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.
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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
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.
Pinging for further study.
Why talk about it...wasn’t it only “fair” that their wealth was redistributed? Get with the program.
It’s easy to make profits when your corporate taxes are waived to the tune of multiple BILLIONS!
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.
never-mind nobody mentions the original 20 billion in taxpayer money down the RAT-hole to old GM before the bankruptcy.
You are not alone.
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