going from $331,250 to $400,000, while Jason Forcier, vice president of the automotive solutions group, saw his pay increase from $331,250 to $350,000. Prystash’s raise was 8.5 percent, going from $350,000 to $380,000.
“It looks like they are trying to pad their top people’s wallets in case something really bad happens,” Paul Chesser, associate fellow for the National Legal & Policy Center, suggested.
The Department of Energy gave the battery company $249.1 million in grant money, while the Michigan government provided A123 with another $141 million in tax credits and subsidies, according to the Mackinac Center.
Add this to the recent shutdown of the Chevy Volt assembly line, and the discovery that another six-figure electric car subsidized by Obama turns into a “brick” if left unattended for too long, and the forecast for Obama Motors looks grim. I would recommend against investing in Obama Motors… but, of course, you don’t have a choice.