IS GENERAL MOTORS OBLIGATED TO KEEP ALL OF ITS AMERICAN PLANTS OPEN?

GM has announced it plans to shut down plants in Detroit, Warren, Ohio, White Marsh, Maryland, Warren, Michigan and Oshawa, Canada

by Howie Katz

Big Jolly Times
November 29, 2018

In December 2008, when GM was about to go belly up, President Bush gave the giant automaker about $50 billion as bailout money. The government’s investment was converted to a 61 percent equity stake in GM plus preferred shares and a loan. In December 2013 the government lost $11.2 billion on its bailout when it sold its stake in GM.

GM has just announced it plans to shut down plants in Detroit, Warren, Ohio, White Marsh, Maryland, Warren, Michigan and Oshawa, Canada. About 3,800 American GM production workers will lose their jobs due to the plant closures. An additional undetermined number of workers will lose their jobs at plants that supply parts to the GM plants that will be shut down. GM also plans to cut its salaried staff by 8,000.

With 2,500 Canadians at the Oshawa plant, a total of about 14,000 workers will lose their jobs. And that’s not counting the jobs that will be lost at parts manufacturers.

GM said it was shutting the plants down because Americans are no longer buying sedans, preferring SUVs, crossovers and pickup trucks instead. It will stop making the Chevrolet Volt, Impala and Cruze, the Buick LaCrosse, and the Cadillac CT6 and XTS.

President Trump is furious, calling for GM to reimburse the government the $11.2 billion it lost when it divested itself of its stake in the automaker.

Is GM obligated to keep the four American plants operating because U.S. taxpayers bailed it out when it was about to go belly up? No, GM has the right to stop operations that are losing money. But Trump is spot on in calling for the return of the $11.2 billion the government lost on the GM bailout.

Of course, there is a bigger question as to whether GM is obligated to keep its plants open, and that is: Should the government have bailed out the automakers, and the banks that were too big to fail before them, in the first place?