As is always the case with controversial decisions, there are differing opinions about the wisdom behind the U.S. taxpayer subsidized bailout of GM. But that's not the relevant question for today.
The relevant question is this one: "Has GM been permanently 'saved' by the taxpayer bailout?" And the only accurate answer to that relevant question is the following: "Of course not."
Because in the final analysis, employees, managers, customers, competitors and the global auto marketplace hold the future of GM in their hands. Not the U.S. government. It's all about what future potential global customers will decide to do with their MOM.
In other words, U.S. taxpayer subsidized bailout funds in the tens of billions of dollars didn't cause GM to be a permanently "saved" company. Markets don't work that way. So whether the taxpayer bailout prove to be anything more than a temporary success remains to be seen. It's a MOM thing.
And here's another question: Was the GM bailout designed with the company's loss making European operations fully considered?
And yet another: If taxpayer bailouts are such a good idea, why not bailout companies like Hostess and Twinkies?
And finally this question: Who in government decides when taxpayer funded bailouts make sense and on what criteria do they base their decisions?
During the presidential campaign, we heard a lot about all that was wrong when U.S. jobs were moved overseas and what a terrible thing it was when companies took those actions.
On the other hand, what we didn't hear a single word about during the campaign was the wisdom of sending U.S. taxpayer dollars to Europe to prop up GM's billions of dollars in annual losses indefinitely.
But let's go ahead and tell GM's European story, even though the election is over, and voters in Ohio and Michigan decided that GM has been "saved" with taxpayer bailout funds.
Or was the government bailout really about saving the UAW? Oh well, at least somebody was saved, at least for now.
GM Affirms Opel Unit's Future says this about GM and its European Opel unit:
"General Motors Chief Executive Dan Akerson assured staff at its unprofitable European Adam Opel unit that the brand is an integral part of GM's global operations and rejected calls for a sale, adding an alliance with PSA Peugeot-Citroën will lead to the economies of scale Opel has so far lacked in Europe.
"Our protracted losses have even prompted some analysts to argue that we should sell Opel or simply close up shop and leave car sales in the region to others. I'm not about to do that," Mr. Akerson told staff at Opel's headquarters outside Frankfurt.
"Recommendations that we 'cut and run' show you that some people simply do not see how important Opel is to our success," he said.
GM's European division is set to lose between $1.5 billion and $1.8 billion this year depending on the level of restructuring in the fourth quarter. Last year it lost $747 million. The region isn't expected to return to break-even on an operating basis until the middle of the decade.
New-car sales in Europe have been shrinking for almost five years amid high unemployment and tough austerity measures in many countries to tackle bloated sovereign debt. Declining demand and chronic overcapacity are causing steep losses in the European mass-market segment, which is forcing car companies to cut thousands of jobs and consider costly plant closures.
GM will cut 2,600 jobs in Europe this year and reduce fixed costs by $300 million. It wants to lower costs by another $500 million between 2013 and 2015 and will continue to reduce head count as well.
Opel employed around 40,000 staff across Europe at the end of last year, with Germany accounting for 22,000 staff.
"Like most auto companies, we expect that the weakness in Europe will continue to impact our business and the industry for the next several years," Mr. Akerson said. "But unlike some forecasts, ours is built around conservative volume and revenue assumptions.
"In other words, we're counting on our own hard work—not an economic recovery—to drive the business forward," he said.
GM forged an alliance with France's Peugeot in February to share costs in the fields of vehicle development, purchasing, logistics and potentially other areas as well. However, several media reports published over the last days suggest cooperation talks have come to a grinding halt or collapsed altogether. . . .
Opel and Peugeot are among the weaker players in the European car industry as they don't have a significant footprint in dynamic foreign markets and rely heavily on sales in Europe.
Peugeot has been battered by a series of credit downgrades. Last month, Moody's Investors Service threatened to tip its banking arm into junk territory, which prompted France's government to throw Banque PSA Finance a lifeline of €7 billion in guarantees for future borrowing, to limit the damage to Peugeot's financing costs and to the loan rates it can offer car buyers. French Prime Minister Jean-Marc Ayrault has stressed, however, that he expects Peugeot to scale down plans for job cuts in return for the state aid."
SUMMING UP
GM, Peuguot, U.S. taxpayers and the French government are all heavily invested in the success of Opel and Peuguot in Europe.
I wonder how many Americans like making that European bet with U.S. taxpayer money. I don't.
So GM and the UAW union received special treatment by the government and at the expense of the U.S. taxpayers. And received tens of billions of taxpayer supplied dollars prior to the recent U.S. elections, of course.
In the end, how much will the special GM and UAW treatment cost taxpayers? Who knows?
And how successful will GM be as a whole? Who knows?
And what about its European operations? How big of a role will they play in determining GM's future success and the eventual loss absorbed by U.S. taxpayers? Who knows?
And why hasn't all this been discussed out in the open by U.S. government officials?
Well, we all know the answer to that one --- because the whole thing stinks and taxpayers wouldn't like the smell of it.
Thanks. Bob.
No comments:
Post a Comment