So, at last we know

The US government has sold the last of its shares in automotive giant General Motors, losing $10.5bn on the bailout.

And for what?

and has added about 3,000 workers, bringing US employment to 80,000.

Expensive jobs those.

13 thoughts on “So, at last we know”

  1. if you want to think solely in terms of jobs, then we are interested in the number of jobs with-bailout versus the number of jobs in the unobserved no-bailout counterfactual. I do not think that 3000 number is it.

  2. Thats $130K (£85K) per.

    How different from the life of our own dear country.

    !/3 of UK renewable subsidy £530 per year

    “The energy secretary said that there had been pledges of £13bn worth of investment, and 9,143 jobs, announced in Scottish renewables since 2010,”

    Over 4 years £2120mill 0r £230K per job – except that the US are now our of subsidising GM but this goes on till all the windmills fall over.

  3. Obviously the problem here was that the government should have just given them lots more money, like the banks, then they wouldn’t have had this loss. Um…

    Every day I see reports in the press that the markets are skittish for fear of a “tapering” in Ben Bernanke’s Free Money Bonanza Giveaway. I wonder what the cost of each of the “saved” Financial Sector jobs has been.

  4. The rot goes a lot deeper than that. Already, in the US, it is being claimed that that the $10.5 billion loss is the price that had to paid to “save” all of GM, and ‘progressive’ talkers are spinning the loss into a profit, based on fanciful guesstimations of economic activity , growth and jobs ‘saved’ by this expenditure of tax monies.

    All these fairy stories launch from the assumption that without the benevolent ‘help’ of the Government, GM would have immediately sunk without a trace and all of its economic activity would have ceased.

    There’s a strong case to be made that GM and Chrysler would have fared a whole lot better in the long run if they had been allowed to go through a conventional bankruptcy and reorganize. As Mitt Romney suggested, albeit inelegantly. What actually happened, of course, was that the bankruptcy was a farce, carefully chaperoned through the system by the Federal government with the express purpose that there be as little re-organization as possible, and with every step vetted to be sure that it benefited the core constituents of the Democratic party. The result is that the basic problems at the heart of GM’s weaknesses have not been addressed at all, in many cases they have been amplified, and they are bound to have serious fiscal troubles again. The stock price tells the tale.

    GM’s original problem was that it was a pensions-and-benefits provider that also built cars on the weekends, and that has not been altered by the Maskelyne-and-Devant trickery of the ‘bankruptcy’ that it went through. Whether or not 3000 jobs were ‘created’ by the reorganization is a distraction – the real problem was and is that they have 80,000 workers supporting > 500,000 retirees and their families. It’s a classic pyramid scheme, which may be why the Democratic administration felt right at home in propping it up some more.



  5. Llamas>

    You can’t have it both ways. GM is ‘a classic pyramid scheme’ as you put it, and yet would not have ‘sunk without a trace’, as you also put it? Why not, if it’s a pyramid scheme?

    In fact, it wasn’t a pyramid scheme, just a failing business weighed down by poor sales combined with an overly large pensions and benefits liability.

    Would it have disappeared ‘without a trace’? Not exactly. But it wasn’t viable as a manufacturer going forwards without government support, and breaking up the group would have been difficult because a) you’d lose all the economies of scale if you tried to run the brands individually, and b) there would be no buyers for most of the brands thanks to competition issues.

    Whether it was worth saving is a different question, but there’s a good case that GM couldn’t have been saved in any significant form without the government help they received. To me that rather strongly implies that the answer to the different question is ‘no’, but the decision was taken on political grounds, not economic ones.

  6. Dave – with respect, I’m not ‘having it both ways’. You’re overlooking what could and should have happened, which is a proper and fiscally-realistic bankruptcy process.

    GM was not ‘weighed down by poor sales’, as you state. GM sales have consistently led the US market. GM was (and is) weighed down by unsustainable legacy costs for its vast army of dependents. Labor costs had largely been brought into line with industry norms before the bankruptcy.

    GM was not viable as a manufacturer going forward, as you say – in the form it was. But that’s what proper bankruptcy is for – to reorganize and put the company on a fiscally-sound basis going forward. Had that happened, there’s no way that the largest US automaker would have disappeared without a trace. It might have emerged a very different animal, to be sure. Instead, it was allowed to go through bankruptcy on terms specified by a Democratic administration. All haircuts were offloaded on those least-likely to be Democratic supporters, while the benefits and privileges of those known to be Democratic supporters were protected at all costs. For example, the haircuts applied to the bondholders of GM, by government fiat, were simply criminal – theft, no other way to describe it. And everything was facilitated by a massive influx of taxpayer money.

