Government Motors (GM)

[Conan71]

What?  Are you telling me that I can't have my own hydrogen bomb?  (snark)

Seriously, those green initiatives and other start up programs for new technology likely wouldn't get funding from private industry.  Can you imagine the petrochemical companies funding development on a competing technology even if it would supplant their existing business in another half century or so?  Instead, they'd quietly buy it out and squash it.  So unless a technological genius is also as wealthy as Midas, it's unlikely his ideas will ever come to market absent government investment.

Sure, it's a simplistic argument, but I expect you'll have fun with it.

You probably could have a hydrogen bomb, but I wouldn't recommend it.

You are correct that there are technologies that the profit-minded wouldn't touch because in the corporate world there has to be an ROI on any expenditure.  With government, we don't expect a profit, but breaking even sure would be nice especially after a 30 year-long spending orgy that's left us over $15 trillion in debt with no future balanced budgets in sight.  You are very much correct that the government can have a place in funding and developing new technologies.  Unfortunately, that's not what happened with Genital Motors and the other energy boondoggles they've lost money on.

If a technology is worthwhile and represents the next great technological break-through, companies won't squash it.  I can tell you with pretty good certainty.  Everyone is looking for the next "integrated circuit".

The difference in what the feds have done with GM is that instead of investing in a new technology, they funneled a bunch of money into re-inventing the electric car.  GM could have licensed plenty of good existing technology which is readily available.  It's one thing to fund the development of the next generation of solar panels, but investing in a business which is doing nothing more than producing what's already in great supply at a cost disadvantage accomplishes nothing other than the temporary creation of jobs.  The government could have been a bigger help to Solyndra by imposting tariffs on similar foreign solar components and it would have resulted in a revenue gain to the government rather than a loss.

[Ed W]

I worked on a couple of electric cars way back when.  I was a summer student at Westinghouse R&D in Pittsburgh, and my exalted status put me in charge (ahem) of the battery racks on two electric car prototypes.  Yep, I charged batteries, topped off electrolyte, and did whatever gofer jobs were necessary.  The first prototype was a reinforced Volkswagen Karmann Ghia chassis with an aftermarket GT40 body on top.  Inside, it was chock full of Sears Die Hard lead acid batteries, a semi-automatic transmission, and a 200hp DC motor that was originally designed for torpedoes.  The real innovation was the controller, a suitcase size box that controlled all that current to the torpedo motor.  The car was extremely heavy, and with only drum brakes all around, it was a bit of a handful at speed.

The other car was an aluminum test mule designed and built by a race car company.  It featured a roll-on/roll-off battery rack that fit in a longitudinal compartment along the mid-line of the chassis.  Batteries were side-by-side and the rack ran the full length of the car.  A driver and passenger sat in tubs on either side of the enclosed rack.  This time, power came from two two hundred horsepower torpedo motors, and the controller was reduced to the size of a breadbox.  There was no body or fenders, so if you were riding in this car, goggles were a necessity as the front tires threw all sorts of things your way.

Westinghouse never marketed an electric car, of course, but I was told the real money came from developing the controller.  The rest of the project was fun, but pretty much a boondoggle. 

[Conan71]

For those of us who are a little more politically-jaded, Generous Motors and Solyndra are nothing more than examples of exorbitant sums of money tossed at "green jobs" because it's fulfilling a campaign promise and it's a great photo-op for the president.  Don't mistake that as me picking on President Obama specifically.  Every president and most every legislator has his or her pet projects which are done for altruistic reasons or even quid-pro-quo which don't make any fiscal sense whatsoever, but it helps their image with donors and voters alike.  I'm simply not okay with continuing that status quo.

Where I start to get onto Obama's case is when I look at projects like Solyndra and there are probably many other places the government could have put $500 million into which might have led to better job sustainability.  I think if we further extrapolated the GM math to jobs saved or created by the Volt, I think we'd see an incredibly wasteful ratio.  It's pretty hard to overlook the obvious connections between major DNC bundlers and what sort of rewards they've attained for that.  Again, the GOP certainly has a pattern of this as well.  The unfortunate part is, the American economy continues to suffer while politicians play corrupt political games.

The comments of "Well, Bush did it" probably rankle me the most.  Emulating the pattern of one of the more fiscally-reckless presidents in history isn't a good act to follow.  

