At the Democratic National Convention in Charlotte next month, the Obama Administration plans to tout its auto bailout “success” as a reason to re-elect him. While such claims may rally the UAW delegates at the convention, it’s not likely to have a very positive impact on  undecided voters who may sway the outcome of the November election.

A recent Heritage Foundation study concluded that the preferential treatment the United Auto Workers received in the bankruptcies of GM and Chrysler “redistributed $26.5 billion more to the UAW than it would have received had it been treated as it usually would in bankruptcy proceedings.” As National Review’s Amy Payne pointed out in June, this means simply that “the entire loss to the taxpayers from the auto bailout comes from the funds diverted to the UAW.” The article goes on to note that the Treasury Department recently estimated taxpayers have lost “between $20 billion and $23 billion” of the $79 billion bailout to General Motors, Chrysler, and GMAC (now called Ally Financial) that Barack Obama completed in 2009.

Since taxpayers have lost more than $1 on every $4 loaned to the auto companies and given it directly to the UAW,  similar “successes” in other industries will continue the transfer of wealth from American taxpayers to privileged and politically connected unions. According to Obama’s own words on the campaign trail, doing for the rest of America’s industries what he did for the auto industry is on his agenda for a potential second term.

According to the Special Inspector General for TARP’s Quarterly Report submitted to Congress last month, GM, Chrysler, and Ally Financial have repaid only $35 billion of the bailout funds to date. This leaves $44 billion of taxpayer funds unpaid.

In theory, some of that will be paid back when the Government liquidates its 32% share in GM, its 6% share in Chrysler, and its 74% share in the former GMAC. The problem is, if those shares were sold at current market prices, the net proceeds–about $20 billion–would saddle American taxpayers with a $24 billion loss. Even the most optimistic Democratic accountant will admit that the majority of the outstanding balance will never be repaid.

According to the Special Inspector General for TARP’s Quarterly Report submitted to Congress last month:

In order to recoup its total investment in GM, Treasury will need to recover an
additional $27 billion in proceeds. This translates to an average of $53.98 per share
on its remaining common shares in New GM, not taking into account dividend
and interest payments received from the GM entities.

After emerging from bankruptcy, GM’s IPO went out at $33 a share. As of the close of the market yesterday, GM was trading at $21.75 per share, about 40% of the break-even price of $53.98 per share. If the government sold all its shares today, taxpayers would receive only $11 billion, racking up a $16 billion loss on the $49 billion GM bailout.

The story of loss continues at Chrysler, where the SIG reports that “taxpayers suffered a $2.9 billion loss on theTARP investment in Chrysler.” Total losses are likely to be just short of $5 billion, since “Treasury also retains the right to recover proceeds from Old Chrysler’s bankruptcy, but, according to Treasury, it is unlikely to fully recover its $1.9 billion loan.”

Getting the $14.7 billion still owed by Ally Financial, formerly known as GMAC, looks to be quite problematic. The company remains “private,” and there are no ready buyers for the taxpayers’ 74% ownership interest. While the company’s management team contemplated a public offering last year, market conditions and concerns about the quality of Ally’s loan portfolio, in addition to pending federal penalties for mortgage foreclosure practices placed those plans on hold indefinitely. This May, Ally placed its mortgage lending subsidiary into bankruptcy and is likely to write off at least $1 billion in loans it made to its own subsidiary.

Added to the $16 billion of likely losses at GM and the $4 to $5 billion of likely losses at Chrysler, potential losses at Ally Financial will bring the total bailout losses to at least $20 to $23 billion, as the Treasury Department stated recently. Some think losses could be even greater. 

And that’s if things don’t get worse!

Louis Woodhill over at Forbes thinks that’s exactly what’s likely to happen in a second Obama Administration. He lays the responsibility firmly on poor management at GM, where executive decisions are increasingly driven by political rather than engineering and market factors.

Last week he wrote a column suggesting that “General Motors Is Headed For Bankruptcy — Again,” largely because it’s falling behind its competitors in engineering, technology, and design:

President Obama is proud of his bailout of General Motors. That’s good, because, if he wins a second term, he is probably going to have to bail GM out again.  The company is once again losing market share, and it seems unable to develop products that are truly competitive in the U.S. market…

Will GM be able to turn itself around, and save American taxpayers from losing $26.5 billion on Obama’s bailout?

