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GM gamble

June 03, 2009 17:06

Taxpayers could be forgiven for feeling shell shocked at the news that Ottawa and Queen's Park are committing $10.5 billion in a bid to save General Motors (GM).

They could also be forgiven for feeling as if those tax dollars have been transformed into chips and dropped on a roulette table. If the spinning ball falls into the right slot, tens of thousands of jobs will be salvaged. If it doesn't, well you can kiss those jobs and those billions of dollars goodbye.

The stakes are simply massive in this game, but a refusal to ante up was unthinkable, according to Prime Minister Stephen Harper and Premier Dalton McGuinty. "The alternative would be for the Obama administration to move unilaterally to restructure GM and secure GM jobs in the U.S.," warned Harper.

"Had we taken that path, there is no doubt in my mind that America would not have for very long tolerated Canadian production of GM vehicles and parts for sale in the U.S. ... Without Canadian money in the game we would be out of the game."

That's what is so unnerving about this process - even the PM acknowledges that this is simply a gamble. There are no job guarantees. There is no guarantee that a revamped, more efficient GM will ever pay the loans back. And it's not clear whether the bailout money will be used to shore up pension shortfalls.

What we can predict (beyond ballooning deficits) is that Canada's investment will ensure that 16 per cent of North American production remains north of the border. What that 16 per cent represents after GM sheds 11 plants, three operations and restructures further is anyone's guess.

So, did Canadians get value for their billions? Well, McGuinty says there are about 85,000 Ontario auto and spin-off jobs at stake in this game. And the U.S. has $50 billion riding on a restructured GM.

We'd better have a seat at the table.

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