“Government” Motors No More, but Taxpayers See a Loss

GMLast week, General Motors announced its intention to buy back 200 million shares from the Department of the Treasury, beginning the process of reemergence onto the market. The nickname Government Motors now stands to be retired following its use after GM received $51 billion under the TARP Recovery Act of 2009.

GM bought back its shares for $27.50 each for a grand total of $5 billion, which is an almost 8% premium on Tuesday the 18th’s closing price. Investors clearly see this as a positive move as trading jumped on GM shares by more than 7% on the announcement date.

The Treasury has plans to sell the remaining 300.1 million shares, equivalent to 19% of the company, starting as early as January to finalize its run as the controlling stakeholder. Currently, the Treasury has recovered $28.6 billion, over half of the original bailout from the once private company. However, the tax-payer may lose out in the end; in order to recover the remaining bailout amount- $21.6 billion- the remaining shares must sell for more than three times what they sold for today, about $72 each.

GM was not the only recipient of aid: its fellow Big Three automobile manufacturer Chrysler received a bailout and the government projected that between the two companies over 1 million jobs were maintained. Taxpayers must weigh the costs and benefits of the bailout between jobs supposedly saved and billions of dollars potentially unrecovered. Was there a net benefit or net cost to creating Government Motors? Due to unseen effects, the calculation may be nearly impossible.

Regardless, GM now stands for General Motors once again.

Posted by: Sophia Higgins

Sources: CNN Money, Reuters

Photo Credit: government motors @ photostream courtesy of Flickr user Fresh C

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STEM Visa Bill Defeated in Congress but Debate Goes On

One of the most talked about measures to improve the competitiveness of the United States in the area of technology and innovation is the STEM Jobs Bill. On September 20th, the bill, put forth by Republican Congressman Lamar Smith of Texas, was defeated in the House, failing to receive two thirds of the votes.

The Bill would enable 55,000 students with a doctorate or a master’s degree in one of the STEM subjects to apply for a Green Card upon graduation. If enacted, the STEM Jobs Bill would have discontinued the Diversity Visa Program, or Green Card Lottery, which currently allocates 55,000 Green Cards to people from countries with low levels of immigration to the United States. The Bill was struck down mostly by Democrats unwilling to eliminate the Diversity Visa Program. Two more bills are on the table, one by Democratic Congresswoman Zoe Lofgren of California, the other by Democratic Senator Chuck Schumer of New York. Both of these bills aim to keep the Diversity Visa Program alive while introducing the STEM Visa program simultaneously.

Politicians on both sides, as well as heads of industry all agree that something needs to be done in order to not lose highly educated workers to other countries. Without the ability to stay and work in the United States, these foreign students are forced to leave and end up working for companies overseas. These students are especially important to the future of the US economy because of the low rates of American students who decide to go in to science and engineering, only about 5% of graduates.

Solving the issue of talent leaving the US will be essential in order to ensure America’s continual success in leading the world in technology and innovation in the 21st century. If Congress can manage to cooperate across the aisle and reach a compromise, the STEM Jobs Bill would supply hi-tech companies with much needed workers and boost the US economy.

Progress is being made, but a lot more has to be done in order for the United States to reverse the current trend of lagging behind other countries in competitiveness. Ultimately, the problem of American students lacking interest in studying science and engineering has to be tackled in order to ensure future prosperity.

Posted by: Samuel Benka

Sources: Forbes, Politico, The Huffington Post

Photo Credit: US Capitol Courtesy of Flickr user katieharbath

The Innovation Frontier No Longer Ends at Silicon Valley: Forbes 500 Inc. Companies Come from all over the United States

Forbes is famous for its annual publications ranking the private sector by a variety of means- revenue, innovation, and growth among them. The lists themselves are fascinating, but even more interesting is looking into the details that explain why some companies manage to top the list and others do not make the final cut. An equally interesting question is that of where these companies come from; what is their geographic location and how does that factor into their ranking? Are the most successful companies grouped together in clusters like Silicon Valley, thriving in big cities Boston, or incorporating in business-friendly Delaware? Do the same geographic areas claim a significant portion of the list each year?

