Edward Niedermeyer: Welcome to General Tso's Motors

After decades of slogans like "See the USA in Your Chevrolet" and "Baseball, Hot Dogs, Apple Pie and Chevrolet," General MotorsGM +0.16% has retreated from its overtly patriotic marketing approach since emerging from government-funded bankruptcy. Maybe that was a wise move, given that American taxpayers paid for the $50 billion bailout of "Government Motors" and not all of them were happy about it.

But another dynamic also seems to be at work: The auto maker has fundamentally shifted its focus. American taxpayers may have rescued GM during its moment of need, but it is China that is disproportionately benefiting from the bailout of America's erstwhile automotive icon.

GM's most recent round of investments vividly demonstrates the change. At last week's Shanghai Auto Show, GM announced it would spend $11 billion on new production facilities in China by 2016, creating some 6,000 new jobs there. By contrast, GM has invested only $8.5 billion in U.S. operations since its 2009 bankruptcy, and since 2005 the number of workers it employs in North America has fallen by 76,000, according to the industry publication Automotive News.

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As the result of the company's new emphasis, GM China President Bob Socia says that Americans "could very well" soon find Chinese-made GM cars on showroom floors. "There is no reason why we can't be exporting to the [United] States," he told a reporter for the website Autoblog at the Shanghai Auto Show.

But GM selling cars made in China at American dealerships probably isn't what the federal government, in late 2008 under President Bush and then under President Obama, had in mind when it came to GM's rescue. Last October, Mr. Obama chided Mitt Romney at a presidential debate by saying, "You know, if we had taken your advice, Gov. Romney, about our auto industry, we'd be buying cars from China instead of selling cars to China."

Currently America is a net auto exporter to China, and Mr. Obama might even defend GM's decision to shift resources to China by pointing out that America's auto exports have risen since the bailout. But it isn't the government bailout or green-technology loans that have fueled America's car-making comeback; it's broader trends in the global economy, most importantly a weak dollar combined with low U.S. interest rates.

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At the new technical center near Shanghai, GM and its Chinese partners are jointly developing new cars based on GM components, including such high-tech elements as electric-car batteries, dual-clutch transmissions and lightweight materials.

GM's technical cooperation with Chinese partners goes beyond what any of its major competitors are willing to risk in light of China's reputation for intellectual-property theft, on top of government-mandated technology transfers. While lost manufacturing jobs are a common concern for Americans today, an even bigger problem down the road may be the erosion of America's technical advantage and its effects on broader U.S. economic performance.

With GM's technology and manufacturing jobs streaming into China even as other auto makers invest in the U.S., taxpayers might well wonder what their billions of bailout dollars really bought. Certainly the future that the Obama administration has promised—one of high-tech green cars designed and built by GM and Chrysler in America for export around the world—doesn't seem to be forthcoming. Instead, GM has become what one might call America's subprime auto maker, increasingly dependent on cheap credit, fueled by the Federal Reserve's near-zero interest rate policy, to support its made-in-China production strategy.

Ultimately this new direction is less a problem for the administration, which is in the process of divesting its shares of "New GM" at a loss, than it is for General Motors. After decades of wrapping itself in Old Glory and campaigning against "import" brands, GM is becoming the new face of Chinese-made cars. If GM's executives think the bailout made the company a political football, wait till they see what happens when American car buyers start finding "Made in China" tags on Chevrolets and Cadillacs.

http://online.wsj.com/article/SB10001424...Opinion_LEADTop

"...taxpayers paid for the $50 billion bailout of "Government Motors" and not all of them were happy about it."

No shite Sherlock. If you happened to own GM stock you were not one bit happy. They lost EVERYTHING!!!
Let me show you how...




GM slid into bankruptcy primarily because it couldn't profitably manufacture cars. (Yes, there were plenty of other issues, like too much debt, investments in subprime mortgages, etc. But the primary reason it couldn't solve these other problems was that it hadn't been making routine profits from manufacturing cars in about 20 years.) And the biggest single reason it couldn't profitably make cars was because its labor costs had soared.



Well, guess what? At $56 per hour, GM still has the highest labor costs in the industry.

http://www.stansberryresearch.com/dailyw...gest-bankruptcy

The GM situation is a microcosm of what's gone wrong in our country.
<snip>
The bankruptcy process didn't deal with the biggest financial hurdle GM faces, which is an enormous (and growing) unfunded pension liability. When the company entered bankruptcy, it owed $20 billion to the trust that was established to pay for the health care of its retired workers. Its pension program, with $100 billion in obligations, was also underfunded by roughly $10 billion. That's $30 billion in legitimate claims, which the union had to present to the bankruptcy court on behalf of GM's employees.






It could have received a mixture of cash and equity in the new GM – just like any other unsecured creditor. But there wasn't really a bankruptcy court. Instead, there was Steve Rattner – "the Rat," as we call him – the crooked Democratic political operative under investigation for bribing New York State pension officials. Obama made him the "car czar."



His job wasn't to fix GM. It was to deliver billions to the union and, thus, deliver Michigan for Obama in the next election.



Bondholders at GM were owed $30 billion, too. A legitimate bankruptcy would have sold or liquidated the company's assets and split the proceeds between the two major claimants, the bondholders and the unions. GM had roughly $20 billion in tangible assets, plus probably another $10 billion in intellectual property. These sums could have either been liquidated or put into a new company, with the equity split between bondholders and unions.



Not surprisingly, the current market cap of the new GM is $34 billion, right around the same number that could have been raised in a liquidation. The bankruptcy court should have given the unions roughly $15 billion worth of cash or new equity and the same thing to bondholders.



Everyone would be square. And the company (or at least the company's assets) would have been freed from the stranglehold of huge debts and pension obligations.



Taxpayers shouldn't have paid a dime in this process because, frankly, it's none of our business.



Remember... the purpose of bankruptcy isn't to repay creditors. They're screwed. They're not getting all their money back because they bet on the wrong horse. That's how capitalism works. That's the price of liberty – you're free to make bad choices.

The purpose of bankruptcy is to free productive assets from the burden of debts that can't be repaid or refinanced. We do this because it's good for society, not because it's good for creditors. Had the bankruptcy been handled legitimately, GM's assets would have ended up in the hands of better entrepreneurs. Its workers could have found new, productive jobs at a rate the market would bear. (Other carmakers are paying $47 per hour – these aren't bad jobs.)

Yes, GM's retirees, its pension program, and its bondholders would have taken a hit. But they wouldn't have walked away empty-handed. They would have been the owners of a profitable company, operating debt-free and without the burden of almost endless obligations to a pension fund.

GM should be all ready to do business in a Communist country after being in bed with the Regime the last 4 years.