GM: Where Are The Taxpayer's Bonuses?

GM (NYSE: GM) workers will probably get about $3,000 in profit-sharing for 2010. The reward would cover 53,000 union members who are also hourly workers. The program is part of a plan to get blue-collar employees back some of the $7,000 to $30,000 that UAW members sacrificed when the car companies began to restructure as losses mounted at the Big Three. UAW leaders have strongly backed the plan as should be expected. They gave in, out of necessity, on layoffs and pay to help save the industry

One school of thought is that blue-collar workers at GM should not get a cent in bonuses. GM has not paid back taxpayers through cash sent to the Treasury to cover loans and through its IPO according to most calculations. GM’s shares have risen over the last three months. However, that improvement has not matched the DJIA or the improvement in the stock price of the world’s largest car company–Toyota Motor (NYSE: TM)

Another way to look at the blue-collar bonus plan is that most UAW workers would not have jobs at all now if the federal government had not bailed the company out. Taxpayers faced long odds to get back the $70 billion put into Detroit. There should be a risk premium return on that capital.

GM”s fate just before the government’s aid package was uncertain but one option in a bankruptcy was to sell the firm off in pieces. Toyota and VW among others, may have been buyers. A bankruptcy could have voided all union agreements along with creditor claims. GM could have ceased to be GM in a matter of days. The Administration believed that the recovery of the American auto industry was essential to move out of the recession. There is no hard data that was true or is true today. Detroit may have lost tens of thousand of workers, which was not much on the scale of the millions of job loses which began at the end of 2007.

Detroit has lost the understanding that it is not privileged. It benefited more from that largess of the government than any industry other than the banks. If there are bonuses to be paid, the taxpayers should get them first. Union members are lucky to have jobs.

Douglas A. McIntyre