Governments should wise up when the next bailout happens. Seek collateral on the company via shares or some other valuable goods that are not easy to shed. Enforce some board member, etc.
For all the criticism Chinese tech companies get, the main control the Chinese government has is by being the largest shareholder of said companies. If the company does something that jeopardizes the stability of society, just enforce control. Every sizable Chinese company has a party secretary for the very same reason.
> Seek collateral on the company via shares or some other valuable goods that are not easy to shed.
As part of the bailout, Canada/Ontario took a 12% ownership stake in GM. They have since sold their shares (at least Ontario has). At the time, the union president argued they should be keeping the shares for that exact reason, so that they have a reasonable influence on company decision making.
Governments regularly dole out tax and other equivalent subsidies all the time to businesses. From these bail outs, to funding stadiums, to getting new jobs or headquarters.
This is all comes with risk and the risk should entirely be on the government making the deals. If they are making bad deals then hold them accountable. Part of this is making sure that all other taxation and such does not eventually price manufacturers out of your region.
With regards to the auto industry, the key word is industry. It is spread across multiple countries which means all must be taken into account when it comes to where vehicles are produced. This gets more important as the industry shifts the types of vehicles being made.
EV production will lead to the largest number of plant closures in the history of automotive production. The drive train savings alone in complexity will remove the need for engine and transmission plants as well as many plants which make the supporting hardware like pumps and more. The cascade effect on repair and maintenance shops will be even more hard felt.
It's hard to say that GM made out in the bailout. Shareholders were 100% wiped out. It's not as if some fat-cat shareholders did well while laying people off. Anyone who owned stock in old-GM lost it all.
It should also be noted that the US ended up owning 60.8% of new-GM while Canada owned 11.7% and the unions' benefit fund owned 17.5% with the unsecured bondholders owning the remaining 10%.
I know that it's easy to hate on the bailouts. People think money was given as a gift rather than the loans and ownership stakes which were what actually happened.
The state is not the best manager, let's be honest. They should sell the shares as soon as possible, permitting market conditions. Otherwise you'll have elected jerks grandstanding and playing games.
Not bailing them is also easier said than done: tens of thousands of direct and indirect jobs.
And because the state bailed them out 10 years doesn't mean that the plant in a certain city will stay open for eternity.
Millions in gov't subsidies, a major bailout in 2009 that saved their company, non-stop threats of closure and ongoing clawbacks of manufacturing. And in the end... up and out.
Obviously it is GM's prerogative and can do as they please but it is time for politicians to stop falling for the folly. Just like your stocks and mutual funds - diversify your industries and don't rely on one big player.
"diversify your industries and don't rely on one big player."
Not only easier said than done, it's basically I think the hardest thing to do in governance in business.
The reason subsidies exist is because everything flows from these 'tentpole' industries, it's hard to underestimate.
Canada overall has become less diversified in the last 30 years, and less able to build more sophisticated products, which is not good. There are a host of reasons.
This happened in Australia with Toyota, Ford, Holden (GM), and I think before all that, Nissan and Mitsubishi. Also in New Zealand with Mazda/Ford, (edit: Toyota in Thames) at least in my lifetime.
Subsidies have never worked. It seems in the end these companies never paid net taxes and the workers lost their jobs anyway. Subsidies are a scam.
It should have long been clear that mass manufacturing in high-wage countries cannot sustainably support as many jobs as it used to be, given low international shipping costs and increasing domestic automation.
The subsidies should be spent to retrain the workers for hard-to-export and costly-to-automate jobs like electricians, plumbers, etc instead. Part of the funds should support their cost of living during the reskilling period as well.
Politicians aren't falling for anything. They are buying political points to help their next election and keep money in their donors' pockets. It is a shell game. They will bail out another group in the future, rinse and repeat.
It is easy to throw shade at politicians, I am sure there were some that genuinely wanted to preserve jobs for the long haul, but sadly they are a minority.
Government's justification for bailing out companies like GM is to ostensibly save jobs. Diversification is great for your economic portfolio but it's not so easy for workers. Telling a laid-off auto worker to switch industries is not a very fair thing to do.
It's far easier to move capital around to different industries. Not so easy to transfer your skills between them.
I'm as opposed to subsidizing individual industries or companies as anyone.
Then again, nothing is forever, and the fact that a single factory closes after a decade doesn't exactly disprove the whole model. That is bound to happen in any industry, subsidized or bailed out or not.
The North American auto industry essentially held the Canadian and US governments for ransom in the 2008-2009 financial crisis, "bail us out or we'll go belly up completely, and look how many people will be unemployed!".
