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Record VW aid changed the auto game

GREG KEENAN

From Friday's Globe and Mail

Latest comment posted at 7:37 PM EST 22/09/08

Ontario, other northern automotive jurisdictions losing their edge after $500-million subsidy, think tank says ...Read the full article

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  1. APP * from Canada writes: ThyssenKrupp is constructing a $5B steel mill in Mobile, Alabama. Not only can they service auto manufacturers in Alabama, Missisippi, Georgia and Tennessee. I am sure that played a part in the decision making process as well.
  2. M Liggins from Perth, Canada writes: Perhaps we need to look at unfair susidy practice via a WTO or NAFTA (or both ) challenge.
  3. M Irwin from MTL, Canada writes:
    "hourly labour costs... between $70 and $75 in Ontario." Are they serious? Is this for skilled or unskilled employees? Please tell me this is for skilled employees.
  4. Beans Y from Canada writes: M Irwin, that figure is not an hourly wage rate. It is a cost, which includes the salary, benefits, future pension. etc. However, as noted, it is now higher than in the States.
  5. Mark Tilley from Brampton, Canada writes:

    Not sure what's so surprising about this. It reminds me of sports team payrolls.

    When are governments going to figure out that the biggest incentive is a level taxation playing field for all industries and the least amount of unnecessary government in order to keep everyone's taxes low?
  6. john 'trillium boy' smith from centre of universe, Canada writes: - well, ontario government policy was to attract GMC business, it was several hundred millions subsidy announced this year, wasn't it? problem is that GMC also builds cars nobody wants and factories will be closed anyway (and possibly GMC will go out of business)

    volkswagen builds fuel efficient cars that sell very well. they are on the way to become car manufacturer number 2 in 10 years. just not that smart thinking on parts of our government to place subsidies with loosers (GMC and CAW). so do not blame south usa that they bet on right horses.

    - labor costs: if you add medical insurance that employers have to pay in US, I believe we are still competitive
  7. More or Less from Canada writes: Although I realize it's an unfortunate reality that government and corporate work hand in hand, giving handouts to a company or industry to ensure its survival is just wrong. If the business model is such that the industry or company is heading south, then so be it. Spencer's 'survival of the fittest' phrase applies as much to biology as it does to economics. The government handing over taxpayers money (what you and I worked hard for) to a private corporation rewards bad management.
  8. Tories Lie Again and Again from Canada writes: Thanks to the generosity of the good people of Tennese, I"ll be able to pick up a new VW cheaper now than my last one in 1996.

    We really need to look at the impact of this corporate welfare and understand where the benefits flow before we get stupid and start cutting cheques.
  9. r john mckinley from fredericton, Canada writes: Volkswagons are also noted for spotty reliability, especially with electrical problems.
  10. john shantz from Canada writes: VW needs to do something about their quality image........... they no longer have one. Better to subsidize Kia, Tata or Fiat, brands that have an image that can build sales in the future.
  11. Tony . from Waterloo, Canada writes: M Irwin from MTL, Canada writes: "hourly labour costs... between $70 and $75 in Ontario." Are they serious? Is this for skilled or unskilled employees? Please tell me this is for skilled employees."

    $23 to $25 an hour is probably about the average going wage for employees, so that sounds about right.

    Remember that labour costs are typically 2 to 3 times the wage an employee earns as it includes the costs to manage those employees, pay benefits, taxes, have some run the payroll for them, etc. etc.

    In the case of a unionized operations you can guarantee that the multiplier above will be much closer to 3 times the wage rather than close to 2 times the wage in non-unionized operations. This is how Toyota, Honda and Nissan have traditionally been able to pay the same wage but have a cost of labour $15 to $20 less than the Big 3. There is quite simply a lot more overhead and waste when unions are involved.
  12. Tony . from Waterloo, Canada writes: Tories Lie Again and Again from Canada writes: "We really need to look at the impact of this corporate welfare and understand where the benefits flow before we get stupid and start cutting cheques."

    That's already pretty well established: the benefits will flow FROM the 95% of Tennessee residents and businesses not involved in this deal to the 5% that are directly related to it.... minus government overhead of course.

    Net result will be loss in revenue for the state due to higher taxes charged to all businesses except the chosen few. It's a bad decision and one we should not try to emulate.

    Let Tennessee take the auto manufacturing jobs, we'll take the other 95% of the jobs.
  13. Tony . from Waterloo, Canada writes: John 'trillium boy' smith from centre of universe, Canada writes: "problem is that GMC also builds cars nobody wants and factories will be closed anyway"

    You mean sort of like the LAST Volkswagen plant to get massive government subsidies in the U.S. in the 1980s?

    In 1976 Pennsylvania gave a big hunk of corporate welfare to attract a VW assembly plant. By 1988 the handouts had dried up and the plant closed down.

    There's a lesson in this that TN just failed to learn miserably and we in Ontario aren't doing much better.
  14. Paul Sallmen from Burnaby, BC, writes: Thank goodness Ontario missed out on this one. Bad enough bribing their existing car manufacturers. Bailouts are a joke. Low corporate tax rates on the other hand are fine. They are fair: every company gets the same rate. If the company needs a bailout, then they probably had a bad business plan to start with. And that's the CEO's job, not taxpayers'. If a company like GM folds, then other, better companies will take its place. We have to stop this corporate welfare mentality. Also, we have stop having cities that are basically one horse towns when it comes to an industry. If the company runs into trouble, they threaten mass layoffs unless the government coughs up. If a city has many industries, then if one industry folds, it's not as serious.

    We need innovation, not corporate welfare. Take the small car manufacturer Zenn. For the longest time, Transport Canada dragged its feet about allowing this car to be sold in Canada, even though it is sold successfully across the US and Europe as a low speed electric city car. It took a CBC broadcast and a Rick Mercer Report episode, leading to public outcry, to change their tune. Now, except for BC and Quebec, all other provinces have dragged their feet about allowing this vehicle to be licensed. If governments would actually pass legislation that promoted innovation (it doesn't cost any extra money), than try to prop up lazy companies who refuse to innovate, then we'd be much better off.

    Just to show you how corporate bailouts don't work: Take a drive past any GM, Ford or Chrysler dealer. What do you notice? That's right, SUVs, Minivans and trucks sit idle on their lot. Why? Because they were bailed out before and didn't need to innovate. Why waste time trying to develop a car for the future, they thought, when SUVs were easy money when oil was so cheap! If they didn't get subsidies, they would've been forced to think on their own.

    Frankly I'm pretty angry at all this. Enough is enough!

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