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.
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!".
Yes, agreed. They should have gone chapter 7 and the canadian equivalent in bankruptcy law. Some foreign buyer would have bought up the assets worth buying, and made better cars. Maybe 1/3 to 1/2 of the workforce could have been re-hired, the government bailout money could be spent on retraining and supporting the remaining 2/3 to 1/2 of the workforce.
"They should have gone chapter 7 and the canadian equivalent in bankruptcy law. Some foreign buyer would have bought up the assets worth buying, and made better cars. "
It's very unlikely.
A) Plants are tooled for a specific car, often to platforms that are company specific.
B) There is a reason GM is shutting it down, and other companies are probably in the same set of circumstances.
C) Do you think company A wants to buy company B's powerful Union? Uhhh, no! It's not entirely rocket science to train people to make cars.
The current MG ceased assembly in the UK a couple of years ago. As it involved laying off 25 people, it seems like it was a rather token effort in he first place.
Thos jobs pay for the social services of many, and if GM and Ford went kaput, it would wipe out the governments ability to pay for those services.
Now - I'm not saying it's the right thing to subsidize, but in a 'subsidize or collapse' situation, that is the reality.
A corporation has many stakeholders: execs, staff, buyers, suppliers, investors, debtors, and then all the ancillary people who benefit independently - they're all in a power struggle to share in the surpluses.
If a company is facing legit collapse, and the investors are truly willing to bite the bullet, it's because they don't think their is incentive there for them. The surpluses generated may actually be going into the other entities in the power equation: just because investors own the profits does not mean that profits represent the big chunk of surpluses.
My ex-neighbour was a long-tim plant worker, he earned quite a lot, granted he was senior - those are in fact plumb jobs that often pay way above others when you factor healthcare, retirement etc.. Also consider low turnover - most people change jobs every few years and lose a few months pay. When you work in an auto plant, for a bank, for the government etc. the stability factor is a real economic benefit you can calculate.
It's hard to tell if companies are bluffing or not, but in many cases they are not - and it illustrates really where the surpluses are and it's not with them.
There's a big Boeing 777 business case that's used in B-School for accounting, and it basically demonstrates that the project is kind of a loser for them, and they should not invest. But the government came along with incentives, making it worthwhile. It's not a paradox, it's just a lesson in who profits from what and how.
Ford is just an example of a 'big company' that might go bankrupt.
A bailout/subsidy for a company is different than a bankruptcy situation.
You can be assured that in a bankruptcy, the factory will probably close, and it's workers laid off. It doesn't matter i some assets are sold off, significant economic activity will dissapear in almost all cases. It's usually better for the economy for a company to survive than not.
I agree, likely we would have had a few smaller splinter companies from it but I don't see that as a bad thing in anyway except for those handful of people who were at the very top of the managerial/administrative pyramid.
And instead of taking the opportunity to nationalize them, our useless neoliberal leaders instead went "uhh okay lol heres some money pls don't do that thing we all know you'll do".
Setting aside the complexities of two nations trying to nationalize the same company...the most recent example of an anglophone government taking over its carmakers (UK) isn’t exactly an encouraging precedent...
Too bad we didn't call their bluff, and especially that of the banks, and put the bailouts into infrastructure or new industry to replace those jobs and put us in a better position for the long term.
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 bitched about it at the time, but the bailouts worked. They saved jobs for ten years, stabilized economies in free fall, and made the governments involved a profit. Ten years of employment is nothing to sneeze at. Plenty of baby boomers hit retirement in that time.
Frankly I'm glad GM is moving out now while the recession still hasn't hit.
You're right, except then they support destructive politicians that says the reason they don't have a job in coal anymore is because of "scapegoat of the day" (global warming lies? the EU? Immigrants? not killing puppies?)
Blockbuster disappeared because the technology it was built upon became obsolete. It also didn't require specialized labour skills - the employees just took their retail experience across the street.
This just seems like a different kind of situation to me. Automotive isn't going anywhere, GM just couldn't perform.
edit: I'm reading some other comments about drive trains and EVs & reduced manufacturing requirements due to it. That's interesting. Maybe I should read about this more
I think we should have a four day work week, with one day of free training as the fifth day. Still keeping Saturday and Sunday. With automation it's the only fair thing to do.
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.
I'm skeptical of this, but I don't know that it's wrong. I'm only making this comment in hopes of somebody else more knowledgeable responding to it (either for or against - really I am just curious if subsidies work).
> I'm skeptical of this, but I don't know that it's wrong.
It depends on what you mean by “worked”.
1) Have they allowed a slower and more humane shift of workers to other more competitive industries?
Yes. The GM bailout is a great example.
2) Have they helped keep certain skill sets in a country?
Yes. Undoubtably.
Is this important? I think so but there are opposing arguments.
It can take decades to build up an industry from scratch vs a few years to pivot into a related industry.
Think of how long it would take Germany to swap its automotive engineers and factories to producing tanks vs how long it would take a services based country to start producing tanks.
3) Have they lead to the revitalization of an industry?
This ones a lot more murky and it all depends on what time frame you are looking at and what you think the future will hold.
There are certainly examples of it working between first world countries for limited time periods (a decade or two).
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.
"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.
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.
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.
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.
In order to show that the engines are wastefully large, you first have to show how a smaller engine provides better fuel efficiency over the 95% range, and then show how the remaining 5% is unimportant. For example, if the big engine is 5% less efficient over the power range of the little engine, but the increased max power it provides allows you to accelerate out of getting stuck in the snow, or travel at safe speeds up mountain roads, reasonable people might decide that the trade offs are acceptable.
Disagree it's off-topic. Automobile manufacturers are focused on sales and right now they are moving with the market toward SUV's. The 3.6L engine is in both GM sedans and GM SUV's. Same engine, different body style. This move by GM means they are focused on production and it's probably too expensive to retool these plants.
Very much topic-related.
Not sure where you're going with the "oil despots" statement. That seems off-topic.
Cars are very expensive ($30k on average), and their production is a huge use of crude oil and water and electricity. What you seem to be advocating (and maybe I'm reading this wrong) is that people buy multiple cars, one small fuel efficient everyday driver, and one bigger more powerful vehicle for the 5% of the time they need something bigger than a Fiat. Humans are heavy, cargo is heavy, trailers are heavy, and furniture is big. A 1.8L engine in a subcompact can't always support those use cases.