"Today, GM is continuing to take proactive steps to improve overall business performance including the reorganization of its global product development staffs, the realignment of its manufacturing capacity and a reduction of salaried workforce."
...
Increasing capacity utilization – In the past four years, GM has refocused capital and resources to support the growth of its crossovers, SUVs and trucks, adding shifts and investing $6.6 billion in U.S. plants that have created or maintained 17,600 jobs. With changing customer preferences in the U.S. and in response to market-related volume declines in cars, future products will be allocated to fewer plants next year.
Assembly plants that will be unallocated in 2019 include:
Oshawa Assembly in Oshawa, Ontario, Canada.
Detroit-Hamtramck Assembly in Detroit.
Lordstown Assembly in Warren, Ohio.
Propulsion plants that will be unallocated in 2019 include:
Baltimore Operations in White Marsh, Maryland.
Warren Transmission Operations in Warren, Michigan.
My former SO lives in Oshawa and I spent a lot of time there.
I got to know a few people that worked at the factory. GM announced they were going to pull out of Oshawa more than 5 years ago. They've been operating on borrowed time. Nobody there will be surprised at the news. From what I recall it was mostly impala and camaro assembly happening there.
The GO train takes you right into Toronto, there's no doubt in my mind most of the laidoff will find work.
The most shocking part of this to me is that they are cutting the Volt? There was so much R&D in that car and it's such an amazing vehicle that I'm shocked. Everybody I know that has one LOVES it.
They just need to do a better job of advertising it. It's not advertised AT ALL. The only people who know about it know about it from word of mouth and research.
Most people posting here say that the US/Canadian government should interfere here. I'd like to present a different point of view: I am relatively young, from the Netherlands and started my job a few years ago. I do not really remember the 2008/2009 bailouts. I have some savings, and I invested mostly in a Dutch ETF, which lead to a nice mix of tech, finance, Food Industry and a big oil company.
I invested a small portion of my money in GM because I did not have a car manufacturer in my portfolio, and Tesla seemed hyped to me. I considered that GM is making a profit, betting on electric cars and already has an affordable model on the roads that could actually benefit society.
I do not care wheter GM production is in the US, Canada, Mexico or China, as long as the employees are treated fairly. In fact, I would think it is unfair that GM makes a choice that will lead to lower dividends and is held back by something that happened prior to the moment that I invested in it.
Maybe this will annoy some people but as someone who lives in the GTA, this attitude just sounds like you are saying your investment portfolio is more important than the thousands of people losing their jobs just before christmas.
I know there are big important things to discuss here (such as the bailout that we all know isn't being paid back and overall manufacturing) but my first emotional response is a certain finger pointed in your general direction.
> betting on electric cars and already has an affordable model on the roads that could actually benefit society.
GM is hedging their bets at best. Right now the Volt and Bolt are compliance cars that allow the remainder of their fleet to be inefficient and still meets CAFE standards.
When you invested in a company you bought in to both its assets and liabilities. Those include good will, implied commitments, and public or government attitudes formed over decades of operation. You bought the whole history.
There is more to be said about the purpose of providing liability shields and corporate rights in exchange for positive contribution to society and the economy; employment is by far the largest benefit society derives from those.
Its interesting to see so many here have the opinion that the subsidies were wasted and the governments should have let GM fail, not spend taxpayer dollars to bail them out.
And yet, most on HN seem perfectly happy to give Amazon huge tax breaks to setup in NY, which is exactly the same thing.
They need a basic lesson on economics.... Umployment rate is probably the one metric that government looks at most attentively, no government will let it go up unless they cant help with it. If GM fails, the economical activity it brings would also cease, people lose their job, the people who serve those people would also suffer. They will stop paying their debt and mortgage, and government will lose their tax revenue. They economy is likely running into a halt, and social services and new investment take years maybe never to begin to be profitable. How could people think the, bailout is wasted is really baffling, it surely isn't, it is life saving..
In no way is "here's billions of dollars, hopefully that'll save you!" the same thing as "move here and we'll cut your taxes by 20% per year for the next 25 years, up to a maximum of $x, as long as you hire this many people and pay them at least this much, and also x, y, and z."
One is highly speculative, one is essentially guaranteed.
It's remarkable that you can say they're the same with a straight face.
Most here are totally for wealth redistribution so long as it suites their needs. They don't understand how subsidies distort the market and lead to consolidation of power by the few, which in turn drives down wages for the many. It seems most would prefer to be wrong than change their perspective and view themselves as a hypocrite.
GM should have been allowed to fail, but not because they were going to turn out to be ungrateful. They should have been allowed to fail because liquidation is the best medicine when the patient is insolvent and bankrupt.
