PM blows billions and his principles
By Don Martin,
June 2, 2009
There's never been a worse buying opportunity for the company stock, but each and every Canadian involuntarily invested $303 in General Motors on Monday.
Investment might be too strong a word. More like a high-risk roll of the dice. Or perhaps a bunch of tax-collected billions thrown into a wishing well by fingers-crossed politicians.
After all, the broker who bought the shares on our behalf without the slightest whiff of an electoral mandate to back the $7-billion federal move, Prime Minister Stephen Harper, declared the stock purchase a probable writeoff minutes after the auto company bailout was confirmed.
In a jaw-dropping reversal of principle, Harper sold out to the corporate welfare mentality he'd steadfastly opposed before becoming a leader of rubber-band pragmatism and fiscal imprudence.
The Stephen Harper who insisted federal governments have no place picking winners and losers in the boardrooms of Canada has delivered the largest one-time, one-company gamble of taxpayer dollars in Canadian history.
A General Motors that has cut its Canadian car production by 50 per cent in just five years, with plans to shed half its domestic workforce in the next five years, has become a flagship Harpernomics investment that won't be declared a winner or loser until the deal expires long after he's gone, in 2018.
We, the taxpayers, now own $500-million worth of preferred shares and 11.7 per cent of a future common share issue that may end up worth as much as the current common shares. Which would mean, literally, nothing.
Industry Minister Tony Clement's firm promise not to pour public dollars into the company's underfunded pension plan was violated in spirit with a $3-billion rescue that will create a double class of faltering pensions--this one kept solvent with the help of government money versus the many that will be allowed to wither and die on their own.
Officials, who could not be named even though they negotiated this madness, kept singing General Motor praises during a media briefing, like they'd mixed it up with Honda or Mazda or Toyota or even Ford.
General Motors will exit the restructuring "with a very clean balance sheet" . . . "a pension plan in really good shape" . . . "sizable cash flow" and "low debt," they insisted.
So glowing was their outlook, one reporter had to ask why private investors weren't rushing in to snap up such a promising auto manufacturer. Because it's financial fiction, that's why.
Keep in mind the Canadian side of this company went from a peak production of 940,000 cars in 2003 to a paltry 463,000 cars last year. With the stigma of U. S. bankruptcy protection window-stickered across overflowing car dealers, the only General Motors buying market will be created at fire sale prices.
Politically, of course, sympathy must be spared for Stephen Harper, who has been forced by dark circumstances he didn't foresee even eight months ago to shed every particle of principle while ignoring strong anti-bailout public opinion.
As the prime minister readily admits, the real Industry Canada minister on this file is a guy named Barack Obama, who has driven Canada into a matching bailout policy to keep the cross-border industry in integrated equilibrium.
Yet Industry Canada officials displayed an uncomfortable degree of ignorance or secrecy and couldn't even produce a napkin highlighting the details of the deal on Monday, leaving reporters to doodle on a nice blank notepad in lieu of any fact sheet or even a news release.
Questions on GMC executive compensation were shrugged, all without revealing specifics, even though every pay penny is disclosed in the United States. There's no built-in guarantee that the company will preserve a certain number of jobs or commit to specific production quotas. They haven't figured out which lucky Canadian will get to sit on the new GM board of directors as our eyes and ears on the restructuring.
The federal political calculus isn't all that complicated. The auto manufacturing, parts and servicing Rust Belt has plenty of federal seats in play. The party that opposes bailouts is heading for a multi-regional wipeout, which is why no party opposes the rescue package.
But Liberals or New Democrats championing this potential monetary squander are easier to take than this particular prime minister embracing a culture of policy defeat.
This is the same Stephen Harper who, in 2004, ridiculed the "corporate welfare" handed out by "tired, old and corrupt Liberals" investing in areas like broadband Internet, research and development and "politically directed infrastructure."
"Only the new Conservative party is going to represent change in this country," he boasted.
Nobody could've anticipated Harper's definition of "change" would be a $7-billion federal dose of corporate welfare for a failing car company that didn't adjust to market demand, deliver a quality product or post the best price.
That's probably enough to drive true-blue Conservatives crazy.
© Copyright (c) The Calgary Herald
Tuesday, June 2, 2009
PM on GM: "I think there's probably some great buying opportunities in the stock market” October 6, 2008
Posted by Fillibluster at 9:04 AM