I don't know too many people who could afford a $20k car to drive to work and then a $40k truck just to park in their garage 95% of the time. And if they can, they're buying a BMW instead.
What do you require a 3.6L for? A 1.8L will move all the cargo you care to. A 2.5L tows my 1200lb camper over high mountain passes. A big engine is really only a must if you are towing something north of a ton, as far as I'm aware.
People tend to buy more engine than they need, and 1.8L's are more powerful than ever. And nobody had 300hp thirty years ago except the sports cars. We survived.
The average American camper weighs 5,200lbs [1] completely empty. Once it's loaded with water, fuel, and gear, it's about 1,500 lbs heavier. I encourage you to find a 1.8L engine that will tow a 6,000+ lb trailer over a mountain pass.
I'm guessing the next argument will be "yeah but no one needs a 5,000 lb camper" to which I will say "why do you need a camper or car at all if you're trying to save the environment" to which the response will be "yeah but" and then I'll come back with "but no" and then I'll get yelled at by `dang so let's skip all that and say someone buying a 3.6L engine they don't need is a bad thing but so is the self-righteous idea that what works for you must always work for everyone else, and then agree that we're not going to solve the world's climate problems with throwaway HN comments.
The original comment was 3.6l is >2 times more cylinder volume than useful in >95% of scenarios. Towing a large american camper would be one of those 5% of scenarios. Many people have large campers, but far far more do not.
Again perhaps a bad assumption, but I generally hear "cargo" to refer to personal items that go in the car. Clothing, backpacks, shoes, groceries, books, etc. Hardly a strict definition of course, but that's what I was thinking about, not towed loads or a bedfull of dirt or construction materials, that I might call a "payload". But I hate quibbling semantics; my apologies.
And nobody had 300hp thirty years ago except the sports cars...
My first car, 45 years ago!, was a '66 Chevrolet Impala with a standard, small block, run of the mill, 283cu in. (4.6L) engine. The motor was blown so I bought a used one for $75 and swapped it out myself. Took about 6 weeks because I had never done it before.
The 283 was rated between 200 and 345hp. It was my daily driver for school (hardly a sports car) until markvdb's "oil despots" tripled the price of gas. I sold the Impala and bought a Volvo 144S with a 1.8L 4 cyl. engine.
Neither car (or engine) was ever able to get better than 25+ mpg and the Volvo made you very aware of how much power you had available.
My friend's father had a black '67 Buick GS400 droptop. It was a true "muscle car" in that it sucked in birds and leaves and spit out twigs and feathers. My Impala on the other hand, had a "three on the tree," a bench seat, and no a/c. But it always started in Chicago winters and ran well delivering pizzas.
You really can't compare HP ratings of cars from that era with modern cars. The old ratings were generally "gross brake horsepower" which was what you got at the crankshaft on a dyno with all the auxiliaries (oil pump, water pump, alternator, fuel pump, fan, etc) disconnected and powered separately and with special exhaust and intake arrangements, eg headers and no air filter. Modern HP is usually "SAE net horsepower" which is measured in almost an as installed in a vehicle configuration. Gross BHP significantly inflates the number.
Thanks for the link DavidGould. Learnt me some I didn't know.
The '66 Impala was a heavy car and I didn't purchase it for racing. I did put a heavy duty clutch plate into it when I replaced the engine. It did burnouts just fine until I snapped the welds on the rear differential and sent the universal joint banging upward against the bottom of the car. Learned a little bit about welding, u-joints and spider gears on that one.
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.
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!
You are forgoing the tax revenue that would've been earned by the workers as well as any benefits that they claim.
In Australia it was estimated that each auto job produces 6 other jobs through network effects [1]. All up that number would be fairly substantial and likely enough to justify some subsidies/bailouts.
Bailouts also use money that the government doesn't yet have.
In 2008 and its aftermath the U.S. ran up huge budget deficits, and the Federal Reserve for the first time monetized enormous amounts of debt. That was all money that the government did not have.
Besides, money is fungible. It doesn't matter if an entity has the money or can quickly raise it, especially if when it has the money it was already earmarked (or soon was going to be) for some other particular purposes.
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.
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.
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..
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.
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.
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.
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.
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 bailout cost tax payers $16 billion which has not been repaid. Nothing says gift louder than that.
In the meantime, they have been offshoring production of parts and vehicles like no one's business. I looked at a new full size truck, and it had 45% domestic content. Most of it is built in China and Mexico. The Ford that I purchased has 75% domestic content.
Yep, the government did take a loss on GM. Sometimes investments don't pan out. Investments still aren't gifts.
If it was a gift, who was it a gift to? It wasn't a gift to GM shareholders who received none of it. If the bad-guy in this situation is greedy shareholders looking to layoff workers, they didn't get the government's money.
One can certainly argue against the investment. However, it's hard to say it's a gift. Who was the recipient of that gift? If anything, it would have to be the workers who didn't face mass-unemployment in the wake of a crumbling auto industry.
If the government hadn't bought GM's assets, workers would have been out of jobs very quickly. During the economic crisis, no one had the available capital to take on that risk. The government's investment meant that most of those workers saw stability (or as close to that as could be had).
If you're on the workers' side, the government bailout is the side you need to be on. Shareholders lost everything while workers (for the most part) kept their jobs and benefits. Yes, there have been layoffs and contract re-negotiations, but that's nothing compared to the chaos of tens of thousands of people suddenly jobless concentrated in areas that don't have a lot of other employers (and during an economic crisis).
That doesn't mean that everything is perfect. However, the bailout benefitted workers, not shareholders who lost everything.
The bailout of GM, accomplished three things, the first of which - it saved the myriad of suppliers (ecosystem) the automakers need to make cars, the second was saving and unknown amount of money from unemployment claims by workers of GM, and downstream suppliers - in addition to money the pension benefit guaranty corporation would have paid out to cover GM pensions, it also preserved around 35 billion in tax revenue. While I'm opposed to bailouts like this on principle, letting an intire industry die, because one dominant player fails - the collateral damage trumps pricpleded thought here.
> 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.
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.
One example of a state business failing doesn't seem like a countercase? Almost every American car company was privately owned and failed, except the few that didn't.
> The best option is to let uncompetitive businesses fail and concentrate on things the private sector can't do well.
This is such an Economics 101-style response, I'm not even sure how to address it.
