There was a fair amount of carping recently during the US Congressional mid-term elections surrounding taxpayer-funded initiatives to help stricken companies through the recession.
Granddaddy of all those initiatives of course was clearly General Motors – which very quickly earned the nickname ‘Government Motors’ – by those whose vision of America can not ever, under any circumstances, entertain the idea the State has a role to play in providing a crutch.
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Even the widely-used ‘bailout’ implied some sort of US$50bn free lunch for GM, but what exactly was the alternative?
Never mind the Americana stuff with iconic Chevys pounding the nation’s highways or Presidential Cadillacs bestowing on the brand some sort of quasi-reverential approval – this was about saving untold hundreds of thousands of real people’s real jobs.
And not only directly in GM of course, but equally up and down the US and spreading out in its myriad supply and dealer tentacles home and abroad.
A highly relieved GM CEO in the guise of Dan Akerson today (18 November) launched GM’s fightback as a taxpayer refunder – and whose company’s share price is already starting to climb on Wall Street after taking its fledgling steps at US$33.
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By GlobalData“If GM – still the largest automotive company – had filed for Chapter 7 the supply chain would have been decimated,” said Akerson. “The fact GM is viable and strong really helps the supply chain which is good for Ford, Chrysler and some of the foreign transplants.
“It [Chapter 7] would have been devastating for the infrastructure of the US. It is a lot of jobs, not only in GM but [for] some of our competitors.”
Recent research from the Center for Automotive Research in the US indicates the bankruptcy procedures for GM and Chrysler – involving the staggering US$50bn ‘bailout’ saved more than 1.1m jobs in 2009 alone.
Added to that colossal figure are a possible 314,000 more saved jobs this year and stemmed personal income losses of US$71.9bn last year and US$24.6bn in 2010.
The sheer scale of the numbers is mind-boggling but, crucially mindful of a vociferous and highly vocal number of critics of the ‘bailout,’ Akerson was at pains today to emphasise the repayment nature of the deal.
True, it has a significant way to go, but today’s enormous IPO of up to $23bn – and a share price that is already rising having been unleashed onto the free market – is surely evidence the American taxpayer will eventually get his money back.
Across the pond in another raging bailout debate, it seems increasingly likely that Ireland – engulfed in a financial maelstrom like almost no other in Europe – will have to go cap in hand to various austere institutions in order to stave off virtual bankruptcy. The repayment – and political – repayment parameters will undoubtedly be long and painful.
But before the GM critics use that as an analogy, back in the US, the manufacturer is now turning in quarter after quarter of robust growth, confidence is high and the model range hugely reinforced.
The rescue of GM is not the slippery slope to socialism – try telling that to those whose jobs have been saved – but a pragmatic application of a temporary solution in brutal times. And as Akerson noted, this is not just about GM but the wider – and massive – spectrum of the US auto industry in general.
