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Comment by esturk | Hacker News Reader

Governments should wise up when the next bailout happens. Seek collateral on the company via shares or some other valuable goods that are not easy to shed. Enforce some board member, etc.

For all the criticism Chinese tech companies get, the main control the Chinese government has is by being the largest shareholder of said companies. If the company does something that jeopardizes the stability of society, just enforce control. Every sizable Chinese company has a party secretary for the very same reason.

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> Seek collateral on the company via shares or some other valuable goods that are not easy to shed.

As part of the bailout, Canada/Ontario took a 12% ownership stake in GM. They have since sold their shares (at least Ontario has). At the time, the union president argued they should be keeping the shares for that exact reason, so that they have a reasonable influence on company decision making.

https://www.theglobeandmail.com/report-on-business/ontario-s...

Couple of points.

Governments regularly dole out tax and other equivalent subsidies all the time to businesses. From these bail outs, to funding stadiums, to getting new jobs or headquarters.

This is all comes with risk and the risk should entirely be on the government making the deals. If they are making bad deals then hold them accountable. Part of this is making sure that all other taxation and such does not eventually price manufacturers out of your region.

With regards to the auto industry, the key word is industry. It is spread across multiple countries which means all must be taken into account when it comes to where vehicles are produced. This gets more important as the industry shifts the types of vehicles being made.

EV production will lead to the largest number of plant closures in the history of automotive production. The drive train savings alone in complexity will remove the need for engine and transmission plants as well as many plants which make the supporting hardware like pumps and more. The cascade effect on repair and maintenance shops will be even more hard felt.

edit: https://www.reuters.com/article/us-gm-restructuring/gm-to-cu...

Appears they are dropping three plants and a few cars

Just take a look at British Leyland to see what happens when the state gets involved in car manufacture.

https://en.wikipedia.org/wiki/British_Leyland

The best option is to let uncompetitive businesses fail and concentrate on things the private sector can't do well.

One example of a state business failing doesn't seem like a countercase? Almost every American car company was privately owned and failed, except the few that didn't.

How do you define "best" here? What outcomes are you optimizing for? Profit alone? Number of cars produced? Carbon emissions?

>What outcomes are you optimizing for?

Not the outcome rather the consumers, tax payers, even the workers, possibly the environment although I suspect that is somewhat orthogonal to this.

> The best option is to let uncompetitive businesses fail and concentrate on things the private sector can't do well.

This is such an Economics 101-style response, I'm not even sure how to address it.

When the plant stops production, it's not only the 2500 people who lose their jobs, it's also the auxiliary economy of parts suppliers, logistics networks and food and drink businesses that are affected and may have to shut down as well. That creates a negative multiplier effect that pushes economic activity down further. Not to mention the long term impact of lower tax receipts, lower property values.

You can't snap your fingers and replace the underpinnings of an entire community overnight via the magic of the "free market". Another company will only accept the costs of relocating there if the government starts offering tax incentives and the like to make it worth their while.

I agree that we need a better system, especially when companies can simply move when it's convenient. But manufacturing is a strategically important industry and governments are willing to pay to keep that industry at home.

Meanwhile if you prop it up the business will remain uncompetitive and the Japanese or Germans will come in and win in the marketplace.

It is Econ 101. Governments can do and pay whatever they want but the parent comment will still be correct.

Being correct doesn’t make you right.

I can't tell if this is sarcastic or not.

This is such an Economics 101-style response, I'm not even sure how to address it.

I keep seeing this response pop up.

"Sure, my position fails to demonstrate even the most basic understanding of economics, but your argument reeks of being built on the fundamentals of the field!"

Another anecdotal example - VW. Lower Saxony has 20% of the voting rights and 11.8% of ownership.

Ever heard of Renault? Due to neo-liberal politics the ownership has changed in more recent times, but they have been state owned for a lot of their history.

The disease of neo-liberalism was a contributory factor to the demise of BL and the word neo-liberalism didn't even exist prior to 1982. The writing was not on the wall with BL during the post war years and their products were highly successful. The UK balance of payments was helped not hindered by the predecessor companies - the Rovers, Triumphs, Austins and what-not.

The problem was investment. So in the years when BL was a lot of private companies they could not get investment from the city. This is because London only invests in companies they can asset strip, they don't speak the same banking language as in Germany where banks invest in companies and people.

After the Labour government that preceded Thatcher rescued BL there was a problem due to the lack of investment, however BL did what they could to rise to the challenge despite the difficulties of strikes and useless managers. Then when Thatcher arrived BL was privatised. There was obviously no investment from the conservative government, that is not how they roll. They just wanted to sell the family silver.

