Family Research Council

Time For Conservatives To Lighten Up On GM?

By Ken Blackwell Senior Fellow, Family Empowerment


Ken Blackwell is Senior Fellow, Family Empowerment at Family Research Council. This article appeared in Investor's Business Daily on November 1, 2013.


About five years ago amidst the background of a national financial crisis, an American icon admitted that the mistakes of its past had caught up to its present: General Motors filed for bankruptcy and turned to taxpayers for help.

A Republican president - George W. Bush - initiated what eventually became a $50 billion government bailout plan.

In the years since then, GM has restructured its business practices and redesigned its product line, brought on new management and many new board members, returned the company to profitability and invested more than $8 billion in the U.S.

But you'd never know that from reading recent editorials in the media.

Five years ago, GM may have deserved robust indignation from American taxpayers. But today, GM is doing plenty to earn its place at the forefront of the U.S. auto industry. The new GM has an interesting story to tell, and it's time to give that story a fair hearing.

It starts with a contrite, and somewhat chastened, company determined to implement change. The bailout money came with certain stipulations, yes, but even beyond those, management knew that without significant internal restructuring and a new commitment to building better vehicles, any taxpayer investment in GM would be wasted.

GM re-negotiated a deal with the United Auto Workers (UAW) that is grounded in reality, not union perks. The agreement gave employees a direct stake in the company and also included a five-year no-strike provision.

The company's legacy costs have been scaled back from $32.9 billion at the time of the bailout, to $7.8 billion at the end of 2012. Its balance sheet today shows the company's debt at $4 billion, compared to the $45.8 billion for the old General Motors.

And since 2009, the new GM has invested $8.8 billion in the U.S., while adding 25,500 jobs here in the U.S.

As a result, the company has seen 14 consecutive quarters of profitability. In 2012, GM earned nearly $8 billion by selling more cars in the U.S. under four brands than it ever did with eight. In August of this year, GM saw retail sales that were up 22% from 2012.

GM's operations in China have become the subject of one-sided criticism. It's strange that a global company with a renewed commitment to free-market practices would be condemned for seizing the opportunity to expand business in another part of the world.

Not competing in one of the top two auto markets globally makes no sense, and other auto manufacturers are working night and day to establish the kind of foothold and market share that GM has achieved in China.

Noticeably absent from the critiques of GM's business ventures in China are other facts.

Despite recent reports, GM's largest manufacturing footprint is still in the U.S., with 41 facilities and 85,500 employees who assemble the cars, stamp parts and build engines, transmissions and tooling.

Moreover, GM's operations are completely self-funding. In other words, no taxpayer money is being sent overseas to support Chinese operations. In fact, the company has repatriated dividends of $3.7 billion back to the U.S. from China.

It's also worth pointing out that General Motors began its expansion into China in 1997 - 10 years before any help from the taxpayer. The company has always been committed to building vehicles where their customers are; by the end of 2015, GM will have 21 facilities in China.

For the first time in decades, GM is operating on sound financial footing with the flexibility to run its business unburdened by past mistakes. It's making better cars, and selling more of them.

By the end of 2013, GM will have successfully bought back its remaining shares from the Treasury Department - the kind of progress that doesn't just come from a government directive.

We'll never know what would have happened if the Bush administration had sent General Motors and Chrysler on their way. Maybe the auto industry, which supports 8 million U.S. jobs and $500 billion in wages, would have survived. Maybe instead we'd be talking about the great auto industry collapse of 2008.

The bottom line is: Because difficult decisions were made, GM is a better company today than yesterday, and we don't have to witness our government spending an estimated $30 billion on unemployment benefits paid to idle auto workers.

As principled free-marketers, it's easy to demonize a major company that preferred partial government ownership to structured bankruptcy. As right-leaning Americans, it's tempting to trot out the auto bailout every few months as a constant ding against the Obama administration. But in the process, we accomplish little save for convincing the public conservatives are stuck in the past.

It's time to look to the future, where General Motors Co. becomes once again an enviable, profitable private company and an American success story.

Meet The Author
Ken Blackwell Senior Fellow, Family Empowerment

Ken Blackwell is the Senior Fellow for Family Empowerment at the Family Research Council. He serves on the board of directors of the Club for Growth and the National Taxpayers (Full Bio)

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