GM's Lordstown Plant Should Stay Open
By Joel D. Joseph, Chairman, Made in the USA Foundation
As a U.S. taxpayer who grew up in the auto industry in Ohio, I am mad as hell about General Motors closing the Lordstown, Ohio factory. General Motors is behaving like a traitor to the United States and its workers. A traitor is defined as a person, or a company, who betrays a friend, a country or a principle. GM has betrayed the United States, its workers and the principle that when you are bailed out, you pay the debt back. In 2009,American taxpayers spent $51 billion to save General Motors with the intent of keeping U.S. factories in business during and after the Great Recession. Ultimately, the U.S. treasury recovered $39.7 billion, but lost a significant $11.3 billion. In addition, GM did not pay any interest on the bailout billions. The federal government is also responsible for the closure of the Lordstown plant because it failed to condition the bailout on keeping the U.S. factories in business.
This month General Motors has closed its largest plant in the United States, the Lordstown, Ohio plant. After fifty years in operation, this plant was manufacturing the Chevy Cruze with 1,700 hard-working American employees. The town of Lordstown, Ohio will be decimated for decades after the loss of its largest employer. Home values will plummet, stores will close and the area will suffer a permanent recession thanks to the disloyalty and treasonous acts of General Motors.
Details of the Bailout
On June 1, 2009, GM entered into bankruptcy. It had $82 billion in assets and $172.8 billion in liabilities. The government immediately lent GM $30.1 billion to fund operations through June and July while it went through bankruptcy reorganization. In return, the federal government acquired 60 percent of the company. The U.S. government gave GM another $20.9 billion to keep the company afloat. The Canadian government bought a 12 percent interest to protect GM factories in Canada. A union health trust received 17.5 percent stock ownership to cover benefits for 650,000 retirees. Bondholders received 10 percent stock ownership.
In 2011, General Motors sold most of its GM stock for $33 a share on the open market, for a total of $37.2 billion. Two years later, the Treasury Department sold the balance of its holdings for two billion dollars.
What General Motors Should Do
GM is currently making five of its eight Buicks overseas: one in Canada, one in China, one in South Korea, on in Canada and one in Poland. GM currently manufactures its small SUV, the Buick Encore and its twin, the Chevy Trax in Korea. GM also manufactures the Chevy Spark in South Korea. The Buick Cascada is made in Poland.
GM should shift production of some of these cars to the Lordstown factory. If consumers prefer SUVs to small cars like the Chevy Cruze, it is not the fault of the workers in Ohio. The Trax and the Encore are about the same size as the Cruze and could easily be manufactured on the old Cruze assembly line. The Cascada is a midsize convertible that could also be built at the Lordstown plant. GM also manufactures the Buick Envision SUV in China. This happened in 2016, well after the Great Recession ended. GM could also move production of the Envision to Lordstown or to another domestic factory. The U.S. government and its hard-working taxpayers did not bailout GM to benefit China, Poland, or South Korea.
The Failure of the Auto Bailout
Although GM is the primary culprit in closing the Lordstown factory, the federal government is partly to blame. No one would rationally spend $50 billion on a bailout without some strings attached. While GM was near death, it most likely would have signed any agreement to stay alive.