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| "Gord Gray" <ggray@mnsi.net> 05/18/2010 04:41 AM |
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Government auto stake could leverage benefits: Ken Lewenza
By Ken Lewenza, Special to The Windsor Star May 17, 2010
Canadian Auto Workers Union President Ken Lewenza.
Photograph by: Rebecca Cook, Reuters
GM's recent announcement that is has fully repaid the loans it received from the U.S., Canadian and Ontario governments (years ahead of schedule, and with interest) was another positive sign of the auto industry's gradual recovery. The loan repayment reaffirms the strategy that our governments followed at the time of last year's meltdown.
Government inaction at that time would have resulted in the collapse of GM and Chrysler, the loss of tens of thousands of crucial jobs, and billions of dollars in additional expense for governments.
Some commentators argued at the time that governments should stay out of the picture, and let the companies collapse (presumably to be magically replaced by new jobs rising from the ashes). Now that the money is being repaid, the folly of that view is being proven. It turns out the government involvement was a good investment, not a "bailout."
The most important legacy of last year's rescue is the jobs and communities which have been strengthened by the preservation of key plants and jobs, including the tens of thousands of spinoff jobs.
By keeping so many Canadians working, and paying taxes, the rescue effort was essential.
The repayment of the GM loans, and the profits now being reported by both GM and Chrysler, have whetted the appetites of some observers for government to dispose of its remaining stake in the two companies.
The loans which GM repaid were a small share of total government support to the firm; the rest was in the form of equity. The U.S., Canadian, and Ontario governments are also the major equity owners of Chrysler. What should be done with those shares in the long run, as the companies gradually regain their footing?
The conventional business view, echoed in a recent Windsor Star editorial (Auto Shares: Taxpayers Have Done Their Part, May 7), is that government should dispose of its shares as soon as possible.
By exiting the industry, government would then leave all the decisions up to the profit-maximizing judgments of auto industry executives and the investors they work for.
Underlying this view is the assumption that private investors know better than government how to run the industry. But is this assumption that "private knows best" really valid?
No, it isn't. If private investors indeed make rational, efficient decisions, how did we end up in last year's crisis in the first place?
In my view, government participation in the future actions of these companies, through a continuing equity stake, would help to ensure that they act in the best long-run interests of all of society, rather than once again pursuing short-term profits regardless of the economic and social consequences.
There are many examples in the global auto industry of the beneficial role of minority public ownership in stabilizing automakers and grounding them better in the economies where they are based. Volkswagen is arguably the most successful automaker in the world today and is part-owned by the state government in Lower Saxony, where the company had its origins.
That public ownership stake has been used to leverage a continuing commitment by VW to a strong German presence, despite Germany's high labour costs. Government officials don't get involved in day-to-day decision-making, but the company knows it has a responsibility to German society.
Public investment is also important in the French, Korean and Japanese auto industries. In most of the world, in short, government investment still plays an important role in the auto industry. In all cases, the companies operate on a global scale, and make decisions that are often painful or controversial.
But minority public ownership stabilizes the companies in the face of volatile market and financial swings, and cements their "home-field advantage" in the countries where they were founded.
Canada is the only G-8 economy which does not have a single "home-grown," domestically based auto company.
Over the years we've managed to attract foreign investment and leverage those investments into spinoff jobs and a state-of-the-art supply base. But we're still vulnerable, lacking a direct ownership stake in the assembly industry.
It's very ironic that The Star editorial quoted so approvingly from the words of Steve Rodgers of the Automotive Parts Manufacturers' Association. He supports a quick sale of the public stake, assuming that private industry will automatically find specific products which Canada can produce competitively.
Yet Rodgers own industry is proof positive that Canada can never count on automatic competitiveness. The autoparts industry has shed 40 per cent of its jobs (a terrible toll of 40,000 lost positions) since 2004. And there's no sign of turnaround.
To me that's a sure sign that Canada can't take anything for granted in the auto industry.
Last year's dramatic events have finally given Canadians a direct ownership stake in the auto industry.
Instead of selling off that stake at the first opportunity, we should learn from the experience of the rest of the world. A continuing public ownership stake would help us maximize the Canadian presence of this industry in the years to come.
That would be good not just for auto communities. It would be good for Canadian taxpayers, who will attain the biggest payoff for the money that they have invested.
Ken Lewenza is national president, CAW-Canada.
© Copyright (c) The Windsor Star
