5 ms·

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. Enfo

by esturk 8y ago

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.

mdasen 8y ago
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.
- AmVess 8y ago
  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.
  - mdasen 8y ago
    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.
    - Scoundreller 8y ago
      It was a gift to the creditors.
      - altcognito 8y ago
        And the suppliers, whom other automakers also rely on.
  - deleted 8y ago
    [deleted]
  - Aloha 8y ago
    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.
peeters 8y ago
> 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. https://www.theglobeandmail.com/report-on-business/ontario-sells-gm-shares-for-11-billion/article22797007/ https://www.theglobeandmail.com/report-on-business/ontario-s...
onetimemanytime 8y ago
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.
tonyedgecombe 8y ago
Just take a look at British Leyland to see what happens when the state gets involved in car manufacture. https://en.wikipedia.org/wiki/British_Leyland 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.
- blahblahthrow 8y ago
  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.
- WhompingWindows 8y ago
  How do you define "best" here? What outcomes are you optimizing for? Profit alone? Number of cars produced? Carbon emissions?
  - tonyedgecombe 8y ago
    >What outcomes are you optimizing for? Not the outcome rather the consumers, tax payers, even the workers, possibly the environment although I suspect that is somewhat orthogonal to this.
- rchaud 8y ago
  > 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.
Shivetya 8y ago
Couple of points. 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-cut-car-production-in-north-america-halt-some-models-source-idUSKCN1NV1NB https://www.reuters.com/article/us-gm-restructuring/gm-to-cu... Appears they are dropping three plants and a few cars
dgudkov 8y ago
>If the company does something that jeopardizes the stability of society, just enforce control. It didn't work out well with Bombardier (CS-series).
hackeraccount 8y ago
Really? That seems like a good idea?
- ryanwaggoner 8y ago
  For some people, government is the only tool in their toolbox, leading literally every problem to look like a nail...

by esturk 8y ago

mdasen 8y ago

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.

AmVess 8y ago
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.
- mdasen 8y ago
  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.
  - Scoundreller 8y ago
    It was a gift to the creditors.
    - altcognito 8y ago
      And the suppliers, whom other automakers also rely on.
- deleted 8y ago
  [deleted]
- Aloha 8y ago
  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.

peeters 8y ago

> 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. https://www.theglobeandmail.com/report-on-business/ontario-sells-gm-shares-for-11-billion/article22797007/ https://www.theglobeandmail.com/report-on-business/ontario-s...

onetimemanytime 8y ago

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.

tonyedgecombe 8y ago

Just take a look at British Leyland to see what happens when the state gets involved in car manufacture. https://en.wikipedia.org/wiki/British_Leyland 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.

blahblahthrow 8y ago
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.
WhompingWindows 8y ago
How do you define "best" here? What outcomes are you optimizing for? Profit alone? Number of cars produced? Carbon emissions?
- tonyedgecombe 8y ago
  >What outcomes are you optimizing for? Not the outcome rather the consumers, tax payers, even the workers, possibly the environment although I suspect that is somewhat orthogonal to this.
rchaud 8y ago
> 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.

Shivetya 8y ago

Couple of points. 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-cut-car-production-in-north-america-halt-some-models-source-idUSKCN1NV1NB https://www.reuters.com/article/us-gm-restructuring/gm-to-cu... Appears they are dropping three plants and a few cars

dgudkov 8y ago

>If the company does something that jeopardizes the stability of society, just enforce control. It didn't work out well with Bombardier (CS-series).

hackeraccount 8y ago

Really? That seems like a good idea?

ryanwaggoner 8y ago
For some people, government is the only tool in their toolbox, leading literally every problem to look like a nail...