How The GM Bailout Turned Into Foreign Aid

Before the bailout of General Motors, it was well understood that the world’s largest automaker was losing huge amounts of money in the US and was staying afloat thanks to stronger performance in overseas markets. Since the bailout, however, that dynamic has been turned on its head. Thanks to a leaner manufacturing footprint, debt eliminations and steadily recovering sales, GM’s US operations have generated the lion’s share of the company’s profit since the bailout. And now, as the rest of the world economy slows, GM is spending more and more of its taxpayer-enhanced cash pile to shore up its faltering foreign divisions. In fact, according to an analysis of GM’s SEC filings, the company is likely to incur over $6.5 billion in losses and expenditures overseas in the 2011-2014 period, not counting over $1.6b in foreign potential legal liabilities or several other incalculable expenses that could add up to billions more.

But they all emphasize the reality that, after years of living off foreign operations, GM’s bailed-out North American division is now bailing out the rest of the world.

"With more losses and expenses coming, taxpayers can expect to see their investment in GM’s North American operations continue to support a steady flow of cash to GM’s overseas operations. Perhaps taxpayers should have been told that they weren’t simply bailing out an American automaker, but a variety of overseas operations as well."

If you have advanced factories, and if you have a skilled workforce, then the work will be performed. GM could have gone bankrupt -- but someone would have shown up with money and started over. A new corporation would have been formed (without unions) and the assembly lines would have re-started, and cars would have been manufactured.

The bailout was never needed.

If the government had not intervened, GM would have reorganized in a traditional court supervised bankruptcy and continued operations just as almost every major US airline has been reorganized over the past 20 years. The major differences between a traditional bankruptcy, and the US government bailout:

1). No taxpayer dollars involved and no US government ownership
2). No union ownership
3). For the company to survive the union contracts would have been rewritten with much bigger union concessions.
4). The salaried and union retirees would have received equal treatment with respect to disposition of pension plans. In the government bankruptcy the union employee pensions were protected and the salaried employees took a reduction.
5). The Volt, and other uneconomical green ventures, would have been cancelled.
6). Bond holder rights would have been protected.
7). The arbitrary cancellation of dealer franchises would either not have occurred or would not have been a political action.
8). Possibly one or more of the discontinued brands would have survived in some form. The product strategy might be very different today.
9). Senior management would likely be different as the government would not have been involved in the selection.
10). The supplier base would have absorbed a larger financial loss. Government GM made good on payments to suppliers. In a normal bankruptcy the suppliers would have lost their receivables at the time of the filing, likely receiving only pennies on the dollar months or years layer.

This is one problem you can hang on the liberals. Did GM management know how to be profitable? Sure did. Did GM management know that their cost to produce a car was too high in comparison to their competitors? Yep. Could they have lowered the production cost per car to make themselves profitable and viable? Of course. Would the liberals let them? No way. If GM had gone to the unions and said they were cutting wages and benefits by 50%, the Democrats and media would have crucified them. So, GM management philosophy became, “Let’s see if we can kick this dead cat down the road far enough that I can get my retirement before it stinks too bad.” Get government and the Democrats out of the way and GM will be fine.

We have an interesting advertising battle here in Indiana in the Senate race.

Donnelly is advertising that Mourdock opposed the bailout which saved Chrysler jobs. (several Chrysler plants here)

Mourdock is saying Donnelly voted for the bailout that screwed bondholders. One of the large bondholders was Indiana PUBLIC EMPLOYEE retirement funds.

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