OK. Nobody is giving anyone a free car, at least not yet. But please forgive me for wondering if government-funded auto giveaways are next, especially after the free ride to the public piggy bank that has been handed to troubled Detroit-based automakers. Expecting Ottawa to buy a car for every Canadian would be nuts. Then again, according to auto sector analyst Dennis DesRosiers, a lot of the bailout spending aimed at saving General Motors and Chrysler is already “insane”unless, of course, you think buying voter support is a fair public expenditure.
The recent government decisions in Canada and the United States to back warranties for new GM and Chrysler cars will not guarantee a successful restructuring of these companies. But it will cost Canadian taxpayers as much as $185 million while guaranteeing more difficult times for healthier North American employers, including Toyota and Honda, not to mention Ford, which may soon jump in on the bailout game because the industry dogs are being kept alive.
This week, Ottawa also found an additional $700 million to ensure accounts receivable for autoparts manufacturers. “This is good news,” says Ontario Economic Development Minister Michael Bryant, “because it provides stability to both parts suppliers and consumers at a time of volatility for the auto industry.”
But DesRosiers says the total sticker price of Canadian aid to the auto sector now sits somewhere between $20 billion and $30 billion. And all this, he estimates, is being spent to save about 50,000 jobs that would be lost if we let market forces restructure the industry. “Do the math and that is about $500,000 to $600,000 per job in Canada with about half of that amount needed each and every year in order to maintain these jobs in the long term. … Wouldn’t we be better off to take this money and put it to use promoting new innovation in the automotive sector in Canada. … Absolutely every blue collar job lost in Canada could be replaced with a higher paying innovation job if the right set of policies were in place.”
DOUBLE TAKE:Aside from trying to promote myself while generating Web traffic that helps put bread and butter on my table, this blog aims to stir debate by taking a harder look at current news and events. I obviously enjoy voicing my own opinions, but I am a big boy and I welcome all comments that dont require R ratings. So let me have it via this blog or send me an email at email@example.com. I reserve the right to post email comments without disclosing the senders name. If you don’t think I am a total twit, follow my DOUBLE TAKE posts via my NotSOCRATES Twitter site at http://twitter.com/NotSocrates . THOMAS WATSONis a Senior Writer and editorial board member at Canadian Business magazine. Since winning a community journalism award as a cub reporter with the Hamilton Spectator in the early ’90s, he has covered business, finance, politics and technology for various news outlets. Prior to joining CB in 2001, he reported on the steel and automotive sectors for the Financial Post. Watson received his first magazine award nomination for exposing a stock manipulation plot aimed at Waterloo, Ont.-based Open Text in 2000, when he was head of investor relations for an international venture capital outfit in the City of London. Watson holds graduate degrees in journalism, international relations and public finance and undergraduate degrees in history and politics.