I have met many Chevy lovers in my day, a good number of dedicated Cadillac drivers, guys who swear by Dodge Ram trucks and even a Buick fan or two. But as convinced as these folks are of the superiority of the brand they drive I have never met anyone who said, "It's either a Caddy or Birkenstocks for me". No one I know would buy a pair of roller skates if they couldn't get a Chevy. None of the Ram truck guys I met in the Dakotas would opt for a mule if it came down to that or a Ford.
So how is it that our projected net outlay of $59 billion (the $14 billion the White House admits to plus the $45 billion in tax breaks for GM they like to keep on the QT) to keep GM and Chrysler alive saved a single job – let alone the "million jobs" Assistant Secretary for Financial Stability Tim Massad claims it saved?
A writer for CNN – the Obama administration's public relations arm – said "Had GM and Chrysler collapsed, it would have cost the federal government about $28.6 billion in lost tax revenues and assistance to the unemployed in just the first two years alone." He went on to crow, "By the way, that $28.6 billion figure doesn't include the business taxes the federal government would have lost but can now expect from two large, profitable automakers and their suppliers. It also doesn't include any lost state and local tax revenue."
It seems to me that JD Power would be projecting US auto sales in 2011 to be 12.9 million whether we bailed those guys out or not. Those Chevy and Dodge buyers would have had to buy something else, as sorrowful as that might be for them. Every car and truck sold by the bailed out companies would have been sold by Ford, Toyota, Honda, Hyundai or one of the other car companies. Any taxes paid by the freeloading companies would have been paid from the increased profits from one of the other companies. (And let's not hear about them being American companies and most of the others being foreign owned. The average Toyota has more American content than a Chevrolet)
The bailout didn't save a single job – it just moved the jobs around. Instead of new jobs in Dearborn, Georgetown or Marysville, the Feds forced the jobs into GM and Chrysler locations. The local tax revenues the bailout 'saved' in Michigan came at the expense of tax revenues in Ohio, Kentucky, Indiana, West Virginia and a lot of southern states where cars are made.
At the end of the day, the big winner from the bailout was the UAW. The bailout kept them in existence. Had it not occurred, those 'saved' jobs would have been mostly in non-union plants, leaving the UAW with only Ford. A shrinking union with only one evil capitalist to battle isn't much of a union. And it didn't hurt any to preserve jobs in rabidly pro-Obama Michigan, instead of letting the jobs go to places like South Carolina, Georgia and Texas where the flow of money to Democrats is barely a trickle.
All tolled the auto bailout cost every American man, woman and child almost $200 each. Strikes me as pretty crappy for the administration to levy a $200 fine on all of us to prop up the UAW and lie to America calling it 'job creation' when 9.2% of the people who have to pay the phony job creation/UAW prop-up tax don't have jobs at all.
James says
Is “tolled” in the last paragraph a deliberate error?
If not it brings a nice tone in keeping with the rest of the post
Simon Cunnane says
It would be mildly amusing if the figures weren’t so staggering.
Bill Waddell says
Nice catch, James. Actually, while I am familiar with the argument that ‘all told’ is correct and ‘all tolled’ is not, I haven’t quite accepted it as the final say in the matter and, in this case, ‘all tolled’ seemed to have the better ring (pun intended) regardless of the linguists opinions.
Jim Fernandez says
Seems to me in this case it should be “all totaled”.
One of the things that makes this country so great is that we have the opportunity to fail, (Or we used to anyway). The car companies, the unions, the banks and any other endeavor must be allowed to fail. In the big picture, failure helps provide good quality of products and services to the customer.
By the way, if a company is not allowed to fail, why would they ever need to apply continuous improvement and Lean principles?
Speaking of failures, I would also include the federal government. Let it run out of money and when the politicians stop getting paid then we will see some really good financial management ideas come forth.
Grant Lindsay says
If GM and Chrysler had been allowed to follow their path to ultimate failure, what impact would that have had on global car production capacity relative to demand?
Bill Waddell says
I don’t know Grant, but had GM and Chrysler gone under there would have been plenty of former GM and Chrysler plants for sale cheap to any car maker needing to expand.
Mark Graban says
Bill is right, plus the global automotive industry has had a lot of excess capacity for decades now.
Grant Lindsay says
I have no doubt other companies would absorb the demand over time, how long it would take is hard to say. To me the more interesting discussion is what the short term (1 or 2 yrs) impact could have been.
Would the excess capacity cover the loss? I think that would be interesting to know.
Mark Graban says
Grant, I think the industry would have absorbed demand just fine without there being a shortage of cars.
Jenny says
Expensive mistake, but honestly, I don’t think we can blame Obama’s political interests. The automakers came to Washington DC as the country was facing a potential Great Depression, and said, ‘if you don’t help us we’re gonna have to lay off the entire state of Michigan.’
Of course the government panicked. They went ahead bailed out the auto companies associated with Made-in-America-Pride. It wasn’t a decision made purely for Democratic Party interests. Rather, it was a decision made due to pure terror.
Expensive Mistake. For now. Technically, those companies owe the American people $200 each for the loan, plus interest. Like the better-run banks, they may someday be able to pay us back for the bail-outs.
Oh, and for the record, no arguments about the UAW. Some unions are reasonable, understand collaborative negotiation — those unions tend to do great work and create much needed industrial improvements. But some unions just create havoc.
Bill Waddell says
Jenny,
Out of idle curiosity, exactly which unions have ‘created much needed industrial improvements’ in the last 60 years?
And I think it is wishful thinking indeed to believe that someday GM will pay anything back. The bath we are taking is in the form of stock we own in GM that we paid way too much for, and tax breaks that were given away. There is nothing in that equation obligating GM to reimburse the US taxpayers for the tax breaks or the losses we are taking on our stock in GM.
Bill