I cant understand why some people conflate tax breaks and subsidies. They're not the same thing. Whether amazon should be given tax breaks is a separate debate.
It's not exactly the same, though. Bailout uses the money that government already has, and that could be used on something else. Tax break is using the money that you don't have yet - and, crucially, will only have if the company actually is there!
Slowing sales of pickup trucks and sedans -- Silverado and Impala in particular.
Ford recently announced ceasing production of all sedans in favor of SUV's. GM said it wouldn't follow suit but it looks like the market might be dictating terms.
Oddly enough, the Equinox uses the same V6 engine as the Impala and Cadillac. I guess it comes down to how you use the vehicle and not how you power it. The 3.6L V6 VVT is a good engine too -- reliable, 300+ hp, 30+ mpg hwy, etc. Built in Detroit even though the vehicles are assembled in Oshawa.
This shutdown is a bellwether, not just a cost move.
For those critical of the 2008-2009 bailouts, GM or any other automaker with manufacturing operations in North America going belly up would have contributed to an even larger disaster. It's not just the main plants that would be affected, but also the entire supply chain - from mom & pop shops up to the big component manufacturers located in clusters across the country, not to mention GE, National Instruments, Intel, and myriad manufacturing-focused startups.
Most people have a very simplistic view of the GM bailout, it was not like the bailout of the banks. GM was allowed to fail, shareholders and senior creditors took a loss in favor of unsecured creditors (Union Pensions were stuffed with GM funny-money bonds). The feds completely disregarded the law and simply did what they thought was politically expedient (bailing out the unions).
What should have happened: GM Fails, GM assets inevitably acquired by someone else. Business involves risk, taxpayers shouldn't subsidize that risk.
The short term impact of letting the automakers fail would have been rough but in the long term we would have ended up with a more competitive economy.
I understand Ontario has very high electrical rates and labor rates. There is also the issue of the Federal Governments new Cap and Trade policy although I don't know if GM received a waiver. Did these things maybe cause GM to close the plant?
The cap and trade system was done away with by our current government in a populist bid to "reduce the price of gas" (and unsurprisingly, gas prices didn't change with the removal of the program).
Our Hydro prices are about middle-of-the-road in North America. We have a tiered-use system that sees prices as high as 13.2¢/kWh On-Peak (during the day) and 6.5¢/kWh Off-peak (at night), with an average around 8-9¢/kWh IIRC. Far from expensive, but when everyone compares our prices to Quebec (one of the cheapest in NA and is something around 4¢/kWh average IIRC) it seems astronomical.
Labour rates generally aren't too crazy either, we do have a relatively high minimum wage of $14/hr, but when unions start to run the show and wages become "competitive" it starts getting out of hand. Cami is in my hometown and IIRC the average employee takes home something around $35/hr. Toyota in Woodstock and Cambridge are over $35/hr at their highest rate, even though they aren't unionized, but they still have to pay competitive wages or they'd never have enough employees. A lot of the feeder plants (i.e. the places that make components; engines, doors, etc) are in the $20-25/hr range and they have an astronomically high turnover rate, nobody wants to do the work unless there's huge money involved. I'm wondering if this is the reason; why pay thousands of ungrateful employees >$30/hr for work that can be done for <$10/hr virtually anywhere else on the planet? Even by the time you factor in the costs of shipping vehicles it's gotta be thousands of dollars cheaper per-vehicle. It can't be easy to justify the cost to shareholders unless the (monetary) benefits massively outweigh the cons
[+] [-] esturk|7 years ago|reply
For all the criticism Chinese tech companies get, the main control the Chinese government has is by being the largest shareholder of said companies. If the company does something that jeopardizes the stability of society, just enforce control. Every sizable Chinese company has a party secretary for the very same reason.
[+] [-] peeters|7 years ago|reply
As part of the bailout, Canada/Ontario took a 12% ownership stake in GM. They have since sold their shares (at least Ontario has). At the time, the union president argued they should be keeping the shares for that exact reason, so that they have a reasonable influence on company decision making.
https://www.theglobeandmail.com/report-on-business/ontario-s...
[+] [-] Shivetya|7 years ago|reply
Governments regularly dole out tax and other equivalent subsidies all the time to businesses. From these bail outs, to funding stadiums, to getting new jobs or headquarters.
This is all comes with risk and the risk should entirely be on the government making the deals. If they are making bad deals then hold them accountable. Part of this is making sure that all other taxation and such does not eventually price manufacturers out of your region.