When the plant stops production, it's not only the 2500 people who lose their jobs, it's also the auxiliary economy of parts suppliers, logistics networks and food and drink businesses that are affected and may have to shut down as well. That creates a negative multiplier effect that pushes economic activity down further. Not to mention the long term impact of lower tax receipts, lower property values.
You can't snap your fingers and replace the underpinnings of an entire community overnight via the magic of the "free market". Another company will only accept the costs of relocating there if the government starts offering tax incentives and the like to make it worth their while.
I agree that we need a better system, especially when companies can simply move when it's convenient. But manufacturing is a strategically important industry and governments are willing to pay to keep that industry at home.
This is such an Economics 101-style response, I'm not even sure how to address it.
I keep seeing this response pop up.
"Sure, my position fails to demonstrate even the most basic understanding of economics, but your argument reeks of being built on the fundamentals of the field!"
Another anecdotal example - VW. Lower Saxony has 20% of the voting rights and 11.8% of ownership.
Ever heard of Renault? Due to neo-liberal politics the ownership has changed in more recent times, but they have been state owned for a lot of their history.
The disease of neo-liberalism was a contributory factor to the demise of BL and the word neo-liberalism didn't even exist prior to 1982. The writing was not on the wall with BL during the post war years and their products were highly successful. The UK balance of payments was helped not hindered by the predecessor companies - the Rovers, Triumphs, Austins and what-not.
The problem was investment. So in the years when BL was a lot of private companies they could not get investment from the city. This is because London only invests in companies they can asset strip, they don't speak the same banking language as in Germany where banks invest in companies and people.
After the Labour government that preceded Thatcher rescued BL there was a problem due to the lack of investment, however BL did what they could to rise to the challenge despite the difficulties of strikes and useless managers. Then when Thatcher arrived BL was privatised. There was obviously no investment from the conservative government, that is not how they roll. They just wanted to sell the family silver.
So then it comes to the media and how they portray the story as all the fault of the unions and the company being nationalised. Yet the story is not an honest one, the truth is that the UK banking sector just don't invest in actual companies that employ people that do actual work. They might front the cash for some asset stripping or they might invest in property, but never did they invest in UK industry. German culture was different, banks there have much better investment ideas, they can also see a better return from investing in their own concerns.
The disease of neo-liberalism was enforced on the world so you have things like Renault that the state aren't allowed to own if they are to be in the clubs of the EU/IMF/GATT and what not.
The people that manage companies are not automagically better people just because they work for vulture capitalists instead of the government.
I'll give you an example of government interference in the British car industry. For entirely political reasons the factory for the Hillman Imp was built in Scotland. The idea was to bring employment to a run down area, the reality was an inexperienced workforce that struggled to get products out of the door.
It's interesting to note we now make more cars in the UK than we ever did in the BL era.
It's not that the people who run the companies are better or worse. It's the customers. Is the company staying in business because once every two years a majority of the country pulls a lever for a group of people who then decide to vote to keep a company in business by sending money their way or is it staying in business because people spend money.
I have a lot more faith in decisions that get made because people put money down then because people put votes down. What's the line? A bet is a tax on bullshit. People say they like lots of things. They'll pay money they had to work to earn for a lot fewer - and they'll think about those a lot harder.
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.
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.
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.
It's not hard to see that proving up failing businesses leads to inefficiency. Why bother making a more competitive product if you know the government will save you with bailouts or tariffs.
It's a standard position for Chicago or Austrian school economists.
It's also how every crisis was handled until the Great Depression. Then we resorted to massive intervention to prevent liquidation. This experiment was repeated in the 90s in Japan, leading to two lost decades of economic growth. We don't seem to want to learn.
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.
Yes, liquidation is the answer when the patient is insolvent and bankrupt.
In a systemic crisis, however, our bankruptcy courts cannot move fast enough. That is a problem that needs to be tackled, otherwise scared politicians will always have enough time to reach for bailouts.
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
> 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
Because if everyone does this, you wouldn't have any customers that can afford to buy your $35-$70,000 cars.
Are there any decent areas anywhere in the country with these kinds of prices? That seems abnormally low. Also a $15 wage single income isn't supposed to support a 3bd house.
But is the bulk of that lowered cost due to the removal of the cap and trade, or is it mostly unrelated?
I'll be the first to admit that I'm not sure, but looking at the average gas price in Ontario (no cap and trade), Quebec (cap and trade) and Canada on [1], the same kinda of savings existed all around, so we can't really credit the removal of the cap and trade. Overlaying the price of cure, it does seem to have had more to do with the massive price drop in crude.
For the benefit of non-Canadians readers, I should mention that the Ontario minimum wage only went to $14/hr starting in 2017. Before that, it was $11.40/hr, which isn't much more than the $10.25/hr people were getting in 2010.
I'm sure he'll tweet something that appears reasonably compassionate, half-suggest a solution, enjoy the resulting media speculation, and then move on to the next thing.
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.
1. The scandal itself. I do not want to support a company that has a proven record of not caring about the environment. I understand that this probably applies to all car companies, but VW is the only one that got caught. Getting caught circumventing environmental laws should be something that CEO's are afraid of, and this is an easy way to contribute to that fear. I would not buy a VW for the same reason.
2. I wanted to diversify outside of the EU. The Dutch and German economy are very connected, which would make my portfolio very vulnerable to a recession in either of those two countries.
The big oil company, Shell, was included in the ETF for the AEX (Index for the Dutch stock market) I bought, so I did not really have a choice there, other than buying ~20 individual stocks which given my small portfolio would be to expensive due to transaction fees.
Moreover, I believe that oil, at least for now, is a necessity for human society and I have no reason to believe that there are other oil companies that are better for the environment than Shell, whereas in the car industry there are plenty of viable alternatives.
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.
At the base of things, though, GM is looking to make money. If they lose money by staying in Ontario, they do no one any good (not the taxpayers who foot the bill, not the government that transfers money from the taxpayers to the corporation, not the people being paid by the corporation).
The bailout presumes a degree of economic health in the region (and perhaps the country) that may not be there. Being bailed out means the employees are on borrowed time.
Money is the bottom line. Failure is necessary. Jobs are a byproduct of consumption and are not a 'right'. If GM pulls out, there will be other places those employees can seek work. If there aren't other places they can get jobs, perhaps Canada should reconsider some of their business regulations (as regulation suppresses numbers of new businesses).
Depending on where you're from, the individual is the bottom line. Money mediates individual exchange. In the US the Fed has a very specific role. Bailing out companies is not actually part of that.
