GM - Largest Company

I believe overall the bailouts made sense; economists would have called it financial “pump priming”. Without the US (90%) and Canadian (10%) governments bailouts, those companies would have ended up as rumps to be bought by foreign owners, Chinese, Indian or other. There would have been some assembly in North America, but many of those jobs would have disappeared overseas.

The Chinese company that took over Volvo basically wants to stop manufacturing in Sweden; already many parts are made in Asia.

I read a report last week that claimed for every new job created by foreign (Japanese, Korean, German) car manufacaturers in the US, 4-6 were lost by the Detroit 3.

Those low starting wages the UAW complains about are a blessing in disguise. Without them the GM new small cars could not have been made in the US. Alabama is the big winner in car jobs because of its “right to work” legislation and cheap infrastructure. The wage structure there will set the benchmark what others have to pay to stay competitive. UAW membership is now about 1/4 of what it used to be.

Funny how people can justify giving hundreds of millions of dollars to Toyota to build a plant in Mississippi, because "the taxes collected from the employees and suppliers will more than offset the tax breaks and subsidies to Toyota", yet refuse to apply the same logic to GM, where the additional taxes collected from employees and suppliers have more than offset the losses the government would record if they sold all their remaining shares today.

What “additional taxes”? You mean the continuation of taxes that are already being collected. The GM bailout didn’t create any new jobs or increase tax revenue. And as the Reverend Mother, Our Lady Pelosi of Perpetual Surprise has instructed us, her unworthy servants, unemployment benefits create jobs

When MikeInNH and I agree, it’s time to rethink your position.

@littlemouse

This is simple - Those workers at GM pay taxes. Had GM gone under, they wouldn’t have been paying taxes and would have been collecting unemployment benefits. The net swing is about $9000 per year less in taxes paid and $18,000 per year increase in unemployment, for a total benefit to the state and federal government (some of the unemployment is covered by the state, but the fed has been picking up the tab for extended benefits) of nearly $27,000 per employee. Combine those GM employees with employees at suppliers who would have lost jobs, then according to the Center for Automotive Research, the total in additional taxes collected (yes, continuation of those that were being collected, but that otherwise would NOT have been collected had GM gone under) and avoided unemployement benefits is GREATER than the money lost on the investment in GM - in other words, the federal government is in a better financial position than they would have been if GM went under.

the federal government is in a better financial position than they would have been if GM went under.

For the short term - MAYBE…but NOT for the long term. And I’d say that GM beat the odds. There was a very good chance the bailout wasn’t going to work.

And I contend that GM may still fail. Have they changed their ways?? Have they changed what got them in this mess. The economy turn around and the drastic increase in car sales in China is what turned GM around. What about the next recession?? Will GM need another bailout then???

Mike - maybe, and that is certainly a valid concern that GM might need another bailout in the future. With their current cost structure, it would likely take more than an ordinary recession to kill them, though - they were pulling profits at annual sales levels barely over 10 million, which is not much above the bottom of the market in the last recession.

I certainly agree that the moral hazard is a real one, though. Just look at banks and how often that entire industry has needed a bailout… the great depression, the savings and loan crisis, and now the subprime/CDS/derivatives-led collapse (which likely could have been avoided had the government not lifted regulations put in place because of the prior bailouts)… And these bailouts have been the historically expensive ones, too…

For all the cries we hear about GM, the banks get far less press and complaints nowadays - you barely heard a peep about the government losing nearly 50% of its investment in Central Pacific Financial Corp. And there’s a case where you had an institution that was small, could easily have been absorbed by domestic competitors, and at little cost to the government. It would be virtually impossible for the government to lose that high of a percentage of their investment in GM at this point - even if they went bankrupt and out of business tomorrow.

@eraser - If we HAD to do just ONE bailout…the ONLY one I would have liked would be GM’s bailout. The bank bailouts were the worse. But if you believe the economists…if we didn’t bail them out our economy would have collapsed. But they were so mismanaged…they screwed themselves with the extremely shoddy mortgage mess.

And I’ve said it before and I’ll say it again…I truly hope that GM succeeds. I truly believe that IF GM and Ford and Chryco wanted to…they could make cars that were so reliable…and cars that people wanted to buy and could afford to buy using ALL AMERICAN WORKERS HERE IN THE US…they’d drive Toyota/Nissan/Honda out of the US market. But that would require LONG-TERM thinking and strategy. Which they haven’t done in over 40 years. They still can’t seem to get by the “Next Quarter” mentality.

the total in additional taxes collected (yes, continuation of those that were being collected, but that otherwise would NOT have been collected had GM gone under)

If I drink a six-pack of beer a day, consider stopping but don’t, am I suddenly drinking an additional six-pack of beer per day? Or just the same amount I was always drinking?

There are NO additional taxes. Calling them that doesn’t make it so.

And we still don’t have a full account of the banking bailout(s). Goldman Sachs too big to fail, but Lehman not? A lot of that money went to European banks. Probably Asian banks too for all I know.

Mouse, that’s not how the government does math. They figure that if you’re drinking a six pack a day and expected to drink a twelve pack a day next year, but you make a New Year’s resolution to drink only nine beers a day instead, you’ve reduced your drinking by three beers a day.

And we know that nobody ever keeps their new year’s resolutions. You’ll drink twelve beers a day, even if you only have enough money for six beers. You’ll borrrow the other six from a neighbor and promise to pay him back nine beers.

That’s the way the government does math. And economics.

Wow, next thing you’ll be telling me hot’s on the left and cold’s on the right.

The way I see it, at best the gummint bought an annuity of uncertain duration at an uncertain rate. At best.