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Thursday, February 16, 2012

Saving Those Jobs At GM & Chrysler

Small Dead Animals points me to this article at the February 15, 2012 Canadian Financial Post concerning the Canadian government's bailout of GM and Chrysler.  (I confess: I did not know that the Canadian and Ontario governments got roped into this idiocy as well as the U.S. government.)  The author calculates that the jobs saved in Canada by the bailout were kind of expensive:
After subtracting the partial repayment made by both companies, the governments’ sale of some shares obtained via the bailout, and the present value of GM stock still held by the two governments, taxpayers are still out $810-million on the Chrysler bailout and $4.74-billion on the GM loan. That’s an estimated $5.5-billion loss, which will fluctuate only slightly, depending on the final GM share price when governments relinquish their remaining shares.
On jobs, three years later, the current employee count in Canada is 10,000 at GM (down from 12,000 in early 2009) and 9,000 at Chrysler (down from 9,800 in 2009). Using present employee counts, that means taxpayers offered up a $90,000 subsidy per Chrysler employee and a $474,000 subsidy per GM employee. (The company-only estimates are fair calculations; in the absence of GM or Chrysler, lost spinoff jobs at auto-parts manufacturers and dealerships would have been at least partly restored by either the two post-bankruptcy companies or by other automotive companies.)
As the author points out, what would have happened if both companies had gone bankrupt, and the employees had fallen into the Canadian safety net?  How many years would it have taken for Chrysler's Canadian workers to have been found new jobs?  Ditto for GM's Canadian workers?  (Especially because Canada, unlike the U.S., is doing okay on job creation.)  You could argue about whether those Chrysler workers would have been out of work long enough to consume $90,000 worth of unemployment and government assistance on health insurance.  But the GM workers?  Even if you threw $50,000 a year into those workers (which sounds generous), it would have taken almost ten years to burn through that subsidy--by the end of which, nearly all of these workers would have found new jobs, reached retirement age, or died.

If the government spends tens of billions of dollars to save tens of thousands of jobs, it means that they are spending a million dollars per job saved.  It would be cheaper to just write a $100,000 severance check to each employee, and let them look for new employment.

1 comment:

  1. I have been looking for a Chrysler all over the internet and ran across a new chrysler in Port Charlotte. Does this mean my car will lose a lot of value?

    ReplyDelete