With regards to the auto industry, the key word is industry. It is spread across multiple countries which means all must be taken into account when it comes to where vehicles are produced. This gets more important as the industry shifts the types of vehicles being made.
EV production will lead to the largest number of plant closures in the history of automotive production. The drive train savings alone in complexity will remove the need for engine and transmission plants as well as many plants which make the supporting hardware like pumps and more. The cascade effect on repair and maintenance shops will be even more hard felt.
edit: https://www.reuters.com/article/us-gm-restructuring/gm-to-cu...
Appears they are dropping three plants and a few cars
[+] [-] tonyedgecombe|7 years ago|reply
https://en.wikipedia.org/wiki/British_Leyland
The best option is to let uncompetitive businesses fail and concentrate on things the private sector can't do well.
[+] [-] dgudkov|7 years ago|reply
It didn't work out well with Bombardier (CS-series).
[+] [-] hackeraccount|7 years ago|reply
[+] [-] mdasen|7 years ago|reply
It should also be noted that the US ended up owning 60.8% of new-GM while Canada owned 11.7% and the unions' benefit fund owned 17.5% with the unsecured bondholders owning the remaining 10%.
I know that it's easy to hate on the bailouts. People think money was given as a gift rather than the loans and ownership stakes which were what actually happened.
[+] [-] onetimemanytime|7 years ago|reply
Not bailing them is also easier said than done: tens of thousands of direct and indirect jobs.
And because the state bailed them out 10 years doesn't mean that the plant in a certain city will stay open for eternity.
[+] [-] the_unknown|7 years ago|reply
Obviously it is GM's prerogative and can do as they please but it is time for politicians to stop falling for the folly. Just like your stocks and mutual funds - diversify your industries and don't rely on one big player.
[+] [-] sonnyblarney|7 years ago|reply
Not only easier said than done, it's basically I think the hardest thing to do in governance in business.
The reason subsidies exist is because everything flows from these 'tentpole' industries, it's hard to underestimate.
Canada overall has become less diversified in the last 30 years, and less able to build more sophisticated products, which is not good. There are a host of reasons.
[+] [-] i_feel_great|7 years ago|reply
Subsidies have never worked. It seems in the end these companies never paid net taxes and the workers lost their jobs anyway. Subsidies are a scam.
[+] [-] nopinsight|7 years ago|reply
The subsidies should be spent to retrain the workers for hard-to-export and costly-to-automate jobs like electricians, plumbers, etc instead. Part of the funds should support their cost of living during the reskilling period as well.
[+] [-] rpiguy|7 years ago|reply
It is easy to throw shade at politicians, I am sure there were some that genuinely wanted to preserve jobs for the long haul, but sadly they are a minority.
[+] [-] chongli|7 years ago|reply
It's far easier to move capital around to different industries. Not so easy to transfer your skills between them.
[+] [-] BurningFrog|7 years ago|reply
Then again, nothing is forever, and the fact that a single factory closes after a decade doesn't exactly disprove the whole model. That is bound to happen in any industry, subsidized or bailed out or not.
[+] [-] walrus01|7 years ago|reply
[+] [-] notatoad|7 years ago|reply
Isn't this what the subsidies are all about? If you want diverse industries to move to your region, you need some incentive to attract them.
[+] [-] unknown|7 years ago|reply
[deleted]
[+] [-] stickfigure|7 years ago|reply
[+] [-] SamuelAdams|7 years ago|reply
"Today, GM is continuing to take proactive steps to improve overall business performance including the reorganization of its global product development staffs, the realignment of its manufacturing capacity and a reduction of salaried workforce."
...
Increasing capacity utilization – In the past four years, GM has refocused capital and resources to support the growth of its crossovers, SUVs and trucks, adding shifts and investing $6.6 billion in U.S. plants that have created or maintained 17,600 jobs. With changing customer preferences in the U.S. and in response to market-related volume declines in cars, future products will be allocated to fewer plants next year.
Assembly plants that will be unallocated in 2019 include:
Propulsion plants that will be unallocated in 2019 include:[+] [-] joecool1029|7 years ago|reply
I got to know a few people that worked at the factory. GM announced they were going to pull out of Oshawa more than 5 years ago. They've been operating on borrowed time. Nobody there will be surprised at the news. From what I recall it was mostly impala and camaro assembly happening there.
The GO train takes you right into Toronto, there's no doubt in my mind most of the laidoff will find work.
[+] [-] brightball|7 years ago|reply
They just need to do a better job of advertising it. It's not advertised AT ALL. The only people who know about it know about it from word of mouth and research.
