General Motors and Chrysler are asking for $10 billion in aid from Canada. This sounds like a big number, but it’s hard to put into context without some analysis. Millions, billions, and trillions can all sound the same until you think it through.
This aid package amounts to about $300 for every Canadian, including children. If the government agrees to this bailout, you can imagine $300 flying out of your pocket and going to GM and Chrysler. This money would be transferred from all of us to benefit the auto workers.
According to the Canadian Auto Workers (CAW), 33,000 of their members work for GM, Chrysler, and Ford. Out of these, about 12,000 work for GM, and 11,000 work for Chrysler. So, the GM and Chrysler bailout would support 23,000 employees.
This amounts to about $430,000 per employee! This doesn’t tell the whole story, though. There are other jobs that depend on the auto sector. The CAW claims that “there are approximately 7 jobs created for every one job in the auto sector.”
If we take this figure at face value, the $430,000 must feed a total of 8 people. Let’s say that the auto worker’s share is $150,000, and the other 7 workers’ shares are $40,000 each. This is a lot of money, and it’s just this round of bailouts. The auto companies will eventually be back for more. As I’ve demonstrated before, North American auto makers make inferior cars, which makes them uncompetitive.
Rather than pay for this enormous bailout, it would be less expensive for the Canadian government to give auto workers (and workers dependent on the auto industry) enhanced employment insurance (EI) benefits. This would make some room for new auto companies that might actually try to be competitive in the industry.