The Ewing Marion Kauffman Foundation has conducted research to answer these questions in a work entitled “The Ascent of America’s High-Growth Companies”. This study demonstrates significant geographical diversity in Forbes’ fastest-growing privately-held companies in terms of revenue between 1982 and 2010. The research “reveals that high numbers of fast-growing firms are concentrated in unexpected regions and industrial sectors”. Conclusively, this interactive data map  allows the viewer to visually compare company density by location and witness the overall the geographic diversity.

Kauffman Foundation researchers Yasuyuki Motoyama and Jared Konczal have discussed some of their surprising findings from the study. First is that of all the large metropolitan areas, Washington, D.C. has the “highest concentration of Inc. firms, both in absolute number and per capita (normalized by population)” demonstrating the growth of a strong government services cluster in the last few decades. Second, typical innovation hotspots are usurped by clusters of companies in areas such as Salt Lake City, Utah, Indianapolis, Indiana, Buffalo, New York, and Louisville, Kentucky. Lastly, the researchers found that though many variables such as patents per capita, access to venture capital investments, and ivy league-level universities significantly influence the placement of innovation centers in the United States, only one relationship matters for the largest-growing firms— having a highly-skilled labor force nearby.

The Kauffman Foundation’s research ends at 2010, but the 2012 Forbes list is out. In an ever-changing economy like the United States companies are always adapting to stay efficient and relevant for the consumer, so the geographical densities are likely different but following the same trend of the last thirty years. It appears that Americans have crossed another frontier; entrepreneurs no longer have to grow their businesses in Silicon Valley, but have the resources to create revenue from anywhere. In a world increasingly without borders, innovation and business seem to be able to grow everywhere.

Posted by: Sophia Higgins

Sources: Forbes, The Ewing Marion Kauffman Foundation, Huffington Post

Fortune Brainstorm TECH 2011 @ Fortune Live Media courtesy of Flickr user Fortune Live Media

US Manufacturing Decline

The month of August showed further signs of a struggling US economy with a decrease in manufacturing.  This was the third month in a row that overall manufacturing in the US has been in decline. A total of 15,000 manufacturing jobs were lost during the month of August with a loss of 8,000 jobs in vehicle parts manufacturing. The US has lost 3.5 million manufacturing jobs since 2002, and as of August, the total number of jobs in manufacturing stands at 11,967,000. With the August jobs report released by the Bureau of Labor Statistics showing an increase of only 96,000 jobs, many questions about the state of the US economy linger on.

The weak performance of the US manufacturing sector mirrors manufacturing developments around the world. With the global economy still in a recession, other countries are experiencing similar economic woes. Chinese manufacturing in the last month was at a nine month low, and its GDP growth of 7.6% in the second quarter of this year compared to a year before was its lowest increase in three years. The Chinese purchasing managers index (PMI), an indicator of financial activity, fell to 49.2, while the American index for August stood at 51.5. A PMI of 50 indicates no change.  The Eurozone showed even greater signs of decline as its composite PMI for all 17 states stood at 46.3 in August.

What does the continual struggle of the US economy tell us about American competitiveness? It is far from clear that it is an indicator of America’s decline relative to other countries. As the numbers above show, the other two major economies in the world, China and the Eurozone, went through similar contractions in the manufacturing sector. What the evidence points to, however, is that we are still in a worldwide economic recession. It should not come as a surprise to anyone that the US economy is still stagnant. With the global economy so integrated, hopes of a stronger US manufacturing sector depends on other countries as well.  With stagnant growth rates affecting a majority of countries in the developed world, these latest numbers on American manufacturing shouldn’t be interpreted as evidence that America is falling behind. The problem with manufacturing jobs will not be alleviated until the global recession comes to an end.  As of right now, there are few signs that an end to the recession is in sight.

Posted by: Samuel Benka

Sources: ReutersThe Wall Street Journal, The Huffington Post

 Photo Credit:  Polar-Polar Tank Trailer ManufacturingCourtesy of Flickr user TruckPR