[+] [-] evandijk70|7 years ago|reply
I invested a small portion of my money in GM because I did not have a car manufacturer in my portfolio, and Tesla seemed hyped to me. I considered that GM is making a profit, betting on electric cars and already has an affordable model on the roads that could actually benefit society.
I do not care wheter GM production is in the US, Canada, Mexico or China, as long as the employees are treated fairly. In fact, I would think it is unfair that GM makes a choice that will lead to lower dividends and is held back by something that happened prior to the moment that I invested in it.
[+] [-] canadianwriter|7 years ago|reply
I know there are big important things to discuss here (such as the bailout that we all know isn't being paid back and overall manufacturing) but my first emotional response is a certain finger pointed in your general direction.
[+] [-] swarnie_|7 years ago|reply
I opt'ed for VW as it was very cheap after the scandal and had some of the best brands in the business. Why did you pick GM instead?
[+] [-] cptskippy|7 years ago|reply
GM is hedging their bets at best. Right now the Volt and Bolt are compliance cars that allow the remainder of their fleet to be inefficient and still meets CAFE standards.
[+] [-] jhayward|7 years ago|reply
There is more to be said about the purpose of providing liability shields and corporate rights in exchange for positive contribution to society and the economy; employment is by far the largest benefit society derives from those.
[+] [-] unknown|7 years ago|reply
[deleted]
[+] [-] grecy|7 years ago|reply
And yet, most on HN seem perfectly happy to give Amazon huge tax breaks to setup in NY, which is exactly the same thing.
[+] [-] Jedi72|7 years ago|reply
[+] [-] tanilama|7 years ago|reply
[+] [-] ryanwaggoner|7 years ago|reply
In no way is "here's billions of dollars, hopefully that'll save you!" the same thing as "move here and we'll cut your taxes by 20% per year for the next 25 years, up to a maximum of $x, as long as you hire this many people and pay them at least this much, and also x, y, and z."
One is highly speculative, one is essentially guaranteed.
It's remarkable that you can say they're the same with a straight face.
[+] [-] linuxftw|7 years ago|reply
[+] [-] cryptonector|7 years ago|reply
[+] [-] suddenstutter|7 years ago|reply
[+] [-] int_19h|7 years ago|reply
[+] [-] johnohara|7 years ago|reply
Ford recently announced ceasing production of all sedans in favor of SUV's. GM said it wouldn't follow suit but it looks like the market might be dictating terms.
[+] [-] johnohara|7 years ago|reply
This shutdown is a bellwether, not just a cost move.
[+] [-] protomok|7 years ago|reply
[+] [-] ilamont|7 years ago|reply
[+] [-] linuxftw|7 years ago|reply
What should have happened: GM Fails, GM assets inevitably acquired by someone else. Business involves risk, taxpayers shouldn't subsidize that risk.
[+] [-] mdgrech23|7 years ago|reply
[+] [-] tomjen3|7 years ago|reply
[+] [-] jammygit|7 years ago|reply
Its so awful when you lose your job because the job goes away. So many people are going to have to retrain.
[+] [-] slededit|7 years ago|reply
[+] [-] Overtonwindow|7 years ago|reply
[+] [-] hourislate|7 years ago|reply
[+] [-] FractalParadigm|7 years ago|reply
Our Hydro prices are about middle-of-the-road in North America. We have a tiered-use system that sees prices as high as 13.2¢/kWh On-Peak (during the day) and 6.5¢/kWh Off-peak (at night), with an average around 8-9¢/kWh IIRC. Far from expensive, but when everyone compares our prices to Quebec (one of the cheapest in NA and is something around 4¢/kWh average IIRC) it seems astronomical.
Labour rates generally aren't too crazy either, we do have a relatively high minimum wage of $14/hr, but when unions start to run the show and wages become "competitive" it starts getting out of hand. Cami is in my hometown and IIRC the average employee takes home something around $35/hr. Toyota in Woodstock and Cambridge are over $35/hr at their highest rate, even though they aren't unionized, but they still have to pay competitive wages or they'd never have enough employees. A lot of the feeder plants (i.e. the places that make components; engines, doors, etc) are in the $20-25/hr range and they have an astronomically high turnover rate, nobody wants to do the work unless there's huge money involved. I'm wondering if this is the reason; why pay thousands of ungrateful employees >$30/hr for work that can be done for <$10/hr virtually anywhere else on the planet? Even by the time you factor in the costs of shipping vehicles it's gotta be thousands of dollars cheaper per-vehicle. It can't be easy to justify the cost to shareholders unless the (monetary) benefits massively outweigh the cons
[+] [-] microcolonel|7 years ago|reply
[deleted]
[+] [-] pfarnsworth|7 years ago|reply