In fact, if the Constitution were taken seriously any more, someone would have noticed the bit about "The powers not delegated to the United States by the Constitution, nor prohibited by it to the States, are reserved to the States respectively, or to the people."
I suppose this is Canada we're talking about, so the above doesn't mean anything in this context.
>If they lose money by staying in Ontario, they do no one any good (not the taxpayers who foot the bill, not the government that transfers money from the taxpayers to the corporation, not the people being paid by the corporation).
You duplicate your list by listing taxpayers and government, as the government is the repository of tax money. You also assume the government would have to send any money to a corporation. And how would someone benefit from NOT getting paid at a union auto job instead of getting paid?
I know businesses need to make money, but as another poster said, society is the bottom line.
> how would someone benefit from NOT getting paid at a union auto job instead of getting paid?
Because of how the money flows through the system. Instead of products being purchased and driving profits for the company (that then pays the workers), the money comes from the general populous (who get no return for the bailout expenditure), to the government, and is then given to the corporation.
So, the people being paid from bailout money are no longer benefiting the population as a whole, and instead have become parasites that act to divert government money (the population's tax money!) away from the common good.
I understand this response completely. I still stand by my post because to me those jobs aren't lost, but replaced by workers in other countries. I care just as much about Mexicans as I do about Canadians.
I should also note that my investment in GM is very small. My investment in GM went up about 150$ because of this decision.
> 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.
If a small child manages to wipe his/her own nose then they can be told 'well done!' but it isn't an achievement really. You would not commend a grown adult for keeping their face clean.
This GM company has been going for a century and for most of that time their products have shown no effort to be considerate of the environment. Stop-start is not rocket science. Light hybrid vehicles are not rocket science. A small child can see the absurdity of cities gridlocked by slow moving or completely stationary vehicles all of them spewing exhaust for no reason. If not the environment it is a waste of petrol. Stop-start has only came along in the last few years, this could have been marketed to people as the thing to have, who doesn't want a nice quiet car when stuck in traffic?
But GM never bothered to do stop-start, something that is a nice engineering challenge, not beyond the realms of impossible. In fairness none of their rivals took this route until the laws made CO2 and other emissions a problem for them.
We know from EV cars that going down hills does not mean lots of heavy braking, you can store the energy and save the brakes. It would not have been impossible for GM to implement something similar, even fifty years ago a solution could have been worked out with a mechanical flywheel, maybe using the already present battery as the mass for that. GM - and the others - never even bothered with that.
The aerodynamics of a car is another aspect where GM failed. It is not hard and even with no wind tunnel it can be deduced that tucking in the windscreen wipers, door handles and other parts will improve the efficiency. The underside of GM (and other) cars is a joke when it comes to aero. They just never bothered.
My background is bicycles where a 4 watt gain is pretty good. A 4 Kg weight saving is epic, the difference between a Tour de France bike and what a mere mortal can afford is 4 Kg. The chrome trim on a GM effort weighs more than my heaviest steel mountain bike. Obviously my heavy mountain bike is actually quicker than any GM product through a congested city and I certainly don't have a V8 motor in my inner core.
So where is this Bolt thing really? Are we talking rocket surgery or a kid being applauded because they have wiped their own nose?
It is easy to criticise when you haven't built a car yourself, sure the realities of mass manufacturing are hard, but I don't think GM have ever really tried. There may be many jobs and communities dependent on GM but there were many jobs and communities dependent on the predecessor companies that made buggies in the Detroit area. The sooner GM is gone the better able the rest of the automotive trade can get on with providing people with cars more in line with Ford's vision, circa Model T era, before GM came along with their planned obsolescence and before the Dodge brothers shafted Ford as best as they could.
What vehicles are they competing against? The Volt and the Leaf? Again compliance cars, these vehicles aren't trying to dominate a market but rather counteract fleet inefficiencies elsewhere.
Tesla is the only manufacturer right now that's 100% committed to EVs. Everyone else is either making compliance cars or legally obligated to dabble.
> Again compliance cars, these vehicles aren't trying to dominate a market but rather counteract fleet inefficiencies elsewhere.
That's not really what the term "compliance car" means in general use.
A compliance car is a lazy rebadge of some other vehicle, that only exists to meet compliance. The Ford Energi vehicles are compliance cars. The Chevy Spark EV is a compliance car.
The Volt and Bolt were mostly unique designs, with state-of-the-art technology, and were generally the best electrics available in the US to date (second only to Tesla). The Volt has the highest customer satisfaction rate of any car sold in the US. https://www.greencarreports.com/news/1080762_chevy-volt-elec... .
Yes, these vehicles help Chevy meet compliance (as any efficient car technically does), but they are not "compliance cars" by the normal definition of that phrase.
> That's not really what the term "compliance car" means in general use.
The term "compliance car" in general use refers to cars produced to be in compliance with a regulation. More specifically the cars you sited were produced to be in compliance with CARB standards.
The Volt/Bolt are compliance cars for CAFE, which unlike CARB specifies that fleet is a reference to cars for sale in the United States.
As I said in my original post, GM is probably hedging it's bets by developing the technologies that will scale up to it's entire fleet but has no desire to do so.
When the Bolt launched, GM said they were going all electric and would be launching 18 EV models by 2023. So far we haven't heard anything about new models and the Bolt is speculated to be losing GM up to $9000 per car. Maybe those 18 models were just re-badges of the Bolt for different markets?
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.
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.
The linked story is just a slice of the larger story, obviously tailored to be more significant for a Canadian audience. But the larger story [Reuters report] involves a major restructuring.
"GM is expected to announce it will cut the Chevrolet Volt, Impala and Cruze, the Cadillac CT6 and XTS, and the Buick LaCrosse"
The linked story seems to have been updated to remove references to the Volt being cut:
"The company also plans to stop building several models now assembled at those plants, including the Chevrolet Cruze, the Cadillac CT6 and the Buick LaCrosse."
Yep, they updated it and removed all that specificity since it was attributed to an anonymous source. However, it doesn't mean it's not true yet. Until details come out, I think they're going to try to control the message tightly to make it sound like a possible ending of The Volt is not a regressive move. Or they'll keep throwing money down that well.
And yes, it's not like they're moving back toward the steam engine, but in the short run it might make sense to kill the Volt and do something else. But the optics of it will look bad. Think Reuters got tripped up by the "increase investment in electric and autonomous vehicles and connected vehicle technology" line because it's broad and potentially conflicting.