One way to answer that question is to compare the 2013 Chevy Malibu against the 2012 Volkswagen Passat, as Car and Driver did.  Results: VW, first out of six; GM, dead last.  However, additional insight can be obtained by looking at how GM’s CEO, Dan Akerson (63), stacks up against Professor Doctor Martin Winterkorn (65), the man handpicked by Ferdinand Piech in 2007 to be his replacement as CEO of Volkswagen AG. . . .

While Dan Akerson is busy rearranging the deck chairs on GM’s Titanic, Martin Winterkorn is leading VW to world domination via technical excellence.

As Mark Modica wrote at the National Legal and Policy Center, GM’s failure to sell its money-losing European Opel car operations recent is yet another illustration that the current management at GM is driven more by political decisions influenced by its UAW board member than it is by the realities of the market: 

While government, journalists and Wall Street sympathizers have given the Obama Administration and GM leadership an almost incomprehensible pass on this value destruction and massive loss (presumably due to the macro-economic nature of the crisis), it’s time to call for the accountability that this new Board was supposedly going to deliver…

Overlooked is that the value-destroying, cash-sucking disaster that is GM Europe was packaged and ready for sale to new European buyers in 2009 before the new Obama GM Board of Directors slammed the brakes on the deal, throwing GM into its current value free-fall. In fact, the decision to not sell the Opel operations (which has not been profitable for more than a decade) in 2009 after GM cleared bankruptcy was the very first major decision of the new Obama Board…

But the “new and improved” Obama Board of Directors, working mostly at the persistent lobbying and urging of the UAW’s appointee, Steve Girsky (in photo), were naively convinced that Opel was simply a rough jewel in need of some new leadership (Opel fired its third leader in as many years a few weeks ago) and TLC from the brain-trust in Detroit. With his persuasive lobbying, the union’s man Girsky convinced all but two of the Board members to vote to ditch the planned sale and hold onto this “gem” that has now contributed to the loss of about $24 billion of the American taxpayers’ forced investment. Beyond the sheer magnitude of the value losses, fixing Europe has become an all-consuming distraction that is draining GM of vital and scarce resources. 

Here in the United States, we’re all familiar with the politically correct decision to keep producing and subsidizing (at a rate of $250,000 per car) the fire prone and wildly unpopular electric/hybrid Chevy Volt.

Earlier this year, National Review covered the Chevy Volt fiasco:

The announcement late last week that Chevy was suspending Volt sales for lack of demand (conveniently timed after the Michigan primary was over, because laying off 1,300 UAW workers would have clashed with Obama’s Election Day, anti-Romney UAW Convention speech boasting that he had saved Detroit jobs) was a huge embarrassment for a president who in part rescued GM in order to make what the president claims is the Car of the Future (no doubt, it’s his vast experience in the car market that convinced him)…

Stunned by GM’s announcement last Friday, Volt cheerleaders are scrambling to explain its lack of appeal (the Volt has as many excuses as Obama’s economic policy). Its infamous tendency to catch on fire? Yes, that surely took the shine off a car that is bought for its social caché (who wants to be the butt of a fire joke at the Art Institute fundraiser?). Its price tag? Yes, although the Leo DiCaprios of the world, who buy it to bolster their green credentials, are hardly comparison shoppers. Because Rush Limbaugh ragged on it? Um, shouldn’t this have boosted sales among the environmental Left?

But the Volt’s biggest problem is that consumers found it too complicated. After charging it overnight, you also want to fill it with gas, because like a hybrid it can run on gas to maintain the battery’s charge . . . Despite the Volt’s impressive DNA (GM design legend Bob Lutz was its father) and undeniable engineering wow-factor, it still needs a market.

Last week, GM continued its politically-oriented decision making when it announced that its Cadillac Division will be one of the founding sponsors of HuffPo Live, the Internet TV offering from the very liberal Huffington Post. It’s hard to see how many of Cadillac’s traditionally older customers will be viewers of this youth-oriented liberal Internet TV program.

Back in 2008, Barack Obama promised to transform America. If given a chance to complete that transformation in a second term, voters can count on seeing more large corporations behave like GM. Political correctness, rather than market conditions, will continue to drive more and more decisions in the market place.