There are two pieces in Thursday's NY Times on the U.S. auto industry and Detroit which, when compared, provide a stark contrast (between the statistics we hear in the MSM versus the reality that is observed on the street) with regard to public perceptions concerning the current state of the U.S. economy, in general.
A lead in Thursday's edition, "U.S. Taxpayers Recover Billions in Sale of G.M. Stock," reports on the very successful initial public stock offering ("IPO") of the "New GM."
U.S. Taxpayers Recover Billions in Sale of G.M. Stock
By MICHAEL J. de la MERCED and BILL VLASIC
NY Times
November 18, 2010
American taxpayers' ownership of General Motors was halved on Wednesday, and billions of dollars in bailout money was returned to the federal government, as a result of the nation's largest initial stock offering ever.
The sale, the largest initial stock offering ever, came 17 months after G.M. emerged from a government-brokered bankruptcy.
The offering, which raised $23.1 billion, is bigger and more ambitious than had once seemed possible. But the recently bankrupt automaker will have to build on its revival for the government to recoup its entire $50 billion investment and validate the Obama administration's decision to keep G.M. from collapsing.
The new shares start trading on Thursday at $33 each. To break even, the Treasury Department will need to sell its remaining 500 million shares at an average price of $53 each in the months and years to come. And while the administration may retain great influence over the company, it may not be able to keep stoking the enthusiasm investors have shown for G.M. stock in recent days...
The front-page article tells us that "...a complete exit by the government could happen even within the next two years. With the offering, G.M. is shedding its ties to the government faster than expected, cutting the Treasury Department's ownership stake to 26 percent, from nearly 61 percent."
It quotes President Obama, who stated on Wednesday that it "...continues 'our disciplined commitment to exit this investment while protecting the American taxpayer.'"
In the Times' piece we learn that the nonprofit Center for Automotive Research's recently-released study noted "...that government aid to G.M. and Chrysler saved more than 1.1 million jobs in 2009 and 314,000 jobs this year -- the highest figure yet reported."
We're also told that just 17 months after G.M. entered bankruptcy protection, "...automakers like G.M. and Ford have turned around their operations by wringing greater efficiency and lower costs out of their work forces and operations."
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This is, truly, an eminently-spinnable story that I'm sure we'll be hearing about--and rightfully so--for years to come.
Here's more background via Wikipedia on: "Effects of the 2008-2010 automotive industry crisis on the United States," and here's the Wiki page link for the United Auto Workers.
To provide some context for organized labor's share of the statistics that are mentioned, above, here's a snapshot from the Wiki UAW page...
The UAW has seen a dramatic decline in membership since the 1970s. Membership topped 1.5 million in 1979, falling to 540,000 in 2006. Then the Great Recession hit, with GM and Chrysler going bankrupt. Membership fell to 390,000 active members in 2010, with more than 600,000 retired members covered by pension and medical care plans.
But, here's another very important side of the story...
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Author and columnist Paul Clemens laments on U.S. plant closings (he mentions 5,000 in the past decade) and Detroit auto industry jobs being shipped outside the U.S. to countries such as Brazil and Mexico in an op-ed in today's NY Times, entitled: "The Ghosts of `Old G.M.'"
IMHO, it's an outstanding read...
The Ghosts of `Old G.M.'
By PAUL CLEMENS
NY Times
November 18, 2010
...ACROSS the nation, as in Detroit, there is an economic disconnect, a split between what the economic numbers say and how things feel on the ground. The economy is growing, but the unemployment rate hasn't budged. The recession officially ended in June 2009, but more jobs have been lost than have been added since that "ending."
Handling this disconnect requires political acuity. It brings to mind something Philip Roth once said about those who have little feel for literature and the texture of lived experience it provides and so "theorize" it. Mr. Roth imagined a scene of a father giving his son this advice while attending a baseball game: "Now, what I want you to do is watch the scoreboard. Stop watching the field. Just watch what happens when the numbers change on the scoreboard. Isn't that great?" Then Mr. Roth asks: "Is that politicizing the baseball game? Is that theorizing the baseball game? No, it's having not the foggiest idea in the world what baseball is."
It'll be fun, for a day or two, to look at the scoreboard, and to see what G.M.'s shares are going for: $26? $29? $33? $35? The numbers on the exchange will change; it'll be great, and a welcome, temporary relief from the numbers, still difficult to comprehend, of jobs lost and plants closed. Soon enough, though, we'll have to go back to watching what's actually happening on the field, where there's still a blowout in progress, with the home team way behind, and no one, seemingly, with the foggiest idea what to do about it.
IMHO, Philip Roth's profoundly brilliant baseball analogy points to the inconvenient truth that focusing upon selected numbers on a scoreboard doesn't even begin to address the reality of "the game." From a practical standpoint, the numbers mean nothing.
The Democratic Party--and dare I say it, the White House, in particular--could learn a lot by "watching what's actually happening on the field."
Yes, "there is an economic disconnect, a split between what the economic numbers say and how things feel on the ground," indeed.
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Slightly OT: Today, I had a lengthy chat with an old investment banker friend of mine (someone whom I've known since college), and he mentioned that he's hearing a term I'd never heard swirling around the investment community, recently, which is being used to describe the current state of our economy. As he phrased it, "We're living in a 'contained depression.'"