Wednesday, June 08, 2005


GM's Announcement of Job Cuts

As I watched the various cable news outlets at 3 A.M. this morning, trying to catch up on the events of the day in a dumbed-down format, it seemed that everyone was panicking about the announcement from General Motors that the struggling automotive company plans to cut 25,000 jobs by 2008. This news should shock no one who has kept up with the automotive industry over the past decade. Two factors have led to this stage (I won't call it an effort to save GM, because I'm not sure that the cuts will do that or will be soon enough), one covered by the media and one that seems obvious but taboo to mention.

First, GM is paying for its short-term fix of investing heavily in SUV production when it was in a downward spiral over a decade ago. Instead of revamping its car line, GM hyped and developed new SUVs, which have a higher profitability margin than cars. With SUV sales sliding, GM has virtually no market share in the car market to fall back on. In the short-term, GM's move worked, but, like most short-term fixes, the long-term consequences could mean bankruptcy. Mainstream media has picked up on this cause, mostly because GM has admitted to it.

Second, and probably more crucial because it reaches to other industries, labor unions are killing GM. The same thing can be said about the airline industry (Delta's CEO Gerald Grinstein was before Congress yesterday, following the lead of United and US Airways, because the companies cannot afford to cover their pension obligations). I am going to opine more at a later time about how labor unions are going to be the albatross around the neck of the U.S. economy, but at this time my concern is about how few voices are blaming the obvious culprits. Unions once had a place in American life by protecting the coal miners of Appalachia and in ultra-dangerous factories of the early Twentieth Century. I don't see the purpose now except to pay-up the ladder so that the fat-cat national leaders can remain in their position of prestige, power, and wealth. As I said, more on this later when time allows, but I am certainly disappointed that more isn't being made about the real problem here that reaches across industry and could cause our economy considerable damage in the future.

I think your second point is the key. I read somewhere that GM spends about $1500 per car on benefits to employees and retirees. George Will had a good article about that. He said that GM is the first "welfare state" to crumble.
Did you ever happen to think that the multi million dollar salaries that the big wigs at GM and the other companies might have something to do with the problems that GM is having. Also If the company only had to pay $500 of the emplayees benifits that was added to the price of the car, do you realisticly think GM would drop the price of every car by $1000? I don't thnk so.
Maby the arragont people who keep buying imports should open their eyes, they are single handly distroying the North American Economy and thousands of lives!!!
same old rhetoric, its the unions fault! without labor unions everybody would make minimum wage you idiot. You probably voted for bush the second time too despite a mountain of evidence proving he is a horrible president.I am so tired of all the sheep in this country. Democrats and republicans should all be ashamed. If you call yourself a republican or democrat this implies that you are loyal to your party no matter what they do or fail to do. heres an idea, try coming to your own conclusion instead of just repeating the bipartisan rhetoric. "WAKE UP"
Randy -

Since you decided to comment on this post a mere 3 years after it hit the site, I felt obliged to respond. After all, you've been preparing for 3 years to zing a pro-union retort, so I should reply in kind.

Everyone would be making minimum wage without unions? Uh, no. I assure you that I do not make minimum wage, and I - nor any other member of my family - belongs to any union. Unions will be the downfall of both the airline and automotive industries. But I guess that's a good thing, right? After all, the union execs will get there money, and eventually - after a rise in crime as more and more people are forced out of work - I will get mine as my client rolls continue to explode.

I guess when you put it that way, Randy, unions are a good thing, huh?


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