Bailout Schmailout

The federal government and government of Ontario announced plans to bailout General Motors yesterday. This isn’t really news, but the structure of it is. The federal and Ontario governments will receive preferred and common shares in a recapitalized GM. Essentially, you, as a taxpayer, are buying GM stock. How do you like them apples? I bet none of you would personally invest money in GM. At least you won’t have to pay any transaction fees.

Ontario Finance Minister Dwight Duncan is optimistic of GM’s future after the company files for bankruptcy. It will be a restructured organization, out from under much of its debt and better prepared for the future. A lean, mean, gas guzzler producing machine.

The future!?!? The future is flying Deloreans that run on banana peels and garbage, clothes that dry themselves, self-extending baseball bats, and floating skateboards, not more Hummers that burn more gas and oil than a 747. Bailing out the auto industry is a complicated issue, more complex than I can handle, but I have a grasp on it. Lots of people work at GM or work for companies that supply parts to GM. These people shop at stores where other people work. If GM fails then jobs are lost, people stop shopping at these stores and more jobs are lost. It’s the trickle down effect. So I can understand why the government would want to keep GM floating; to keep Canadians employed and money flowing. Some jobs may be lost as a result of restructuring, but not all of them.

But I don’t understand why the government wants to keep people employed with GM? I don't care if GM is better equipped to handle the future, I want a Canada that is better equipped to handle the future. Why not invest in other technologies that will create other jobs for the displaced employees? Invest in new technologies. Hell, the nickel used to make the hybrid batteries is mined in Sudbury, why not invest in a hybrid battery plant. Invest in some technology I haven’t heard of, maybe algae batteries or Ipod Thinks (you don’t even have to touch them).

Sure, some jobs will be lost as some displaced workers may not be relocated, but isn’t that the same scenario as above. The result is the same except instead of having people employed at a factory that produces old technologies and cars that are losing market share to foreign vehicles we have people employed in new technology factories, factories that could bring Canada to the forefront of the modern manufacturing world.

But no, the future, according to our leaders, is the same as the past, except now you have a stake in it. I’m going to make a bold prediction about this future. We’ll come out of this recession sometime. And In 10 years or so after that there will be another recession. We’ll come out of that one too and the cycle will continue. That’s the way economies works.

Maybe I’m wrong, maybe GM will invest in new technologies and both GM and Canada will be better equipped for the future. But GM had plenty of time to do that before and didn’t until they were forced to react to Toyota and other forward thinking auto makers. Instead they produced gas guzzling SUVs and trucks to keep profits high. Maybe they will, but I’d sooner invest in flying Deloreans that run on banana peels and garbage, clothes that dry themselves, self-extending baseball bats, and floating skateboards.


Update: I just read the paper and the following quote is from the Globe and Mail:

At General Motors of Canada Ltd. alone, the rescue package could amount to a staggering $1.4-million for every job saved, with no guarantee that the bailout will ensure the long-term survival of the company's remaining auto assembly and engine plants.

Update #2: Most of the loan won't be repaid.