This is a momentous day. Who would’ve ever thought a few years ago the General Motors would file for bankruptcy protection on this day. I think in a nutshell you could say nobody; GM was as solid as a rock, an icon in the North American car industry. So as June dawned and we woke up to the news that the inevitable had finally happened, suddenly we find as Canadian taxpayers we have an equity stake in what is now being called “Government Motors”.
In many ways of course it is hard to believe. Now GM is 60% owned by the US government, 12.5% owned by the Canadian and Ontario governments, 17.5% owned by the United Autoworkers with the remaining 10% held by unsecured bondholders. General Motors has already received $20 billion in taxpayer’s money but will be receiving another 30 billion from the U.S. Treasury Department and 9.5 billion from the Canadian government. It’s incredible to see one of the biggest corporate players at one time in the world get bailed out by government.
You can call it many things, for instance some might call it corporate welfare. For instance I am one of many North Americans who at one time owned an American car but gave that up many years ago. So some might argue that GM got what they ask for in a number of different ways. For instance some might think they should’ve been let go because they don’t sell products people want, others might have other opinions. Needless to say, regardless of how you feel, letting GM go without some type of orderly bankruptcy and government infusion of cash would have been an economic calamity in places like Ontario. Simply put as stated before in this column the money put in the auto industry might be a lot cheaper than letting this industry be sold off to the highest bidder.
I believe that because in places like Ontario there are so many jobs that depend on the auto industry and GM has always been King. The cheapest stimulus plan was simply to infuse the money into the industry and into the company. However in my mind $9.5 billion from the Canadian government is gone forever. Is my understanding that Canadian taxpayers are supposed to be paid back from the new downsized GM but more or less I think it is a down payment on keeping the auto industry within Canada.
Regardless of the justification for keeping GM in some form afloat, there will be many detractors. For instance some might argue that GM just doesn’t get it and never did. I find it hard to believe that a company that ran itself into the ground will suddenly find religion and build cars that people want. For instance it may take a complete psychology cultural change in our society to make this work. In North America “we” have always had a love affair with the automobile but I think there is generational change with regard to that. Many people regardless of age look at cars as simply a way to get from A to B.
I’ve always had a problem with spending 20, $30-$40,000 for an automobile and maybe that’s the reason why I’ve never done it. However in North America cheap financing and wide-open spaces have always meant cars have been part of the equation. My question is what is going to happen to these North American car buying habits and the new downsized GM when Chinese vehicle show up in the showrooms along with those Tata Nanos? Don’t ever think we’re going back to the good old days because when it comes to cars and car companies isn’t going to happen.
President Obama has said that it is the goal of the US government to get GM back on its feet and then take a hands-off approach and get out quickly. I would be surprised if that happens. Needless to say when you mix politics with economics you get what you get today, government owning a big car company.
I just hope people get it. Every day I hear American commentators on conservative radio stations talking about government owning a car company and the scourge of socialism because the government is taking over the private sector. Such talk in my mind is unbelievably stupid. What we’ve had over the course of the last eight months is a manifestation of the private sector running amok. Now you might argue government, taxpayers and autoworkers are bailing the big fat cats out. And at the end of the day what choice did they really have?
It is what it is and that’s not saying much. The road ahead may not be any better than the road we just traveled through. Sure our loonie is bouncing, commodity prices are once again going up and oil is testing $70 a barrel. However that doesn’t guarantee us anything. “Government Motors!” I can’t believe it.