Here's a selection of top "Chevy Volt" headlines for the past few years:
2015: "Yes the 2016 Chevy Volt Will be Profitable."
2016: "GM Will Lose Money on the Chevy Bolt to Make Money On Other Models"
2017: "GM trims battery costs, aims to make profitable EVs"
2018: "GM races to build a formula for profitable electric cars."
In the larger sense, GM's leadership has been sending some weird messages talking about a future they don't fully understand. Spouting things like blockchain, autonomous, ride sharing, and future profitability being tied to selling customer information. You know, all the apparently popular contemporary trends.
Been following gm closely for a while and never heard mention of blockchain. All I could find was this - https://www.coindesk.com/bmw-ford-gm-worlds-largest-automake... . But there's like 50 companies in that coalition... So it seems weird you would say blockchain first. The other stuff doesn't seem misplaced at all, and future profitability also seems down on the company since they are currently profitable albeit their fcf could use improving.
When I see that word mentioned in any business I get skeptical, especially one where there's a classical product involved, like bananas. Or cars. In this case I strongly believed it was used for adding feathers to their plume and so I used it in a mocking tone. Radio Bloomberg (broadcasts) mentioned the blockchain line with some skepticism for awhile and so it stuck in my head.
None of these parroting futurisms make sense for GM. Their largest customers are fleets like Enterprise Rent a Car, who buy massive numbers of new models before consumers can get to them, assuring delivery numbers. If they compete with them for rentals or ride-sharing, what if ERAC orders a bunch of Fords next year? They'd be crazy to endanger this relationship. GM should stick to making cars and messaging to that effect.
Anyhow, I stand firmly by how I interpreted this announcement. My overall opinion on GM, however, is probably very ignorant and naive.
"A GM spokesperson told Jalopnik over the phone: “We are ending production of the Volt March 1, 2019.”"
I just read the article you linked, and it says the opposite:
"The company also plans to stop building several models now assembled at those plants, including the Chevrolet Cruze, the Cadillac CT6 and the Buick LaCrosse.
GM said it will shift more investment to electric and autonomous vehicles."
This morning seems to be a roller coaster related to the Volt, stories said it was being cut, then people removed references to that, and now they're back to saying it will be cut. This Verge article[1] currently says production will end March 1, 2019 and Jalopnik agrees[2].
Obviously, they say they are focusing on electric. Maybe they are killing off the hybrid to focus on the purely electric. Maybe some new product will be released to replace it. It is far from clear at the moment.
> Update (Nov. 26, 2018 10:50 A.M. ET): It is official. A GM spokesperson told Jalopnik over the phone: “We are ending production of the Volt March 1, 2019.”
It's never powered by a gas engine, it just has an onboard generator that produces electricity to power the electric engines or charge the battery when the battery gets drained.
It was marketed like that, but in reality there's a planetary gear that allows the engine to directly (mechanically) drive the front wheels. This marketing claimed a pure serial hybrid... up to the day it shipped and GM quietly mentioned that the engine can drive the wheels directly.
At first GM claimed that it happens only above 70 mph, or when the battery was dead. But then GM goes consistently more vague, and them eliminated this completely in the generation 2 revision.
So the current volt is a bog standard parallel hybrid.
"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.
166 comments
[ 3.4 ms ] story [ 166 ms ] threadObviously 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.
That money could have been funneled into social services instead of propping up industries.
You played and lost, you don't get my tax dollars.
It's very unlikely.
A) Plants are tooled for a specific car, often to platforms that are company specific.
B) There is a reason GM is shutting it down, and other companies are probably in the same set of circumstances.
C) Do you think company A wants to buy company B's powerful Union? Uhhh, no! It's not entirely rocket science to train people to make cars.
https://www.bbc.co.uk/news/uk-england-birmingham-37449289
Thanks for letting me know.
A car company, like 'Jaguar' (similar story) has assets.
Thos jobs pay for the social services of many, and if GM and Ford went kaput, it would wipe out the governments ability to pay for those services.
Now - I'm not saying it's the right thing to subsidize, but in a 'subsidize or collapse' situation, that is the reality.
A corporation has many stakeholders: execs, staff, buyers, suppliers, investors, debtors, and then all the ancillary people who benefit independently - they're all in a power struggle to share in the surpluses.
If a company is facing legit collapse, and the investors are truly willing to bite the bullet, it's because they don't think their is incentive there for them. The surpluses generated may actually be going into the other entities in the power equation: just because investors own the profits does not mean that profits represent the big chunk of surpluses.
My ex-neighbour was a long-tim plant worker, he earned quite a lot, granted he was senior - those are in fact plumb jobs that often pay way above others when you factor healthcare, retirement etc.. Also consider low turnover - most people change jobs every few years and lose a few months pay. When you work in an auto plant, for a bank, for the government etc. the stability factor is a real economic benefit you can calculate.
It's hard to tell if companies are bluffing or not, but in many cases they are not - and it illustrates really where the surpluses are and it's not with them.
There's a big Boeing 777 business case that's used in B-School for accounting, and it basically demonstrates that the project is kind of a loser for them, and they should not invest. But the government came along with incentives, making it worthwhile. It's not a paradox, it's just a lesson in who profits from what and how.
I am totally in favor of letting bankruptcy courts do the job they are best at. All those assets don't just go away, they are put to better use.
A bailout/subsidy for a company is different than a bankruptcy situation.
You can be assured that in a bankruptcy, the factory will probably close, and it's workers laid off. It doesn't matter i some assets are sold off, significant economic activity will dissapear in almost all cases. It's usually better for the economy for a company to survive than not.
It's far easier to move capital around to different industries. Not so easy to transfer your skills between them.
Frankly I'm glad GM is moving out now while the recession still hasn't hit.
But we do that all the time and with good reason. Blockbuster employees and coal miners for example. At some point the jobs no longer make sense.
Blockbuster disappeared because the technology it was built upon became obsolete. It also didn't require specialized labour skills - the employees just took their retail experience across the street.
This just seems like a different kind of situation to me. Automotive isn't going anywhere, GM just couldn't perform.
edit: I'm reading some other comments about drive trains and EVs & reduced manufacturing requirements due to it. That's interesting. Maybe I should read about this more
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.
