Few episodes in the auto industry were more controversial than the government bailouts provided to General Motors and Chrysler in the wake of the U.S. recession. Without the money, the companies probably would have failed. With it, they became everything that was both right and wrong with manufacturing on such a massive scale.
The bailouts didn’t just help the manufacturers directly. Had they closed their plants, it would have sent a tsunami through the industry, affecting everything from the component suppliers, to the trucking and rail companies that moved the cars and parts, and right down to the catering firms that ran the cafeterias, and the mom-and-pop sandwich shops where line workers would no longer go for lunch.
On the other side, many taxpayers were infuriated at seeing their money going to companies that, in theory, should be self-supporting. I still hear from people who said they’d bought a Ford because the company didn’t take funding (although it applied for it, and was ready to use a line of credit if necessary). And some purchased Canadian-built Hondas or Toyotas, because those manufacturers didn’t draw from the public purse either.
But there’s one more side that many people don’t realize: all automakers take from the public trough. GM and Chrysler were just the ones that made headlines over it.
When they build a new plant, carmakers don’t just select a site, stick a shovel in the ground, and then write some cheques to cover the expenses. Instead, it’s a well-orchestrated game of cat-and-mouse between carmakers and governments. Factories get plunked where automakers get the best tax breaks and most grant money. They also look for economically-depressed areas where the promise of jobs will best loosen the local government’s purse strings, which is why so many of them end up in the U.S. South.
When Volkswagen built its plant in Tennessee in 2011, for example, $577 million of the $1 billion price tag came from state subsidies. Any new plant, plant expansion, or even major upgrades depend heavily on public funding, and even though it’s usually local rather than federal money, it’s still coming out of taxpayers’ pockets.
The automakers aren’t the only ones who do this, of course. All major corporations, no matter what they produce, shop around for the “best deal” when they expand their facilities.
And it’s not necessarily a bad thing. Plunk an auto factory down, and now you’re adding direct jobs in the plants, and indirect jobs around it. Workers pay taxes that improve their communities, and spend money in local stores and businesses. (Just don’t get me started on the ones who sport bumper stickers telling people to buy locally-made cars, while they shop at Walmart for products made in whatever overseas country will do it the cheapest.)
Where it all comes crashing down is when there’s a whiff of a benefit in moving production elsewhere. That may be the fundamental basis of a free market, and we’ve come to accept that jobs-for-life no longer exist. But you certainly can’t blame a worker for thinking that because he or she has nabbed a decent-paying job screwing cars together, that it couldn’t hurt to buy a house and raise a family.
Take those jobs away, and now you have a gutted community of people who might have moved there to feed the factory’s voracious appetite for manpower, or who established a home on auto worker wages that they can’t carry on the minimum-wage, minimum-shift jobs that may be all they can find if the factory leaves. It’s certainly possible to retrain workers for other careers, but since many of these plants were built in small, out-of-the-way places to take advantage of the local government’s desire for jobs, there simply aren’t enough other employers capable of absorbing hundreds or even thousands of laid-off workers.
Regulators need to step up and take action to protect the assets of taxpayers who have funded these massive plants. No matter what the company makes—whether it’s cars or ketchup—there must be accountability for all those subsidies. If you get several million dollars from the public purse to build or upgrade your facility, then before you move Job-One somewhere else, there should be regulations requiring that the money be repaid.
The people have invested in the company, and for that, the company owes the people. If a manufacturer ever covered all its costs, then it could possibly argue that it bears no responsibility to the community it created around it. But when you, and I, and all of us have provided millions of dollars so that company can set up shop and turn a profit, then you better damn well believe it owes us something in return.