My first posting to this blog, during the week of September 18, 2006, was about the auto industry crisis, specifically a buyout plan General Motors was offering to 100,000 of its workers.
That plan didn’t really address the fundamental problems the automaker faced then and still faces now. In fact, since then, things have only gotten worse for GM. Last week’s report by Deloitte & Touche, GM’s auditor, that GM’s survival is in “substantial doubt” even if it gets $30 billion in bailout money from the federal government, underscores in very stark terms what some of us have predicted for a long time — GM needs to be reorganized under the bankruptcy laws.
What’s the alternative? More and more and more handouts from the feds (read: you and me)? Continuous uncertainty for buyers who are leery of investing in a brand they can’t be sure will be around? Supply chain partners also struggling to survive?
GM needs to alter its DNA to survive and grow again. It’s time to stop the hemorrhaging of both GM and the public treasury and do what needs to be done.
—David R. Brousell, MA Editor in Chief
4 Comments
GM and Chrysler need management which is capable of managing and reasonable numbers of capable managers. The fact that labor accounts for only 8-10% of each vehicle produced refutes claims that these companies need to achieve concessions from Unions to survive. Unions have already given significant concessions during the 2007 negotiations with GM, Ford, and Chrysler. The fact of the matter is that domestic automaker executives are effectively “raping” these companies during the last 5-10 years of their careers. Senior management turns over at about this rate. They come in, grab the “golden parachute”, do nothing, and depart with sacks of cash. Foreign manaufacturers do not have the ridiculously lopsided numbers of management personnel as compared to labor, nor do they pay ridiculously lopsided salaries to their executives as compared to labor. GM, Ford, and Chrysler will “buyout” hourly and skilled trades workers who are “value added”, performing direct labor on the end product but will make no attempts to achieve any reductions in the highly compensated managers which have grown to insane numbers during the “fat” years. They find it difficult to put someone on the street making $200,000 or more yearly but have no problem pushing out employees earning $40,000. The end will ultimately come with this mentality.
GM needs Major consession from Labor and Management. GM needs car people running the company and not penny wise, dollar foolish accountants. GM needs to design cars people really want to have and not be forced into buying out of loyalty and the threat of Job security. If the Japanese can do it why won’t they. Culture change may be the root and that comes from putting the customer 1st.
I agree GM is not without its problems, but who has worse problems in terms of running their business, GM and Chrysler or AIG and Citigroup? In your response you use the term bail out, this is true for AIG, Citigroup and the rest of the banks but our automotive industry has asked for Government LOANS!!! The Banks have gladly accepted and used BAILOUT money to acquire more banks, yet they haven’t eased up at all on lending which has ground our entire economy to a halt. It is astounding that no one wants to listen to the economic experts that have explained to the Congress that a GM bankruptcy will cost the tax payers many times more then any LOAN will ever cost. If GM files for bankruptcy tens of thousands of suppliers will also have to file (many already are) and job losses will require state and federal unemployment benefits anyways creating a staggering cost much greater then loaning them money will. Why does our country refuse to LOAN money to an industry that is the manufacturing backbone of our nation? If we lose our Auto Industry we lose with it the R&D, technology development and innovation that has created new technology and automation as well as millions of jobs that benefit everyone. The Auto industry and their suppliers create and support millions of jobs, for everything from raw materials to computer software. Currently 1 job in 10 is affected by our domestic auto industry! The affect of the plant closures and slowdowns has already resulted in unemployment, joblessness and home foreclosures that are making a bad situation worse. Things are so bad in fact that 1 child in 50 is now HOMELESS in our country. How many kids will letting GM go bankrupt put on the streets? Where will the money to pay for them and all of the retirees that will lose their pensions come from? If you review sales figures you will notice sales at all of the foreign transplants are down drastically and even Toyota is struggling. Automobiles are stacking up and sitting idle in ports around the world. For our domestic Autos to survive we need to at least provide an even playing field, yet with this global economic meltdown Americans refuse to acknowledge that foreign companies are already subsidized by their governments with either direct funding or at a minimum the advantage of not having to fund health benefits and retirement plans. Imagine if the domestic autos did not have to bear these costs like their rivals? My question is do we want the same people who have been looking after our “best interests” so far to oversee a plan for the autos and their restructuring, when only 3 people that sit on this committee drive American made products? How is it these same people have given the banks, Citigroup, and AIG a blank check with no accountability? Where and Why is there no AIG and Citigroup oversight committee? We need a strong manufacturing base in this country for the security of our country and potentially so that our children might be able to make a decent wage someday. Letting GM go Bankrupt is not good for the US. To be honest I am shocked that anyone involved in Automation would advocate bankruptcy that will in the long run cost way more money than A LOAN ever would. If you are going to advocate such a thing then at least put forth a plan along with it that will address putting back to work the millions Americans that have already lost their jobs and the additional millions that will be out of work if GM is allowed to go Bankrupt!
I think instead of focusing so much on trying to save GM / Chrysler, the administration should turn their attention to the foreign carmakers (Toyota, Nissan for example) that are here in America. Working with these companies that have a proven track record of being profitable and sensitive to the needs of the consumer makes more sense than trying to revive a dying dinosaur. I mean the same amount of vehicles could still be made in America it just won’t be GM or Chrysler that makes them.