I'm skeptical of this, but I don't know that it's wrong. I'm only making this comment in hopes of somebody else more knowledgeable responding to it (either for or against - really I am just curious if subsidies work).
It depends on what you mean by “worked”.
1) Have they allowed a slower and more humane shift of workers to other more competitive industries?
Yes. The GM bailout is a great example.
2) Have they helped keep certain skill sets in a country?
Yes. Undoubtably.
Is this important? I think so but there are opposing arguments.
It can take decades to build up an industry from scratch vs a few years to pivot into a related industry.
Think of how long it would take Germany to swap its automotive engineers and factories to producing tanks vs how long it would take a services based country to start producing tanks.
3) Have they lead to the revitalization of an industry?
This ones a lot more murky and it all depends on what time frame you are looking at and what you think the future will hold.
There are certainly examples of it working between first world countries for limited time periods (a decade or two).
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.
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.
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.
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.
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.
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.
This shutdown is a bellwether, not just a cost move.
Pick your favorite reason to minimise your crude oil consumption. Global warming and not subsidising oil despots are two good ones to me.
That’s why my car has 300hp and my next will as well. But I don’t pretend I’m saving the environment or that it’s practical.
Very much topic-related.
Not sure where you're going with the "oil despots" statement. That seems off-topic.
I don't know too many people who could afford a $20k car to drive to work and then a $40k truck just to park in their garage 95% of the time. And if they can, they're buying a BMW instead.
People tend to buy more engine than they need, and 1.8L's are more powerful than ever. And nobody had 300hp thirty years ago except the sports cars. We survived.
I'm guessing the next argument will be "yeah but no one needs a 5,000 lb camper" to which I will say "why do you need a camper or car at all if you're trying to save the environment" to which the response will be "yeah but" and then I'll come back with "but no" and then I'll get yelled at by `dang so let's skip all that and say someone buying a 3.6L engine they don't need is a bad thing but so is the self-righteous idea that what works for you must always work for everyone else, and then agree that we're not going to solve the world's climate problems with throwaway HN comments.
[1] https://camperreport.com/camper-weight/
My first car, 45 years ago!, was a '66 Chevrolet Impala with a standard, small block, run of the mill, 283cu in. (4.6L) engine. The motor was blown so I bought a used one for $75 and swapped it out myself. Took about 6 weeks because I had never done it before.
The 283 was rated between 200 and 345hp. It was my daily driver for school (hardly a sports car) until markvdb's "oil despots" tripled the price of gas. I sold the Impala and bought a Volvo 144S with a 1.8L 4 cyl. engine.
Neither car (or engine) was ever able to get better than 25+ mpg and the Volvo made you very aware of how much power you had available.
See: https://en.wikipedia.org/wiki/Horsepower#SAE_gross_power
The '66 Impala was a heavy car and I didn't purchase it for racing. I did put a heavy duty clutch plate into it when I replaced the engine. It did burnouts just fine until I snapped the welds on the rear differential and sent the universal joint banging upward against the bottom of the car. Learned a little bit about welding, u-joints and spider gears on that one.
You could just rent a truck when you need to transport something that's beyond the car's capabilities.
And yet, most on HN seem perfectly happy to give Amazon huge tax breaks to setup in NY, which is exactly the same thing.
Thread here https://news.ycombinator.com/item?id=18454215
In Australia it was estimated that each auto job produces 6 other jobs through network effects [1]. All up that number would be fairly substantial and likely enough to justify some subsidies/bailouts.
[1] - https://www.aph.gov.au/Parliamentary_Business/Committees/Sen...
In 2008 and its aftermath the U.S. ran up huge budget deficits, and the Federal Reserve for the first time monetized enormous amounts of debt. That was all money that the government did not have.
Besides, money is fungible. It doesn't matter if an entity has the money or can quickly raise it, especially if when it has the money it was already earmarked (or soon was going to be) for some other particular purposes.
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.
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.
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.
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.
In the meantime, they have been offshoring production of parts and vehicles like no one's business. I looked at a new full size truck, and it had 45% domestic content. Most of it is built in China and Mexico. The Ford that I purchased has 75% domestic content.
If it was a gift, who was it a gift to? It wasn't a gift to GM shareholders who received none of it. If the bad-guy in this situation is greedy shareholders looking to layoff workers, they didn't get the government's money.
One can certainly argue against the investment. However, it's hard to say it's a gift. Who was the recipient of that gift? If anything, it would have to be the workers who didn't face mass-unemployment in the wake of a crumbling auto industry.
If the government hadn't bought GM's assets, workers would have been out of jobs very quickly. During the economic crisis, no one had the available capital to take on that risk. The government's investment meant that most of those workers saw stability (or as close to that as could be had).
If you're on the workers' side, the government bailout is the side you need to be on. Shareholders lost everything while workers (for the most part) kept their jobs and benefits. Yes, there have been layoffs and contract re-negotiations, but that's nothing compared to the chaos of tens of thousands of people suddenly jobless concentrated in areas that don't have a lot of other employers (and during an economic crisis).
That doesn't mean that everything is perfect. However, the bailout benefitted workers, not shareholders who lost everything.
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...
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.
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.
Not the outcome rather the consumers, tax payers, even the workers, possibly the environment although I suspect that is somewhat orthogonal to this.
This is such an Economics 101-style response, I'm not even sure how to address it.
When the plant stops production, it's not only the 2500 people who lose their jobs, it's also the auxiliary economy of parts suppliers, logistics networks and food and drink businesses that are affected and may have to shut down as well. That creates a negative multiplier effect that pushes economic activity down further. Not to mention the long term impact of lower tax receipts, lower property values.
You can't snap your fingers and replace the underpinnings of an entire community overnight via the magic of the "free market". Another company will only accept the costs of relocating there if the government starts offering tax incentives and the like to make it worth their while.
I agree that we need a better system, especially when companies can simply move when it's convenient. But manufacturing is a strategically important industry and governments are willing to pay to keep that industry at home.
I keep seeing this response pop up.
"Sure, my position fails to demonstrate even the most basic understanding of economics, but your argument reeks of being built on the fundamentals of the field!"
Ever heard of Renault? Due to neo-liberal politics the ownership has changed in more recent times, but they have been state owned for a lot of their history.
The disease of neo-liberalism was a contributory factor to the demise of BL and the word neo-liberalism didn't even exist prior to 1982. The writing was not on the wall with BL during the post war years and their products were highly successful. The UK balance of payments was helped not hindered by the predecessor companies - the Rovers, Triumphs, Austins and what-not.
