FRONT PAGE CONTRIBUTOR
General Motors Continues to Invest American Tax Dollars Overseas
The World Cup ended in a tight contest between Argentina and Germany on Sunday, but even after what was by most accounts an exciting tournament, the American enthusiasm gap between football and futbol remains considerable.
It was noteworthy, then, when the iconic American car brand Chevrolet inked a $70 million sponsorship deal with English Premier League giant Manchester United. The Chevy logo will now grace the front of that legendary soccer team’s jersey.
Meanwhile, just days before the Argentinian men’s soccer team fell to Germany in extra time, General Motors had announced that the South American nation would house the company’s new aluminum motor factory.
The plant will employ 2,800 people in Rosario, the largest city in the country’s Santa Fe province.
It will once again expand a large GM facility in the city. The last expansion came in 2012, when the company announced plans to produce vehicles at the Rosario complex.
There’s nothing jingoistic about a bit of indignation over a company propped up with billions in taxpayer funds expanding in the labor-cheap developing world. In fact, language written into the 2009 GM bailout was supposed to prevent just that sort of offshoring.
The idea was intuitive: if American taxpayers were going to throw the company a lifeline, they should expect a return on their investment. And in the troubled economic times of 2009, creating jobs in the United States seemed like a reasonable request.
A few years later, GM was consistently falling short of its domestic car production requirement. As the company’s boosters are quick to remind us, GM is producing large numbers of vehicles.
But repeatedly, it seems, it’s doing so overseas. To wit, GM cars take only two of the top 10 spots on Cars.com’s American-Made Index, which takes into account not just where vehicles are assembled, but the total American labor and investment that goes into their production.
Japanese companies Toyota and Honda both have more cars in the top 10 than America’s flagship automaker. Ford, which did not receive a bailout, takes the top spot.
The company may have its federal benefactors to thank for the availability of cheap third-world labor.
Company executives told shareholders last year that the Treasury Department had agreed to “irrevocably waive certain of its rights,” including “certain manufacturing volume requirements.”
GM spokespeople refused to address whether that included domestic production quotas. Only a couple months later, it stopped releasing North American production statistics.
Like GM’s Argentina expansion, other investments by the company have sought to offshore specific aspects of vehicle production.
It announced last year that it would invest nearly $700 million in its operations in Mexico, in part to finance the production of transmissions south of the border.
President Barack Obama was fond of his campaign tagline proclaiming Osama Bin Laden dead and General Motors alive. He often paired that zinger with claims that his opponent, former Massachusetts Governor Mitt Romney, was an expert in outsourcing that, as a federal policy, would cost Americans jobs.
General Motors is certainly alive, but we didn’t need a ruthless financier to facilitate just the sort of outsourcing Obama decried. While the tagline certainly worked wonders for the Democratic presidential ticket in 2012, Americans are right to wonder today why they bailed out a company intent on operating overseas.
This is precisely the sort of fallout that cronyism produces but is usually missing from the analysis of bailout “successes.” Often sold on the basis of stabilizing a “system” like banking or manufacturing, the results of these valiant efforts to hand billions of dollars to failed companies is that the companies feel no sense of urgency to make the investment worth it to the taxpayer.
In the world of short-term political decisions, saving jobs by throwing money at a failing company is an easy “fix.” And always with terrible predictabilitly to the long term detriment of the American taxpayer.
Written as part of my Blogger Fellowship with the Franklin Center