Perry Glasser

GOVERNMENT MOTORS

In Business, Economics, Economy, Finance, Political Economy, Politics, TAXES, Wall Street on September 16, 2011 at 11:01 am

Citizen

US Citizens still own 33 percent of the new GM, a corporate entity that was sustained by TARP money. In a non-lead front page story today, The Wall Street Journal notes that GM’s expansion plans  include the construction of several auto plants in China.

More jobs for the Chinese.

China requires foreign companies to partner with Chinese firms, in GM’s case, Shanghai Automotive Industry Corp (Shanghai GM). That arrangement has existed since 1997, more than a decade before the bailout.

More wealth creation in China.

The typical deal in China is that the technology, capital, and expertise being brought to the table by a US company is being matched by a grant of access to Chinese markets.

The temptation is great: Chinese markets are currently growing ay 9.4 percent per year. There are more cars and trucks sold in China than in the United States.

GM’s Chinese investment will probably make the company a lot of money, but after its split with Shanghai Automotive Industry Corp., GM will never bring what’ left of its profit back to US shores for domestic investment. They’d be crazy to do so: repatriating overseas profits will cost GM 35 percent in US taxes.

The Chinese investment in bailing out GM: $0.

GM can’t bring the profits home to Detroit, so what GM will do is plow its profits back into China.

Daniel Akerson, the CEO of GM, and was named to the Board of Directors in 2009 by the US Treasury in July 2009.

To sum up:

  • YOUR money saved General Motors from bankruptcy.
  • GM’s reorganization maintained union contracts but dissolved stakeholder claims–that would be your retirement fund’s investment;
  • CHINESE participation in the bailout = $0
  • YOU still own 33% of GM;
  • YOUR profits are building factories and creating jobs in China.
  • GM’s CEO is a US Treasury appointee representing YOUR interests.

TARP—a great deal for the Chinese, a great deal for GM.

Citizens?

Screwed.

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