Q: Is General Motors becoming ‘China Motors’ using taxpayer dollars?
A: No. The restructured GM is still based in Detroit and is still one-third owned by the U.S. government. But it sells nearly as many cars in China as in the U.S. and has continued expanding operations there.
FULL QUESTION
How much of this is true?
Subject: Video – No more GM cars for me!
WHAT AN EYE-OPENER!
No more GM cars for me.
Even if this were only half true it would light a fire under you. Trouble is, it’s ALL true !!!
CLICK ON the LINK below and open up your eyes….
http://www.youtube.com/watch_popup?v=Lvl5Gan69Wo YES, YOUR TAX MONEY AT WORK, THANKS TO THE OBAMA ADMINISTRATION !!!!!
FULL ANSWER
Several readers have asked us about the claims stated in a viral video that criticizes General Motors’ expanding operations in China. The video has received more than half a million views on YouTube since it was posted May 4. The narrator, a man who gives his name as Vince Wade, asks: “Did we bail out GM so that it could become a Chinese company?”
It’s a fair question. The short answer is, “No.”
Still American
GM is still a U.S.-based multinational auto company, incorporated in Delaware and headquartered in Detroit. In fact, according to the Congressional Budget Office, about 33 percent of the stock in GM is still owned by the U.S. Treasury as a result of a taxpayer-assisted bankruptcy and downsizing in 2009.
But the company sells cars in more than 120 countries and accounted for nearly 12 percent of all car and truck sales worldwide last year (11.9 percent, according to GM’s annual report). It’s also true that China is now the largest market for car sales on earth. Total car sales in China surpassed those in the U.S. in 2009. China retained the lead in 2011, and that lead is expected to grow in the future.
So like it or not, the world’s automakers have been drawn to this huge and growing market, and GM has been particularly successful there. The video’s narrator clearly doesn’t like it.
His video asks, “Was the bailout a mistake?” And he goes on to quote an account criticizing GM’s Cadillac brand for supposedly currying favor with “the underworld mob that runs China.”
We won’t offer opinions on whether or not GM or any other company should be doing business in China, or on other controversial issues on which the narrator takes a stand. Our job is to look at the facts.
Overall, the video gives a one-sided picture. And on a couple of points it misleads. Here we offer a more complete and accurate picture, so readers may decide for themselves how they feel about GM’s dealings in China.
GM Expanding
Narrator Wade states that “GM has been shrinking its U.S. operations, while it’s aggressively expanding and investing in the People’s Republic of China.” But the fact is GM is currently expanding in both places.
It’s true that GM shrank much of its U.S. operations — shedding old brands and dealerships and many workers — when it went through bankruptcy in 2009. The alternative was to go out of business entirely.
But since then, the “new” GM has enjoyed expanding sales and operations. For example, it announced in January that it is building a new, $200 million stamping plant in Arlington, Texas. And it states: “Since June 2009, the company has announced more than $6.9 billion of investment to upgrade or expand operations in 12 states, creating or retaining more than 17,600 jobs.”
It’s true that GM also has been expanding in China — but that was true long before the bailout. The “old” GM (the one that went bankrupt) was the largest foreign car maker in China in 2008, battling for supremacy there with Volkswagen.
The “new” GM has continued that overseas success. It sold a record 231,183 vehicles in China in May, up 21 percent from a year earlier, for example. That compares with 245,256 vehicles sold in the United States, up 11 percent from a year earlier and the highest in 33 months.
Cost to Taxpayers
The video is also misleading as to the cost of taxpayer support. It cites a figure of $80 billion, which actually covers the government’s peak disbursements for both GM and Chrysler, as the narrator mentions in passing. But the net cost of the entire bailout is currently estimated to end up being $19 billion (by the Congressional Budget Office) to $22 billion (by the U.S. Treasury).
Most of that $80 billion has been recovered through interest payments, loan repayments and sale of government-owned stock. And of course, some portion of that is attributable to bailing out Chrysler.
Taxpayers still own about 33 percent of GM stock, according to CBO (other calculations put the total closer to 32 percent). Either way, the final cost of the bailout depends largely on whether the price of GM stock rises or falls between now and when the government decides to sell its shares.
So the better GM does, the less U.S. taxpayers will be hurt. And a key part of GM’s global business strategy is selling and manufacturing cars in China. As then-GM CEO Rick Wagoner said in 2008: “The automaker that gets China right will be the future leader of the industry.”
Global Auto Realities
Much of the video is devoted to showing GM Chairman and Chief Executive Officer Daniel F. Akerson explaining GM’s overseas operations to reporters in Shanghai in February 2011. Akerson noted that almost “seven out of 10 of our vehicles were made outside the United States” and that “we have 11 joint ventures” with government-owned Chinese companies (which the narrator later describes as partnerships with the “autocratic, anti-Democracy, Communist government of China”).
Akerson goes on to say, “We’re involved in vehicle manufacturing, sales, distribution, engineering design” and other auto-related businesses. He also said GM operates 11 assembly plants and four power train plants in eight cities in China.
That may sound surprising to some viewers, but the fact is that building and selling cars outside the home country is standard for multinational auto firms today. Japanese and German firms have many manufacturing facilities in the U.S., for example.