The problem was investment. So in the years when BL was a lot of private companies they could not get investment from the city. This is because London only invests in companies they can asset strip, they don't speak the same banking language as in Germany where banks invest in companies and people.
After the Labour government that preceded Thatcher rescued BL there was a problem due to the lack of investment, however BL did what they could to rise to the challenge despite the difficulties of strikes and useless managers. Then when Thatcher arrived BL was privatised. There was obviously no investment from the conservative government, that is not how they roll. They just wanted to sell the family silver.
So then it comes to the media and how they portray the story as all the fault of the unions and the company being nationalised. Yet the story is not an honest one, the truth is that the UK banking sector just don't invest in actual companies that employ people that do actual work. They might front the cash for some asset stripping or they might invest in property, but never did they invest in UK industry. German culture was different, banks there have much better investment ideas, they can also see a better return from investing in their own concerns.
The disease of neo-liberalism was enforced on the world so you have things like Renault that the state aren't allowed to own if they are to be in the clubs of the EU/IMF/GATT and what not.
The people that manage companies are not automagically better people just because they work for vulture capitalists instead of the government.
It's interesting to note we now make more cars in the UK than we ever did in the BL era.
I have a lot more faith in decisions that get made because people put money down then because people put votes down. What's the line? A bet is a tax on bullshit. People say they like lots of things. They'll pay money they had to work to earn for a lot fewer - and they'll think about those a lot harder.
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
It didn't work out well with Bombardier (CS-series).
> GM or any other automaker with manufacturing operations in North America going belly up would have contributed to an even larger disaster
Is an equally bold claim and is often asserted without citing a single thing.
It's also how every crisis was handled until the Great Depression. Then we resorted to massive intervention to prevent liquidation. This experiment was repeated in the 90s in Japan, leading to two lost decades of economic growth. We don't seem to want to learn.
What should have happened: GM Fails, GM assets inevitably acquired by someone else. Business involves risk, taxpayers shouldn't subsidize that risk.
Yes, liquidation is the answer when the patient is insolvent and bankrupt.
In a systemic crisis, however, our bankruptcy courts cannot move fast enough. That is a problem that needs to be tackled, otherwise scared politicians will always have enough time to reach for bailouts.
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
Because if everyone does this, you wouldn't have any customers that can afford to buy your $35-$70,000 cars.
Maybe because Ontario has ridiculous housing costs?
Id be happy to work for $15/hr if I could get a decent 3 bedroom house for $70-80k.
I mean seriously mortgage costs + $11/hr on top and I would be happy.
Yet even somewhere like London it will cost 400k+ and just forget about Toronto.
These seem like unusual expectations.
Are there any decent areas anywhere in the country with these kinds of prices? That seems abnormally low. Also a $15 wage single income isn't supposed to support a 3bd house.
While that might not be completely true...gas prices are down. I'm talking $1.45 to $0.99 / L.
As someone who drives ~ 3 hrs a day (and all my friends do too) - We do appreciate the reduction in the gas price.
I'll be the first to admit that I'm not sure, but looking at the average gas price in Ontario (no cap and trade), Quebec (cap and trade) and Canada on [1], the same kinda of savings existed all around, so we can't really credit the removal of the cap and trade. Overlaying the price of cure, it does seem to have had more to do with the massive price drop in crude.
[1] - https://www.gasbuddy.com/Charts
(source: Ashlee Vance's bio)
[1] https://en.wikipedia.org/wiki/Elon_Musk
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.
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?
1. The scandal itself. I do not want to support a company that has a proven record of not caring about the environment. I understand that this probably applies to all car companies, but VW is the only one that got caught. Getting caught circumventing environmental laws should be something that CEO's are afraid of, and this is an easy way to contribute to that fear. I would not buy a VW for the same reason.
2. I wanted to diversify outside of the EU. The Dutch and German economy are very connected, which would make my portfolio very vulnerable to a recession in either of those two countries.
Moreover, I believe that oil, at least for now, is a necessity for human society and I have no reason to believe that there are other oil companies that are better for the environment than Shell, whereas in the car industry there are plenty of viable alternatives.
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.
The bailout presumes a degree of economic health in the region (and perhaps the country) that may not be there. Being bailed out means the employees are on borrowed time.
Money is the bottom line. Failure is necessary. Jobs are a byproduct of consumption and are not a 'right'. If GM pulls out, there will be other places those employees can seek work. If there aren't other places they can get jobs, perhaps Canada should reconsider some of their business regulations (as regulation suppresses numbers of new businesses).
In fact, if the Constitution were taken seriously any more, someone would have noticed the bit about "The powers not delegated to the United States by the Constitution, nor prohibited by it to the States, are reserved to the States respectively, or to the people."
I suppose this is Canada we're talking about, so the above doesn't mean anything in this context.
You duplicate your list by listing taxpayers and government, as the government is the repository of tax money. You also assume the government would have to send any money to a corporation. And how would someone benefit from NOT getting paid at a union auto job instead of getting paid?
I know businesses need to make money, but as another poster said, society is the bottom line.
Because of how the money flows through the system. Instead of products being purchased and driving profits for the company (that then pays the workers), the money comes from the general populous (who get no return for the bailout expenditure), to the government, and is then given to the corporation.
So, the people being paid from bailout money are no longer benefiting the population as a whole, and instead have become parasites that act to divert government money (the population's tax money!) away from the common good.
Nortel did not
Christmas of 2019. This is not an immediate shutdown.
I should also note that my investment in GM is very small. My investment in GM went up about 150$ because of this decision.
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.
If a small child manages to wipe his/her own nose then they can be told 'well done!' but it isn't an achievement really. You would not commend a grown adult for keeping their face clean.
This GM company has been going for a century and for most of that time their products have shown no effort to be considerate of the environment. Stop-start is not rocket science. Light hybrid vehicles are not rocket science. A small child can see the absurdity of cities gridlocked by slow moving or completely stationary vehicles all of them spewing exhaust for no reason. If not the environment it is a waste of petrol. Stop-start has only came along in the last few years, this could have been marketed to people as the thing to have, who doesn't want a nice quiet car when stuck in traffic?
But GM never bothered to do stop-start, something that is a nice engineering challenge, not beyond the realms of impossible. In fairness none of their rivals took this route until the laws made CO2 and other emissions a problem for them.
