In 2009, the Obama administration turned over $49.5 billion in bailout money to General Motors.
The company knew what to do with this money. It created jobs in China, where it has 2,700 dealerships. It also had its Cadillac division sponsor a movie produced by the Communist Party of China that praises the history of the founding of the Party.
This is called “branding.” Message: “The Chinese Communist Party is the Cadillac of Communist parties.”
The head of GM bragged in a speech in China that 70% of GM’s cars are made outside the USA.
You say you never heard about this. I wonder why not. Keep reading. It gets worse.
GM in 2010 said that it had repaid the 2009 loans. It did, too, and then borrowed money back at 5%. It had been paying 7%, which was a subsidy at that low rate to a busted company. Such a deal!
Over half of the bailout money went to buy GM shares, not make loans. That $26 billion in shares will be repaid (bought back by GM), we are assured, when GM’s shares hit $50. GM’s shares are under $25 today.
You say you didn’t know all this. You say it smells like crony capitalism to you. Me, too. But our sense of smell doesn’t count.
Then there was the government’s decision to force GM bondholders to lose their right of first repayment in the bankruptcy, which the law had previously guaranteed them. Instead, the government turned 40% ownership over to the United Auto Workers for its pension fund. The bondholders got stuck with shares in the company, which are down almost 50% from the 2011 transfer price of $40. Remember that? There was no hue and cry.
Here is a brief documentary on The GM-China connection. It is marred by one thing. It says that the government bailed out GM and Chrysler to the tune of $80 billion. But $30 billion went to Chrysler. It’s still crony capitalism, but the documentary is on GM. My rule: never overstate your case. Just tell the story. This story is surely worth telling. No one has told it any better.