How GMC Influences Political Policies to Benefit Itself - Case Study Example

?GMC, How it Influences Political Policies to Benefit Itself, Why This is Wrong and How to Prevent it from Happening in Future Policies are basic principles that guide decisions directed towards rational outcomes. Polices can be formulated at individual, organisational and government level, also called political or government policies. In this case, political policies are supposed to serve as guidelines that direct government decisions on various national issues or issues of public interest. When formulating these political policies, the government normally prioritises public interest and thus its actions seek to maximise public benefit. However, there are times in which individual persons or large corporations can use their power to influence political policies in order to benefit themselves, especially financially, at the expense of the public. Such people or corporations use coercion, incentives or their close relations to the government to influence the actions of others in the way they desire. An example of a large corporation that has influenced political policies for its own financial gain is GMC. GMC is an automobile company that manufactures vans, sport utility vehicles, military vehicles and trucks that are marketed in the Middle East and North America by General Motors. By 2007, the company was the second-largest vehicle-selling company in North America. One of the company’s policies on corporate political expenditures and contributions is that the company may express its views on particular public issues that are of importance to the company. As authorised by the vice president through the Public Policy and Government Relations and permitted by the law1, company expenditures may be made to influence or inform voting on public policies that are of paramount importance to the business of the company, its stakeholders and employees (GMC 3). Acting on this policy, the company seems to have gone to the extremes in 2010 to direct political actions for its financial gain at the expense of the American tax payers. The Chevy Volt story was brought to public attention as one of the biggest scandals for the Obama Administration. In this saga, GM used its close relations to the Obama administration to secure a tax payer funded subsidy to leverage and promote the production and sale of its unready-for-prime-time Chevy Volt car brand, a poorly-performing electric car. The GM is a politically powerful UAW2. Modica (par 4) explains that the Obama administration perpetuated a manipulated bankruptcy process that openly favoured this politically powerful UAW financially over other classes. In the midst of this bankruptcy process, GM’s Chevy Volt hype came to light as the public was presented with the so called green wonder-car that would benefit them. This explanation was then used to justify the use of $50,000 million worth of tax-payer’s money to bail out the company from its bankruptcy. The use of tax-payer money to subsidise the business activities of the company was therefore an added an insult to the injury of the company’s bankruptcy arrangement. Under this economy, many Americans cannot afford a new car and therefore, it would have been proper for the government to subsidise the production of goods that are of priority to the public. This shows that the government decision to commit in such a subsidy was a result of some form of undue influence from GM. According to Ponick (par 9-2), the White House intends to increase government subsidies for the rich buyers of the Chevy Volt and other green technology vehicles up to as much as $10,000 per buyer, of course, through the use of tax payer’s money3. An evaluation of the situation reveals that to some extent, the company lied to the government and the public to win their support. Early claims about the car praised it as a pure electric vehicle that could secure the equivalent of 230 MPG. However, none of the two claims was true. At the same time, the Volt was also presented to the public as a vehicle that would be a saviour for the GM Company. However, GM later admitted that the Volt is actually used by the company as a “halo” vehicle to switch and bait consumers into buying Chevy Cruzes. This means that the American tax payers were not paid anything for subsidizing the production of the Chevy Volt. In addition, the company had tried to win public support by claiming that the Chevy production would create a lot of jobs in America and of course, revenue for the government. Contrary to this, these jobs are now moving to China. Recently, the company confirmed that it was going to establish an electric car platform in China in conjunction with SAIC, a Chinese auto company. The saddest part of this is that GM owns only a third of this company although it bought the right to claim all the purchases made by the company. This means that instead of the tax-payer funded project benefiting them and their country as a payback for their investment, the company is benefiting itself with the developed technology by utilising the cheap production costs in China and the huge subsidies in China. A report from the company’s CEO Akerson, indicates that GM the Chevy Volt will be produced in China so that it could qualify for the huge Chinese subsidies of up to $19,000 per car. This also shows that not only are the tax payers going to be at the losing end but also, the government to some extent. The Chevy Volt is not selling much to the American public and to cover it up and make it look like the technology is selling, the company CEO made claims that the demand for the Volt was exceeding its supply. The company also released sales reports that are inclusive of the sales made at its minority-owned Chinese SAIC Company. Much of the company’s purchases are being done by General Electric (GE) and the remaining is done by some of the wealthiest Americans. GE is one of the companies that had a part to play in GM’s Volt deceit. By supporting GM’s Volt production, GE was to benefit from developing charging stations and by extension, power grid infrastructures that would serve the Volt. This plan would be easy to implement since GM and GE’s CEO had cosy relationships with Obama, the US President. Through the government and a media-network which was majorly owned by GE, GM Company managed to succeed campaign for and involve all tax payers in its IPO with the promise that they would “benefit.” When the Volt was officially launched, the GE-owned network spent a great deal of their day promoting it. Since then, GE has been purchasing Volts and is targeting to purchase a total of 12,000 Volts, a 150% increase from the sales of 2011. These sales have been simply stepped up to create the impression that the Volt is selling. So instead of retail sales growing and which would be a sign that the American society is benefiting much from the technology, fleet sales are rising. A critical analysis of the whole story shows that out of its influence, GM managed to convince the government to flex its financial policies and channel tax payer’s money to fund a dubious project of resurrecting an enterprise suffering from bad management. Why the Influence of Political Polices of Selfish Gain is Wrong The actions like those of GMC Company can be said to be very wrong from various angles. Looking at it from the economic view point, such actions can contribute to economic stagnation or degradation in the country. It eats away government revenues or tax payer’s money that could have been used to implement various economic projects or improve the standards of living. It