    GM remains deeply-troubled – you have only to look at the stock price, which is set by people who can do arithmetic – precisely because the rot which brought it low has not been fully addressed, but merely papered over with billions of taxpayer money. GM will eventually meet the same crisis again. The only things which may delay the inevitable are lowered energy costs (which boost sales of high-margin vehicles) and the gradual reduction of their vast legion of dependents. But I don’t think they can wait for the Grim Reaper – there’s hundred of thousands of GM retirees and their families still in their 60s and 70s, and they’re just not going to die fast enough to let GM off the hook.



  7. Why are there hundreds of thousands of GM retirees to less than a hundred thousand workers? Are these hundreds of thousands all full-lifetime-equivalent pension rights holders, or is it the headcount, most of whom will have far less than full benefits?

  8. Finally one I can partially answer,
    “Why are there hundreds of thousands of GM retirees to less than a hundred thousand workers?” – because it takes a lot less manpower to manufacture cars nowadays

  9. Llamas>

    “there’s no way that the largest US automaker would have disappeared without a trace”

    Ever heard of British Leyland? A car company that only produces total shite for a decade or more, for whatever reason, will be in serious trouble.

    You don’t seem to grasp that even if GM had been the leading seller in the US – and that’s not actually the case once their sales slump started – that’s not enough to run a viable global vehicle manufacturer these days. In fact, GM achieved what sales they were getting by doing something that totally trashed their global reputation.

    The company is a basket case, no doubt about it. There are undoubtedly brands within it that could be worth saving, but the problem is that the companies who might save them would be barred by competition regulators from buying them. And there’s no way that GM as a whole can be kept going long-term, any more than BL could have been.


    You’re right, and of course that shows us why worker numbers aren’t actually a relevant stat. We want to compare the ratios of the number of workers then to the total values of cars produced then and now.

  10. Well I think it is fantastic that the American taxpayer bailed out Opel, Vauxhall, Holden. All that taxpayer money helping keep jobs in France, Germany, the UK and Australia.

    The bit that annoys me is that Ford restructured in 2005 and as a result didn’t need a bailout. It would have been far better for GM to be forced to do the same, proper chapter 11 restructuring with no government funding.

    There is no way that GM would have disappeared. It had substantial assets, good brand value and there is no doubt that it could have been restructured and become a better company. Bailing it out simply delayed the inevitable and allowed GM management to socialise $10 Billion in losses.

  11. you’d lose all the economies of scale if you tried to run the brands individually,

    Getting rid of some of the brands would be no bad thing. I never understood why one company would have multiple brands directly competing with one another, aside from the fact that brand loyalty is strong when it comes to cars.

  12. @ Dave – yes, I have heard of British Leyland. I woz there. But I’m glad you brought up the example of what happens when excess union power and government meddling combine to bring a car company down. Let’s hope that doesn’t happen at GM.

    Your comparison and suggestion that GM produces/produced ‘total shite’ is simply debunked by GM’s continuing sales success. Snarks about GM’s product offerings and quality are, quite simply, 30 years out-of-date – it’s what I call ‘the ‘Top Gear mentality’, and betrays a basic ignorance of the sate of the US auto industry today. Blips in their sales record (which are mirrored by other makers) reflect issues with financing and the general economy, not with their products. As a general rule, customers in the US and elsewhere like GM products, and they buy a lot of them even when they have a range of choices.

    The company is not a ‘basket case’, even now. It has strong sales, generally-excellent quality, decent margins, the labor cost issues are under control and getting better, and as far as the car-making business goes, they’re doing OK. But they continue to be at severe business risk because of their vast unfunded legacy costs.

    In a normal bankruptcy process, this would have been addressed. In the Obamaruptcy process that actually occurred, the issue was (as another has well-observed, above) socialized away with taxpayer money for a while (long enough for 2 critical election cycles), as well as by what amounted to legalized theft from the secured creditors. But it was not fixed. It will rise up to strangle GM again, no matter how well they are doing as a car company.

    The example of Ford is instructive. Although not in as bad a way as GM, they made the hard choices, restructured themselves before a bankruptcy judge did it for them, and are now in pretty good shape – without having p*ssed away billions of taxpayer dollars to do it, and without the risk of having the exact same thing happen to them again in another 5 years. I’d buy Ford stock now – you couldn’t give me GM stock at gunpoint.

    FTR, while I live and work in Detroit, I do not work in the auto industry.



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