Following in Chrysler's footsteps, General Motors filed for bankruptcy protection in the United States on Monday. North of the 49th it's a bit of a different story. Unlike GM in the States, GM Canada will not be filing for creditor protection.
Showing a rare co-operative spirit, the Canadian federal Conservative government and the Ontario provincial Liberal government have pledged a total of $10.5 Billion (capitalized for emphasis!) for an 11.7 per cent equity position in the revamped GM. The feds are pulling $7 billion out of our pockets and the provincials $3.5 billion. As a result of its contribution to GM, the federal deficit for the current fiscal year is expected to exceed $50 Billion and the provincial deficit $18.5 Billion. To put that in perspective, as a Canadian, my share of the federal deficit is $1,478; the provincial $1,500.
Okay, so let me get this straight. A company that has been around for just over one hundred years and that should have learned some basic business lessons during that time but apparently hasn't, now cries the blues and two governments, ostensibly on behalf of their constituents, come to the rescue with money we apparently don't have. Granted, that's simplistic, so let's take a closer look.
I'm old enough to remember the oil crisis of the 70's and the effect it had on the North American auto industry. While consumers were drawn to more fuel efficient vehicles, GM continued to produce gas guzzlers. Smaller vehicles were introduced into the lineup, but poor management led to production deficiencies a large scale. Anyone who remembers the Vega and the Xcars knows what I'm talking about. Although they sold well initially, once they started spending more time in the shop than on the road, the writing was on the wall. Japanese automakers Honda and Toyota were only too pleased to pick up the slack. And they did so in a major way.
Labor woes, including strikes and pension fund underfunding further eroded GM's capabilities to remain on solid financial footing. Management's reluctance to learn from their Japanese counterparts and the union's stranglehold on labor costs including wages and benefits for workers and retirees have brought us to today.
As a resident of Ontario, and now apparently a stakeholder in an automotive company for which I have little respect, I'm just wondering how I can claim my place on the board of directors of the 'new and improved GM'. As far as I'm concerned I'll never refer to the company as General Motors again; henceforth it'll be Government Motors. Whether the $10.5 Billion of taxpayer money will actually be repaid or, hope against hope, show a return on investment, remains to be seen, but given all that has gone before, I'm not optimistic.