is now very clear that each time an unpopular white elephant is sold, tax payers not only lose money but also, these ‘eco-friendly” products are subsidised heavily at their expense. Subsidies for some of these products like the Chevy Volt are very huge, ranging from $7,500-$10,000 per single purchase. Assuming that 10,000 of the Chevy Volt vehicles are sold annually, a subsidy of $10,000 per buyer is expected to cost tax payers about $100 million annually. This is a lot of money that could have been channelled to other development projects or to improve the living standards of the people. The government is targeting to have 1 million new-tech vehicles on the road by 2015 and this means its subsidy cost up to $10 billion. In addition, America as a nation will also have lost a lot of money developing the product. If the production of the Chevy Volt is done in China as planned by GM, then there is no way China will be blocked from accessing the technology developed using tax payers’ money. Generally, the development of GM’s electric platform in China means that public money spent on the promise of many jobs and a brighter future for America is going to benefit China. Such actions can also lead to loss of trust in the government. Tax-payers have entrusted all their money in the hands of the government with the belief that it will use it diligently for the benefit of the taxpayers. When such scandals resulting from the political influence of some powerful corporations come to light, the public looses their trust in the government. To the public, this is like a betrayal, especially when the government uses this money for the benefit of individual companies. This would be a different thing if the government had used the money to fund a public project then it failed for some reasons out of the government’s control. When the public has lost trust in the government, it will be difficult for them to support other important projects in the future, some of which could be truly important and beneficial to them. In relation to the above, such actions could generate unnecessary political tensions in the country. Opposition leaders usually act as an important public eye for the actions of the government. Such a scandal could therefore be magnified by opposition leaders and political activists leading to social protests against the actions taken by the government in favour of some firms. Such protests are never attractive and could even lead to violence depending on the perception and gravity of the matter held by the public. One of the message that such actions send to the public concerning the government is that it is incompetent economically and therefore the need to remove it from office. How to Prevent Such Undue Political Policy Influences from Happening in the Future In order to ensure that selfish political policy influence like that of GMC does not occur in the near future, the government should limit its involvement in the management or management decisions of companies. In this way, it will be difficult for company CEOs to use their closeness to the government to influence political policies in a way that it will benefit the company even at the expense of the public. For example, if the government did not have some level of control over the GMC, then it would have been difficult for the company’s CEO to use their cosy relationship with the President to secure a public-funded subsidy for the development of the Chevy Volt. In support of the above solution, the government should make sure it liquidates its stocks at the company the soonest possible. In other words, President Obama should keep his word regarding what he said a few years back concerning the government’s influence on the management of the company. The President stated his administration had no interest in running GM4. The company would be managed by a private board of directors consisting of persons with good management records (Nyhan par 2). With such a kind of detachment, the government and the company will be separate entities, totally unrelated in any way. Under such a relationship, the government will be forced to treat the company like any other company instead of acting in favour of it as witnessed in the bankruptcy arrangements then the subsidy plans. Such a move will not in any way take or reduce the government’s commitment to innovation. The government should use other approaches to influence the fuel efficiency of new vehicle models and other technologies. Alternatively, the government can also reduce its political meddling and prevent undue influence from the company management by transferring the management of its shares in the company to the Federal Reserve-type Board of Independent Experts. With this strategy, the government will be freed from de facto responsibility for the company’s decisions and insulate the President from any fallout. This will force the company management to consider the issues that might result to its financial downfall and, draw public and political. It will then guide it to adjust its business strategy accordingly. For the company, this strategy will ensure that the ending of political meddling does not frustrate its efforts to return to profitability. A policy guiding the use of tax-payer money to subsidise the development, production and sale of products should also be formulated. Under this policy, one of the requirements is that the decision should take into consideration the level of consumption of public need of the good or the project over other goods or projects. For example, there should be a high possibility that a significant percentage of the public will afford or purchase the product. In this way, companies will not manage to influence the government and convince it to give them money for funding projects that will benefit only as minute percentage of the tax payers. Conclusion Political policies guide the government on the various decisions it makes concerning the economic, social and political progress of the country. These policies are formulated basing on the benefits they are likely to avail to the public, taking into consideration the existing and expected social, economic and political situations in the country. However, the outcome of actions directed by policies influenced by individuals or large companies for their own gain work against the tax payers. Through the use of incentives, coercion or even relations with influential government officials, such policies are normally tailored to obtain some financial benefits to the specific company. In this way, there are high chances that public funds are also used to find some dubious projects which when analysed, they reveal some of the biggest scandals in the government. There is therefore a need for policies that guide the relationship between the government and various firms for example, how government shares in companies will be managed to ensure no undue political influence from companies occur as a result of their close relations with the government. These policies should also give guidelines for using public money to fund projects for individual companies. Bibliography GMC (2009). General Motors Company Policy: Corporate Political Contributions and Expenditures. General Motors Company. Modica Mark (2012). Will GM’s Akerson Come Clean on the Chevy Volt? 20 January 2012. Web. 22 May 2012. http://nlpc.org/stories/2012/01/20/will-akerson-come-clean-volt-after-history-gm-deceit> Nyhan Bredan (2009). The threat of political meddling in GM. 2 June 2009. Web. 22 May 2012. Ponick Terry (2012). Top Ten Obama Administration Sandals. 22 February 2012. Web. 22 May 2012. . Read More