A Circle Has No End -- GE and the Corporate State

The arch-corporate-statist  -- and official manufacturing company of the Obama Administration is feeding at the trough again.  Apparently a perfectly profitable company cannot buy assets from another profitable company without a large subsidized loan from taxpayers.  In this case, the Obama Administration is funding the KCS in its purchase of 30 new locomotives from GE.  The Obama Administration has recently doubled-down on its backing of the US Ex-Im bank, which has been helping to fund Boeing aircraft sales to foreign airlines (each of which, surprise!, has a couple of GE engines on it).

GE knows how this political game is played, with resources allocated based on quid pro quo.  Just the other day, GE announced that it would help bail out Obama and Government Motors buy mandating that all its company vehicles be Chevy Volts, in effect committing to buy more Volts than Chevy sold to consumers all last year.  Of course, the circle has no end, so in turn GE will be rewarded with $90,000,000 in government subsidies for its 12,000 Chevy Volts, a number that could increase to $120 million if Obama's proposal to increase the per car subsidy is accepted.

By the way, the Obama Administration has criticized oil companies like Exxon-Mobil for earning excessive profits and getting overly large tax breaks.  In 2010, Exxon paid a whopping 40.7% of its income in taxes ($21.6 billion in taxes on $53 billion in profits).   In the same year, Obama subsidiary General Electric paid 7.4% of profits in taxes.

  • Jon

    Exxon paid 40.7% of its profits, not income, per your numbers. Might want to correct that.

  • Bram

    Exxon paid $21.6 billion income taxes - AFTER paying $28.6 billion in sales taxes, and $36 billion in "taxes and other duties".

    Every time I hear about those big oil company tax breaks, I ask for specifics and never get answers.

  • me

    OMFG. I would normally go on about how the last republican did just the same and both inept presidents are equally bad, and how this is more an issue of taxpayers vs Washington Power brokers...

    But this is just too awful. I call for an immediate vote of no confidence on Senator Obamarorum.

    Darn. Sorry, can't think due to bloodpressure spike. So f-ing mad.

  • BFD

    GE manufactures things and ExxonMobil just finds oil so GE obviously is the better corporate citizen worthy of our beloved leader's largess.

  • IGotBupkis, Rejector of the Status Quo

    .

    "I either want less corruption, or more chance to participate."
    -- Ashleigh Brilliant --

    .

  • Allen

    I love the environmental justification for this one as though KCS is going to retire 30 of those old GP38-2s, yes dash twos and not the rebuilt dash 3s) they have and replace them with these ACs. They're being the ACs for big heavy hauls on the mainline.

    KCS' last big engine order for @30 SD70ACs from EMD was subsidized by Canada via it's export bank. That won't be happening as EMD has closed it's London, Ontario plant.

  • DJB

    The $90,000 that GE received from the government subsidies is not corporate welfare for GE (at least not directly) but for Chevy. Just as with anyone who purchases the Volt, the check is really to Chevy, as they are the final recipients to the money. The price the market is willing to pay is $40,000. The price that Chevy can make a profit is $47,000. The government makes up the difference. Now if the government paid the money directly to Chevy they would be missing out on the sales tax they get from $47,000 vs $40,000 that the consumer pays (having ignorantly not accounted for it when they purchased the car). In your scenario, GE dose get the money when the government (via KCS) purchases GE locomotives. I think you should have started with GE buying volts (showing that chevy gets $90,000) and in return has the government supplements the purchase of locomotives.

  • Beale

    Based on what happened with the TARP loans, I predict that the cheap money will cost KCS dearly.

  • Daniel

    Warren, Do you know if Warren Buffet (Berkshire Hathaway) has a stake in KCS?