Aftermath Of The GM Bailout

General Motors — the company that American taxpayers bailed out less than a decade ago, rescuing the company from near-certain bankruptcy after years of mismanagement — continues to struggle, and the dominoes that were toppled by the bailout decision continue to fall.

636198172298775780-lsjbrd-04-17-2016-gli-1-a001-2016-04-14-img-gm-shutdown-jpg-1-1-fhe0e7gq-l792930015-img-gm-shutdown-jpg-1-1-fhe0e7gqYesterday the company announced that it is engaging in a massive restructuring that will close assembly plants in Ohio, Michigan, and Ontario, Canada, eliminate thousands of jobs, and end some car lines.  One of the vehicles  being discontinued is the Chevy Volt, the electric hybrid GM rolled out to great fanfare.  The company said that “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.”  GM’s CEO, Mary Barra, said “GM wants to stay in front of changing market conditions and customer preferences for its long-term success.”  One of the “changing market conditions” is the declining public demand for passenger cars like the Volt and the Chevy Impala, which also is being discontinued.

President Trump and the United Auto Workers are both unhappy at the GM move.  Trump said he didn’t like GM’s decision and reports that he told Barra “You know, this country has done a lot for General Motors. You better get back in there soon. That’s Ohio, and you better get back in there soon.”  The UAW, which will see the loss of lots of blue collar jobs held by its members, said:  “This callous decision by GM to reduce or cease operations in American plants, while opening or increasing production in Mexico and China plants for sales to American consumers, is, in its implementation, profoundly damaging to our American workforce.”  The UAW news release added that “GM’s production decisions, in light of employee concessions during the economic downturn and a taxpayer bailout from bankruptcy, puts profits before the working families of this country whose personal sacrifices stood with GM during those dark days.”

GM’s decision will no doubt be devastating to those employees who lose their jobs and the communities where the plants will close.  But it also makes me wonder how even the advocates for the taxpayer bailout of GM less than 10 years ago feel about their decision to prop up GM now.  The underlying question raised by the UAW and President Trump is legitimate:  Was the bailout worth it, in view of these kinds of decisions?  GM remains a public company, and it gets to make decisions that it considers to be in its own competitive interest.  And if changing market conditions really do require GM to cut thousands of jobs that the bailout advocates expected would continue indefinitely, that may just tells you something about the wisdom of taxpayer bailouts generally.

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Calling With A Final Update On That GM Investment

Mr. Webner, long time, no talk! It’s the federal government calling to update you on your GM investment.

For the love of God! Leave me alone! We got rid of our land line so you wouldn’t bother us any more. How did you get this number?

Don’t be naive, Mr. Webner. We’re the federal government. Now let’s talk about that GM investment. We liquidated the last of our GM investment in December, and incurred only a $10 billion loss on our $49.5 billion investment!. Isn’t that wonderful?

Wait a second . . . did you say a $10 billion loss? You’re happy that the government lost more than 20 percent of our investment in GM?

That’s right. GM stock has gone in the dumper over the last few months. By wisely selling when we did, we’ve managed to keep our losses to only $10 billion. If we’d held on and tried to sell now, we’d have a much bigger loss!

Isn’t the drop in GM’s stock due to some extent to its problems with faulty vehicles due to a faulty ignition switch? Were you guys aware of that problem when you decided to invest our money in GM stock and then to sell it when you did?

(Silence.)

You know, there was a Senate hearing today on that issue. More than 2.5 million GM cars worldwide have been recalled, and Senators suggested that GM’s failure to act more promptly raised issues of criminality. Say, do you think you guys might be in trouble because you were aware of that whole issue?

(Heavy breathing.)

You know, the whole recall situation makes your decision to sell GM stock seem really convenient. As long as we’re on the phone, maybe you can answer this question — what did the government know, and when did it know it? Was there some insider trading here? Maybe you should get a lawyer.

(Click.)

Calling To Report On That GM Investment

Calling To Update The Report On That GM Investment

Calling With Another Update On That GM Investment