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.
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.
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.
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.
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
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.
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.
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 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.
Thanks for letting me know.
A car company, like 'Jaguar' (similar story) has assets.
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.