[we vs us]

The difference in what the feds have done with GM is that instead of investing in a new technology, they funneled a bunch of money into re-inventing the electric car.  

In actuality, the Volt had been in development for years prior to the government bailout, and the first consumer model was introduced in 2008, before the bailout.  Essentially (as this conservative writer points out), it was the product of the free market. 

I haven't seen any credible reporting that suggests that, after the gov's bailout in 2009, they used their leverage to favor the Chevy Volt over other cars (separate, of course, from the existing green vehicle tax credits, which also include Toyota Priuses, et al).  They only provided bridge financing to help it through bankruptcy, with very few strings attached. 

[Gaspar]

Wow!  Now they are trying to escape, but the treasury won't let them, because it would make the administration look bad.
http://www.marketwatch.com/story/general-motors-pushing-us-to-sell-stake-report-2012-09-17

CHICAGO (MarketWatch) -- The Treasury Department is resisting General Motors' push for the government to sell off its stake in the auto maker, The Wall Street Journal reports. Following a $50 billion bailout in 2009, the U.S. taxpayers now own almost 27% of the company. But the newspaper said GM executives are now chafing at that, saying it hurts the company's reputation and its ability to attract top talent due to pay restrictions. Earlier this year, GM GM -1.07%  presented a plan to repurchase 200 million of the 500 million shares the U.S. holds with the balance being sold via a public offering. But officials at the Treasury Department were not interested as selling now would lead to a multibillion dollar loss for the government, the newspaper noted.

Good Lord, give them their company back!  Let them hire some brain-power because what they have now is not working.  The government has already wasted our investment in that little jewel, there's no sense in letting the baby go with the bathwater.

http://www.bailoutcost.com/

[nathanm]

Why? So you can beat the administration over the head for taking less for their shares than they could get better by holding for a while longer?

[erfalf]

Why? So you can beat the administration over the head for taking less for their shares than they could get better by holding for a while longer?

Do you think the we should still own this much if any of the company? Should we expect our leaders to only make decisions based on their political outcomes?

If they were, they not only would get less than they paid (which profit obviously wasn't the goal) they will drive down the price further by putting all those shares back on the market.

[nathanm]

Do you think the we should still own this much if any of the company?

I think it doesn't really matter. Treasury is not exercising any significant managerial control.

[Gaspar]

Hey, anyone think this is strange.

President Obama filed a complaint with the WTO over China subsidizing their auto industry at the same time that he is refusing to stop subsidizing his auto industry?

http://www.washingtonpost.com/business/economy/us-files-trade-challenge-against-china-over-auto-subsidies/2012/09/17/a8840f0a-00d5-11e2-b260-32f4a8db9b7e_story.html

After they stopped laughing the WTO responded with "pancakes".   

[nathanm]

In what way is (partial) ownership subsidy?

[Gaspar]

In what way is (partial) ownership subsidy?

Really has to do with how you view it.

For a moment, pretend you are a taxpayer. . .

The Government comes to you (well, ok, they don't actually ask your opinion) and says "I'm going to take your money and give it to this company so they can stay in business."

OR

The Government comes to you (I know, they don't actually care about your opinion) and says "I'm going to take your money and buy part of this company so they stay in business."

Either way, it's a subsidy, because you know you will never see that money again, and it will only serve to promote more failure and weaken the market over the long term.

You can flavor it however you like. 

[nathanm]

Good too see that ideology continues to trump consequences in your mind. No different than the Teahadists who actively desire that we default on our debt obligations.

[Conan71]

For a moment, pretend you are a taxpayer. . .

I see what you did there. Clever.

[erfalf]

So if GM goes under anyways, is that still considered a subsidy? Nathan's complaining that we will criticize them for selling now at a loss. Just think what would happen if GM went bankrupt again, and the gov't got nothing.

[Gaspar]

So if GM goes under anyways, is that still considered a subsidy? Nathan's complaining that we will criticize them for selling now at a loss. Just think what would happen if GM went bankrupt again, and the gov't got nothing.

You must also understand, either way, government gets nothing.  Government by its nature is incapable of meaningful investment, therefore any win-fall will instantly be turned into spending, and that spending represents a fraction of the power that money would exert in a free market environment.