GM's Capital Outlays Dictated by Politics, Not Economics

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green GM logoGeneral Motors recently announced a couple of more ways to freely spend taxpayer money. While GM boasts of "investing" in politically-correct "green" initiatives and makes misleading job "creation or preservation" claims, shareholders continue to be neglected as share price languishes below the IPO price. Although GM seems to dislike the nickname of "Government Motors", its actions belie the company's perceived desire to run a profitable, publicly-owned corporation.

GM's latest efforts to appeal to the environmentally conscientious crowd involve the building of a solar powered plant in Michigan to build the Chevy Volt. The project will cost GM (as well as taxpayers and shareholders) $3 million. The savings on electric usage are stated to be $15,000 per year. At that rate, the building will pay for itself; in 200 years! Not exactly a cost effective investment. The inefficient investment is still worthy of boasting from GM. Bob Ferguson, vice president of GM Public Policy, stated, "Making sustainable choices is good for both the environment and our bottom line." I won't speculate on the benefits to the environment, but this certainly is not helping the "bottom line."

The latest hype surrounding job "creation" at GM comes in the form of an announcement to "protect or add" 96 jobs. The cost? A mere $109 million spent to support engine production in Michigan. The price tag of over $1 million per job kept does not stop GM from bragging about the feat in a press release. Is this starting to sound more and more like "Government Motors"?

These latest announcements come weeks after GM revealed that 100 "temporary" workers at a Michigan factory would be replaced by 150 "permanent" workers. The UAW members being replaced worked for GM for about two years. These were newer workers earning $14 per hour. The replacement UAW workers were previously laid off by GM and will receive about $28 per hour. I guess it takes 150 seasoned veterans to do the work of 100 newer workers, and at double the cost! GM does not seem to get that the idea is to become more profitable by lowering costs. Or perhaps the simple answer is that GM's allegiances lie elsewhere.

General Motors continues to act like a politically motivated entity. There does not seem to be any loyalty or obligation to shareholders, other than the UAW ownership. GM's actions reek of political influence and neglect the basic goals of cutting costs and maximizing profits. Perhaps because those that exert the most influence on GM, like the Obama Administration that controls the taxpayers' investment stake, care less about free market capitalism and profitability than they do about political goals and ideology.

Mark Modica is an NLPC Associate Fellow and a spokesman for GM Main Street Bondholders.

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