Free Republic
Browse · Search
News/Activism
Topics · Post Article

Skip to comments.

The $474,000 GM job (Auto-industry profits donít mean bailout was a success)
Financial Post ^ | 02/16/2012 | Mark Milke

Posted on 02/16/2012 6:14:46 AM PST by SeekAndFind

With sales and profits up at General Motors, proponents of the 2009 automotive bailout for GM (and Chrysler) now assert the taxpayer-financed rescue was a success. In a visit to Michigan in late January, U.S. President Barack Obama argued the deal saved jobs. Canadian politicians, including Finance Minister Jim Flaherty, who last summer incorrectly asserted taxpayers received all their money back, have made similar boasts.

Given the revisionist history in play, let’s place that 2009 deal in proper ­context.

It’s no surprise that GM and Chrysler are doing better. Relieve any company of its debt through bankruptcy and stuff it with taxpayer dollars and it would be remarkable if cash flow and profits did not dramatically improve. But corporate restructuring through bankruptcy regularly occurs. The relevant question, in this specific instance, is why were taxpayers also dragged into it? The answer — jobs, as the politicians assert — is not convincing. In 2009, 5,420 companies went bankrupt Canada-wide. I’m aware of only two rescued with tax dollars: GM and Chrysler (the latter for the second time in three decades).

It was a costly exercise. The federal and Ontario governments loaned $13.7-billion to the two companies in fiscal 2009-10. That was 38% of the $36-billion in corporate income tax revenue collected by both governments that year.

It was an interesting gamble, risking four out of every 10 corporate tax dollars to resuscitate two companies. Problematically, in a shrinking market for automobiles, jobs “saved” at one company are merely sacrificed at another. The bailout did not increase demand for automobiles or for any of the parts or materials needed to build them.

Some bailout cash has been returned to the public treasury. But taxpayers have still lost substantial amounts, according to the federal Finance department.

After subtracting the partial repayment made by both companies, the governments’ sale of some shares obtained via the bailout, and the present value of GM stock still held by the two governments, taxpayers are still out $810-million on the Chrysler bailout and $4.74-billion on the GM loan. That’s an estimated $5.5-billion loss, which will fluctuate only slightly, depending on the final GM share price when governments relinquish their remaining shares.

CLICK ABOVE LINK FOR THE REST


TOPICS: Business/Economy; Culture/Society; Government; News/Current Events
KEYWORDS: bailout; bailouts; canada; gm

1 posted on 02/16/2012 6:14:55 AM PST by SeekAndFind
[ Post Reply | Private Reply | View Replies]

To: SeekAndFind

MORE CALCULATIONS:

On jobs, three years later, the current employee count in Canada is 10,000 at GM (down from 12,000 in early 2009) and 9,000 at Chrysler (down from 9,800 in 2009). Using present employee counts, that means taxpayers offered up a $90,000 subsidy per Chrysler employee and a $474,000 subsidy per GM employee. (The company-only estimates are fair calculations; in the absence of GM or Chrysler, lost spinoff jobs at auto-parts manufacturers and dealerships would have been at least partly restored by either the two post-bankruptcy


2 posted on 02/16/2012 6:15:56 AM PST by SeekAndFind
[ Post Reply | Private Reply | To 1 | View Replies]

To: SeekAndFind

GM’s profits are flat even though sales are up as of a report released today. But all of this aside, none of it addresses the injustice to the secured bond holders of GM. The theft and redistribution of their assets is NEVER talked about.


3 posted on 02/16/2012 6:26:11 AM PST by johniegrad
[ Post Reply | Private Reply | To 1 | View Replies]

To: SeekAndFind
Wow!

Pinging for further study.

4 posted on 02/16/2012 6:31:11 AM PST by Upstate NY Guy
[ Post Reply | Private Reply | To 2 | View Replies]

To: johniegrad

Why talk about it...wasn’t it only “fair” that their wealth was redistributed? Get with the program.


5 posted on 02/16/2012 6:33:38 AM PST by hal ogen (1st Amendment or Reeducation Camp?)
[ Post Reply | Private Reply | To 3 | View Replies]

To: SeekAndFind

It’s easy to make profits when your corporate taxes are waived to the tune of multiple BILLIONS!


6 posted on 02/16/2012 6:43:26 AM PST by poobear
[ Post Reply | Private Reply | To 1 | View Replies]

To: johniegrad
But all of this aside, none of it addresses the injustice to the secured bond holders of GM. The theft and redistribution of their assets is NEVER talked about.

That is the grave moral injustice that mortally offended me. I will never forgive GM for that theft, and for that reason, I will never buy or rent any GM product, ever. GM and Chrysler are under a permanent boycott - both companies are dead to me. I won't even admire a new GM car on the rare occasions that a "friend" buys one. I am disappointed in anyone who would buy from a corrupt organization and see no reason to make them feel better about their actions.

7 posted on 02/16/2012 7:11:24 AM PST by Pollster1 (Natural born citizen of the USA, with the birth certificate to prove it)
[ Post Reply | Private Reply | To 3 | View Replies]

To: SeekAndFind

never-mind nobody mentions the original 20 billion in taxpayer money down the RAT-hole to old GM before the bankruptcy.


8 posted on 02/16/2012 7:23:55 AM PST by stylin19a (time to Obamanos)
[ Post Reply | Private Reply | To 1 | View Replies]

To: Pollster1

You are not alone.


9 posted on 02/16/2012 9:01:32 AM PST by mcshot (CHECKS AND BALANCES WHERE ART THOU? LORD HEAR OUR PRAYERS.)
[ Post Reply | Private Reply | To 7 | View Replies]

Disclaimer: Opinions posted on Free Republic are those of the individual posters and do not necessarily represent the opinion of Free Republic or its management. All materials posted herein are protected by copyright law and the exemption for fair use of copyrighted works.

Free Republic
Browse · Search
News/Activism
Topics · Post Article

FreeRepublic, LLC, PO BOX 9771, FRESNO, CA 93794
FreeRepublic.com is powered by software copyright 2000-2008 John Robinson