We know from EV cars that going down hills does not mean lots of heavy braking, you can store the energy and save the brakes. It would not have been impossible for GM to implement something similar, even fifty years ago a solution could have been worked out with a mechanical flywheel, maybe using the already present battery as the mass for that. GM - and the others - never even bothered with that.
The aerodynamics of a car is another aspect where GM failed. It is not hard and even with no wind tunnel it can be deduced that tucking in the windscreen wipers, door handles and other parts will improve the efficiency. The underside of GM (and other) cars is a joke when it comes to aero. They just never bothered.
My background is bicycles where a 4 watt gain is pretty good. A 4 Kg weight saving is epic, the difference between a Tour de France bike and what a mere mortal can afford is 4 Kg. The chrome trim on a GM effort weighs more than my heaviest steel mountain bike. Obviously my heavy mountain bike is actually quicker than any GM product through a congested city and I certainly don't have a V8 motor in my inner core.
So where is this Bolt thing really? Are we talking rocket surgery or a kid being applauded because they have wiped their own nose?
It is easy to criticise when you haven't built a car yourself, sure the realities of mass manufacturing are hard, but I don't think GM have ever really tried. There may be many jobs and communities dependent on GM but there were many jobs and communities dependent on the predecessor companies that made buggies in the Detroit area. The sooner GM is gone the better able the rest of the automotive trade can get on with providing people with cars more in line with Ford's vision, circa Model T era, before GM came along with their planned obsolescence and before the Dodge brothers shafted Ford as best as they could.
Tesla is the only manufacturer right now that's 100% committed to EVs. Everyone else is either making compliance cars or legally obligated to dabble.
That's not really what the term "compliance car" means in general use.
A compliance car is a lazy rebadge of some other vehicle, that only exists to meet compliance. The Ford Energi vehicles are compliance cars. The Chevy Spark EV is a compliance car.
The Volt and Bolt were mostly unique designs, with state-of-the-art technology, and were generally the best electrics available in the US to date (second only to Tesla). The Volt has the highest customer satisfaction rate of any car sold in the US. https://www.greencarreports.com/news/1080762_chevy-volt-elec... .
Yes, these vehicles help Chevy meet compliance (as any efficient car technically does), but they are not "compliance cars" by the normal definition of that phrase.
The term "compliance car" in general use refers to cars produced to be in compliance with a regulation. More specifically the cars you sited were produced to be in compliance with CARB standards.
The Volt/Bolt are compliance cars for CAFE, which unlike CARB specifies that fleet is a reference to cars for sale in the United States.
As I said in my original post, GM is probably hedging it's bets by developing the technologies that will scale up to it's entire fleet but has no desire to do so.
When the Bolt launched, GM said they were going all electric and would be launching 18 EV models by 2023. So far we haven't heard anything about new models and the Bolt is speculated to be losing GM up to $9000 per car. Maybe those 18 models were just re-badges of the Bolt for different markets?
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.
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.
"GM is expected to announce it will cut the Chevrolet Volt, Impala and Cruze, the Cadillac CT6 and XTS, and the Buick LaCrosse"
More info at https://www.reuters.com/article/us-gm-restructuring/gm-to-cu...
"The company also plans to stop building several models now assembled at those plants, including the Chevrolet Cruze, the Cadillac CT6 and the Buick LaCrosse."
And yes, it's not like they're moving back toward the steam engine, but in the short run it might make sense to kill the Volt and do something else. But the optics of it will look bad. Think Reuters got tripped up by the "increase investment in electric and autonomous vehicles and connected vehicle technology" line because it's broad and potentially conflicting.
Here's a selection of top "Chevy Volt" headlines for the past few years:
2015: "Yes the 2016 Chevy Volt Will be Profitable."
2016: "GM Will Lose Money on the Chevy Bolt to Make Money On Other Models"
2017: "GM trims battery costs, aims to make profitable EVs"
2018: "GM races to build a formula for profitable electric cars."
In the larger sense, GM's leadership has been sending some weird messages talking about a future they don't fully understand. Spouting things like blockchain, autonomous, ride sharing, and future profitability being tied to selling customer information. You know, all the apparently popular contemporary trends.
They're a car company.
When I see that word mentioned in any business I get skeptical, especially one where there's a classical product involved, like bananas. Or cars. In this case I strongly believed it was used for adding feathers to their plume and so I used it in a mocking tone. Radio Bloomberg (broadcasts) mentioned the blockchain line with some skepticism for awhile and so it stuck in my head.
None of these parroting futurisms make sense for GM. Their largest customers are fleets like Enterprise Rent a Car, who buy massive numbers of new models before consumers can get to them, assuring delivery numbers. If they compete with them for rentals or ride-sharing, what if ERAC orders a bunch of Fords next year? They'd be crazy to endanger this relationship. GM should stick to making cars and messaging to that effect.
Anyhow, I stand firmly by how I interpreted this announcement. My overall opinion on GM, however, is probably very ignorant and naive.
"A GM spokesperson told Jalopnik over the phone: “We are ending production of the Volt March 1, 2019.”"
"The company also plans to stop building several models now assembled at those plants, including the Chevrolet Cruze, the Cadillac CT6 and the Buick LaCrosse.
GM said it will shift more investment to electric and autonomous vehicles."
That reads like they're investing in the Volt.
Obviously, they say they are focusing on electric. Maybe they are killing off the hybrid to focus on the purely electric. Maybe some new product will be released to replace it. It is far from clear at the moment.
[1] https://www.theverge.com/2018/11/26/18112536/gm-layoffs-fact... [2] https://jalopnik.com/general-motors-may-kill-the-chevrolet-v...
> Update (Nov. 26, 2018 10:50 A.M. ET): It is official. A GM spokesperson told Jalopnik over the phone: “We are ending production of the Volt March 1, 2019.”
It's never powered by a gas engine, it just has an onboard generator that produces electricity to power the electric engines or charge the battery when the battery gets drained.
The engine in the Gen2 is connected to the transmission and does provide mechanical force to turn the wheels.
https://gm-volt.com/2015/02/20/gen-2-volt-transmission-opera...
At first GM claimed that it happens only above 70 mph, or when the battery was dead. But then GM goes consistently more vague, and them eliminated this completely in the generation 2 revision.
So the current volt is a bog standard parallel hybrid.
Its so awful when you lose your job because the job goes away. So many people are going to have to retrain.
"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: