If there are only 50,000 American workers at the new GM, how have we saved one million jobs?

The left laughs about the “$200 million a day” Obama India trip figure–even if we don’t know the true price and that figure appeared in a reputable Indian newspaper. Well, what about this jobs figure?

From the Associated Press:

Obama: GM stock sale a success for his policy(AP) – 13 hours ago
WASHINGTON (AP) — President Barack Obama on Thursday celebrated the return of a reborn General Motors to the U.S. stock market, saying it shows some of the “tough decisions that we made” during the financial crisis were beginning to pay off.
(…)
Obama said estimates indicate that actions by his administration helped save more than 1 million jobs across 50 states.

The Center for Automotive Research estimated that aid to GM and Chrysler saved more than 1.1 million jobs in 2009 and 314,000 jobs this year. The third Big Three automaker, Ford Motor Co., did not accept federal assistance and stayed out of bankruptcy.

From the Christian Science Monitor:

Robert Reich’s Blog
Despite profits, US corporations won’t hire American workers
By Robert Reich, Guest blogger / July 27, 2010
(…)
GM now sells more cars in China than it does in the US, but makes most of them there. The company now employs 32,000 hourly workers in China. But only 52,000 GM hourly workers remain in the United States – down from 468,000 in 1970.

GM isn’t just hiring low-tech assembly workers in China. Last week the firm broke ground there on a $250 million advanced technology center to develop batteries and other alternative energy sources.

You and I and other American taxpayers still own over 60 percent of GM. We bought GM to save GM jobs, remember?

Robert Reich–our former Labor Secretary–says that the new GM has about 50,000 American workers. How is that even close to 1,000,000 American jobs saved? OK, include Chrysler and some suppliers–does that add up to a whopping 950,000 jobs?

The figure comes from the Center for Automotive Research (which gets its funds from the government) in a report issued just this week (perfect timing). As with everything these days, something smells bad about this.

From the Wall Street Journal:

November 17, 2010, 3:13 PM ET.
GM IPO: Auto Bailout Saved More Than 1 Million Jobs, Study Says.
By Shira Ovide
No matter what happens with Government Motors, the taxpayer intervention in the auto business appears to be a win for Americans, a new research report asserts.

The Center for Automotive Research said today the government’s bailouts of the U.S. auto industry spared more than 1.14 million jobs last year alone, and prevented “additional personal income losses” of nearly $97 billion combined for this year and last.

Another 314,400 jobs were saved this year thanks to the $80 billion in taxpayer lifelines extended to GM, Chrysler, and the GMAC and Chrysler Financial financing businesses, CAR said. The research organization based its conclusions on the potential impact of auto-industry collapse for jobs at U.S. auto makers and suppliers, and cascading effects on the economy at large. See more on CAR’s methodology here.

I checked “here.” It’s from May 28, 2009, and it’s just a worst-case projection.

The perfectly timed November 17, 2010 report is here. Let’s look at Page 3:

If the government had not invested in the automotive industry, up to 80,000 automotive jobs would have been lost, and General Motors alone would have lost one million units of sales in 2009.

Once Chrysler and GM emerged from their “orderly bankruptcies, the growth of automotive sector employment has been strong, with 52,000 workers added since July 2009. Had GM and Chrysler not successfully emerged, those jobs would have been permanently lost.

I’m going to have to ask this question of my old friend, the economist Tyler Cowen. 52,000 jobs sounds about 950,000 short of a million to me.

Plus, something would have happened to GM and Chrysler in bankruptcy. Maybe a company like Toyota would have bought the most profitable units and have continued to employ American workers. Or maybe GM and Chrysler would have remained dead, and people would have bought, say, more Toyota trucks manufactured in San Antonio, Texas.

I’m puzzled by the report and I’m calling its jobs figure bogus.

Rachel Maddow proudly announced that GM’s IPO was the largest of all time, but here, inflation-adjusted, it works out to number three.

Here’s a little piece from The Big Picture:

Is GM Fixed? How Will GM Do Over Time? By Barry Ritholtz – November 18th, 2010, 10:51PM
I had an interesting conversation with a hedge fund manager on the way home tonight — he bet me (an expensive dinner) that 5 years from now, GM is back int he need of some reorganization.

His view: GM is not as clean as it appears, the disclosures on the book (prospectus) note that the “We have determined that our disclosure controls and procedures and our internal control over financial reporting are currently not effective. The lack of effective internal controls could materially adversely affect our financial condition and ability to carry out our business plan.”
And, he argues, the Fed has to raise rates eventually — ending the cheap financing that helps GM;Lastly, the company is not strong enough to survive the next recession.
~~~
I took the bet — 5 years hence, GM should still be here surviving.

How would you have bet ?

How do you invest in a company that admits its financial reporting is not reliable?

Essential reading is Points and Figures:

Who Is Buying the GM IPO?
Posted by Jeff Carteron November 17th, 2010
(…)
To further the oddity that capital markets are witnessing, the US Treasury is in a “quiet period” as mandated by the SEC. Management of companies are not allowed to make statements about the company when it is undertaking an IPO, or when it is making filings with the SEC. Just contemplate that for a moment. The US Treasury is in a quiet period……..

We’re in a quiet period?

One competitive advantage they will have is that their largest shareholder is also the US government. They will get favorable rulings from the government. For example, it looks like GM will be able to avoid paying taxes (like other government employees) for years.

A $45 billion tax break, according to the Wall Street Journal.

Not paying taxes on profits sort of gives GM a competitive advantage over other car companies.
(…)
This jumps out at me. ”Although our U.S. and non-U.S. pension plans were underfunded by $17.1 billion and $10.3 billion on a U.S. GAAP basis at December 31, 2009, a hypothetical valuation as of September 30, 2010 projects total contributions of $0.6 billion to U.S. pension plans through 2013.”

On July 30th, I pointed out here than an auto expert had called the new Chevy Volt and “electric lemon.” Again, with curious expert timing, Motor Trend voted the Chevy Volt its “Car of the Year.” This is a tiny car that’s being priced at over $41,000, and needs a whopping $7,500 per-car subsidy to even approach any sales.

With more curious timing, GE (closely related to the Obama administration) said it would buy 25,000 Chevy Volts.

It’s bad enough that the government put billions into a failed private business, but every single government action stinks. Is no one adding it all up?

From Money Morning:

November 19, 2010
Stock Market Analysts and Insiders Wave Caution Flags After $20 Billion GM IPO
By Jason Simpkins, Managing Editor, Money Morning
General Motors Co. (NYSE: GM) yesterday (Thursday) raised $20.1 billion in an initial public offering (IPO) that moves the company closer to paying back the taxpayer funds it received in a bailout last year.

However, GM’s journey doesn’t end there. Even after all of the IPO money changes hands, the company will still owe the federal government more than $26 billion. And the challenges that drove the company into bankruptcy to begin with – union payouts, tougher competition, and higher gas prices – are still relevant.

SUMMARY
MSNBC’s Keith Olbermann and Rachel Maddow were gloating over the apparent success of the GM bailout. See, Republicans! You were wrong! Lawrence O’Donnell chimed in that it’s just another case of how socialism saved capitalism.

I say, wait five years on this. See what the fully audited annual statements say.

I will still argue, on principle, that government has no business investing in private business.

Tags: GM IPO