Obama's 'Mandate for Sacrifice' Costs Thousands of Jobs

[W]hen asked explicitly whether the [Obama] Auto Team could have left the dealerships out of the restructurings, Mr. [Ron] Bloom, the current head of the Auto Team, confirmed that the Auto Team "could have left any one component [of the restructuring plan] alone," but that doing so would have been inconsistent with the President's mandate for "shared sacrifice."

Treasury (a) should have taken every reasonable step to ensure that accelerating the dealership terminations was truly necessary for the long-term viability of the companies and (b) should have at least considered whether the benefits to the companies from the accelerated terminations outweighed the costs to the economy that would result from potentially tens of thousands of accelerated job losses. The record is not at all clear that Treasury did either.  The anticipated benefits to the companies of accelerated terminations were based almost entirely on the not-universally-accepted theory that an immediate decrease in dealerships would make them similar to their foreign competitors and therefore improve the companies' profitability, and the theory arguably did not take into account some of the unique circumstances of the domestic companies' dealership networks. It undertook no market studies to test the counterintuitive theory until after making its Viability Determination. More importantly, there was no effort even to quantify the number of job losses that the Auto Team's decision would contribute to until after the decision was made, and the effect on the broader economy caused by accelerated dealership terminations similarly was not sufficiently considered.

Treasury's [The Obama Treasury Department's] letter seems to imply that Treasury was faced with the decision either to encourage the acceleration of dealership terminations substantially, as it did, or let the companies fail altogether. This is a false dilemma with no factual support: no one from Treasury, the manufacturers or from anywhere else indicated that implementing a smaller or more gradual dealership termination plan would have resulted in the cataclysmic scenario spelled out in Treasury's response.

... the Administration created a Treasury Auto Team (the "Auto Team"), which reports to the Task Force and had the responsibility of evaluating the companies' restructuring plans and negotiating the terms of any further assistance. Leading the Auto Team were two advisors: Ron Bloom, a former investment banker and head of collective bargaining for the United Steelworkers Union, and Steven Rattner, the co-founder of the Quadrangle Group, a private-equity firm ... Although this group was responsible for managing AIFP, none of the Auto Team leaders or personnel had any experience or expertise in the auto industry.