So then it comes to the media and how they portray the story as all the fault of the unions and the company being nationalised. Yet the story is not an honest one, the truth is that the UK banking sector just don't invest in actual companies that employ people that do actual work. They might front the cash for some asset stripping or they might invest in property, but never did they invest in UK industry. German culture was different, banks there have much better investment ideas, they can also see a better return from investing in their own concerns.

The disease of neo-liberalism was enforced on the world so you have things like Renault that the state aren't allowed to own if they are to be in the clubs of the EU/IMF/GATT and what not.

The people that manage companies are not automagically better people just because they work for vulture capitalists instead of the government.

I'll give you an example of government interference in the British car industry. For entirely political reasons the factory for the Hillman Imp was built in Scotland. The idea was to bring employment to a run down area, the reality was an inexperienced workforce that struggled to get products out of the door.

It's interesting to note we now make more cars in the UK than we ever did in the BL era.

It's not that the people who run the companies are better or worse. It's the customers. Is the company staying in business because once every two years a majority of the country pulls a lever for a group of people who then decide to vote to keep a company in business by sending money their way or is it staying in business because people spend money.

I have a lot more faith in decisions that get made because people put money down then because people put votes down. What's the line? A bet is a tax on bullshit. People say they like lots of things. They'll pay money they had to work to earn for a lot fewer - and they'll think about those a lot harder.

>If the company does something that jeopardizes the stability of society, just enforce control.

It didn't work out well with Bombardier (CS-series).

Really? That seems like a good idea?

For some people, government is the only tool in their toolbox, leading literally every problem to look like a nail...

It's hard to say that GM made out in the bailout. Shareholders were 100% wiped out. It's not as if some fat-cat shareholders did well while laying people off. Anyone who owned stock in old-GM lost it all.

It should also be noted that the US ended up owning 60.8% of new-GM while Canada owned 11.7% and the unions' benefit fund owned 17.5% with the unsecured bondholders owning the remaining 10%.

I know that it's easy to hate on the bailouts. People think money was given as a gift rather than the loans and ownership stakes which were what actually happened.

The bailout cost tax payers $16 billion which has not been repaid. Nothing says gift louder than that.

In the meantime, they have been offshoring production of parts and vehicles like no one's business. I looked at a new full size truck, and it had 45% domestic content. Most of it is built in China and Mexico. The Ford that I purchased has 75% domestic content.

Yep, the government did take a loss on GM. Sometimes investments don't pan out. Investments still aren't gifts.

If it was a gift, who was it a gift to? It wasn't a gift to GM shareholders who received none of it. If the bad-guy in this situation is greedy shareholders looking to layoff workers, they didn't get the government's money.

One can certainly argue against the investment. However, it's hard to say it's a gift. Who was the recipient of that gift? If anything, it would have to be the workers who didn't face mass-unemployment in the wake of a crumbling auto industry.

If the government hadn't bought GM's assets, workers would have been out of jobs very quickly. During the economic crisis, no one had the available capital to take on that risk. The government's investment meant that most of those workers saw stability (or as close to that as could be had).

If you're on the workers' side, the government bailout is the side you need to be on. Shareholders lost everything while workers (for the most part) kept their jobs and benefits. Yes, there have been layoffs and contract re-negotiations, but that's nothing compared to the chaos of tens of thousands of people suddenly jobless concentrated in areas that don't have a lot of other employers (and during an economic crisis).

That doesn't mean that everything is perfect. However, the bailout benefitted workers, not shareholders who lost everything.

It was a gift to the creditors.

And the suppliers, whom other automakers also rely on.

The bailout of GM, accomplished three things, the first of which - it saved the myriad of suppliers (ecosystem) the automakers need to make cars, the second was saving and unknown amount of money from unemployment claims by workers of GM, and downstream suppliers - in addition to money the pension benefit guaranty corporation would have paid out to cover GM pensions, it also preserved around 35 billion in tax revenue. While I'm opposed to bailouts like this on principle, letting an intire industry die, because one dominant player fails - the collateral damage trumps pricpleded thought here.

The state is not the best manager, let's be honest. They should sell the shares as soon as possible, permitting market conditions. Otherwise you'll have elected jerks grandstanding and playing games.

Not bailing them is also easier said than done: tens of thousands of direct and indirect jobs.

And because the state bailed them out 10 years doesn't mean that the plant in a certain city will stay open for eternity.

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