Sure the GM bailout worked. For GM
TheStar.com – News/Canada
Published On Sat Nov 20 2010. By Thomas Walkom, National Affairs Columnist
State capitalism works. That’s the lesson of General Motors’ near-miraculous recovery. What’s not yet clear is exactly for whom it works.
Certainly, the taxpaying public of Ontario, Canada and the U.S. have not yet recouped the $60 billion (U.S.) they paid to resuscitate the auto giant. In spite of all the hoo-haw over how well GM did upon its return to the stock markets Thursday, the fact remains that all three governments sold off chunks of their ownership in the company at a loss.
The Ontario and Canadian governments, for instance, gave GM about $9.5 billion (U.S.) last year — about $1.4 billion in the form of loans (which were repaid last spring) plus an additional $8.1 billion in return for an ownership stake.
On Thursday, the two Canadian governments sold 20 per cent of this equity ownership, nominally worth $1.6 billion, for about $1.2 billion — a loss of $400 million. They may eventually recoup that, plus everything else they put in, but only if GM’s shares rise from their current price of about $34 to about $53.
But then it never was about the money. The whole point of bailing out GM during that dark winter of 2008-09 was to save jobs.
And certainly, with the company now back in the black, there will be jobs. The only question is where.
True, auto plants have reopened in both Canada and the U.S. True also that GM still earns most of its money in North America.
However, this very global company already sells more autos in China than North America. It builds cars in low-wage China and expects to build more.
Last month, GM announced that it will start exporting Chinese-made Chevrolets to South and Central America as well as the Middle East.
None of this appears to have been top-of-mind in the Ontario and Canadian governments when, back in the winter of 2008, GM came begging. The political problem then was much more immediate — the spectre of GM’s giant auto plants in Southern Ontario simply going bust.
As a result, neither government demanded explicit job guarantees in return for their aid, figuring that — as long as Canada received its historic share of North American auto production — everything would work out.
It seems everyone assumed North America would remain GM’s hub. But then, in those days, Japanese auto plants operating in North America rather than Chinese plants abroad were seen as the competition.
Indeed, the rap on GM was that it wasn’t Japanese enough. It was said to make big cars that people no longer want (bad management) and pay its unionized labour force too much (greedy workers).
The company agreed with the overpaid-worker charge but said it couldn’t solve that problem without government muscle.
On both sides of the border, governments obliged. First they pressured the auto unions to make wage, benefit and pension concessions, as well as accept job losses. Then the American government organized a kind of kangaroo-court bankruptcy proceeding that allowed GM to stiff its creditors, keep all of its assets, bundle its liabilities into a separate company and start all over again.
Which it did. Yet, curiously, GM kept on building the big gas guzzlers said to be the cause of its troubles. Its production of pickup trucks and sport utility vehicles are up 23 per cent over last year.
Now we have the same company (freed of its creditors) making the same kinds of autos, paying its workers less and planning, over time, to refocus its production on China — all aided and abetted by governments here.
It has all been a great success. I’m so glad we could help.
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