Saving General Motors
guest columnists 3:13 PM
by Chris Johnson of Drawnlines Politics.
I am a long time car buff. My first cars were made by the Big Three- my favorite of which was a red on white 1972 Oldsmobile Cutlass Supreme. They really knew how to make a car then! In the years following that, American car companies fell prey to a fuel shortage and to trade rules that introduced the Japanese auto revolution in the U.S. Booming economies then brought about the notion of engineered obsolescence. This was the perfect storm that instigated severe cuts to quality. American cars became a joke.
It has been obvious to anyone that bothered to look that the “Big Three” were on a spiraling course to irrelevance for decades- that is, unless they were willing to do something about it. Well their hand has been forced now and I, for one, am anxiously waiting to see what comes from the now-in-motion fix being undertaken by General Motors.
Don’t get me wrong- a change is absolutely necessary to save one of America’s largest companies, their subsidiaries, vendors, and ALL of their employees. I am ecstatic to see that there is at least the hope of a serious and real shift in the way that American car companies do business. But being an idealist, I have a couple of critiques (suggestions really) about how this change is being undertaken.
I agree with President Obama in that our government should not own or operate General Motors. And also like him, I feel that the current situation of the Treasury holding about 70% of the shares for the company should be short lived. But, when a floundering giant like GM is gushing money and jobs; when a company that truly fits the bill for “too large to fail” is heading that way, who should take over? For my ideas on that, we have to look at one of the problems that everyone agrees is at the heart of the matter: labor.
It doesn’t matter if you are pro-union, pro-business, right, left, green, or purple- everyone knows that the relationship between the unions and the companies got built up into a deadly cycle that would eventually bring the manufacturing economy to its knees.
When you think about it, between R&D, manufacturing preparation, real estate, utilities, materials, and all the other sundry expenses that go into building a car, it is absolutely amazing that these companies can sell them for $20k and still make a profit… When you throw in wages, benefits, and retirement, it makes it into nothing short of miraculous.
The line employees at your run-of-the-mill GM plant are hard working. The job they do is both physically and mentally taxing. They deserve to be paid well for their toils. They by no means deserve to be paid better than anyone else that does their type of labor. Line employees that build circuit boards do not get pensions. Many airplane line employees do not get pensions- some do not even get benefits. The average pay for veteran factory employees does not reach the pay that GM’s union employees make. How can a company compete?
Now, here is where my liberalism jumps into high gear- I will do my best to keep it to a tolerable level. ALL EMPLOYEES DESERVE HELATHCARE AND A GUARANTEED RETIREMENT AHHH! And that’s all I have to say about that for today. I think I just channeled Sam Kinison for a second.
Until the day (and it is soon in coming, mind you) when we have sound and effective public retirement and healthcare programs, companies can’t be expected to compete if they are on unequal footing to begin with. Toyota, BMW, Hyundai, and many other “foreign” auto makers that build their products with American labor all pay their employees a fair, if not generous, wage. The big difference is that they are not saddled with the legacy costs of retired employees. Their labor costs are approximately half of their American competitors. And yet, the 2009 year model cars from Ford and GM are some of the best on the road. They have definitely got their swing back.
Now that they, once again, have a product that is worth spending some money on- let’s see what we can do to keep them open and save the world while we are at it. Here’s the silver bullet- sell General Motors to the UAW. Not the paltry 17.5% deal that they worked out with the bond holders- sell them a controlling share.
Here are the benefits:
First, we take the burden off of the US government to run a company-whew. We really shouldn’t be in the car business.
Second, free market enterprise is never better than when there is true competition in the market. If the government owns one of the competitors… it might be implied that they have a bit of an advantage.
Third. The union would be in control of its own fate. This one is my favorite. The union would pick board members and would vote on issues that would effect the future of their own success and employment. The company does well- there are bonuses all around. The company comes out with a new Pontiac Aztec (car people know what that means) and heads would roll. A decision about legacy costs would be arrived at before lunch on the first day. The industry standard 401k would instantly replace permanent pensions- and the beauty part is that every employee would know exactly why.
Lastly, at least for this article, General Motors would be liberated to move with market demand than it can in its current form. The big oil influence would be banished from the board room and replaced with the idea that better quality, ecology, safety, variety, and economy means that we all go home with more money to a happier, healthier, and more reliable home.
I am looking forward to being able to walk onto a lot in a couple of years and drive away in my new Cadillac CTSV knowing that it was made by American hands, with American ingenuity, and rest assured that the company made it through a revolution that defined the way that big business will be run from here on out.
Next time I think that I am going to take on that good-old-boys-who-like-to-play-with-airplanes club that we call the airline industry…
I am a long time car buff. My first cars were made by the Big Three- my favorite of which was a red on white 1972 Oldsmobile Cutlass Supreme. They really knew how to make a car then! In the years following that, American car companies fell prey to a fuel shortage and to trade rules that introduced the Japanese auto revolution in the U.S. Booming economies then brought about the notion of engineered obsolescence. This was the perfect storm that instigated severe cuts to quality. American cars became a joke.
It has been obvious to anyone that bothered to look that the “Big Three” were on a spiraling course to irrelevance for decades- that is, unless they were willing to do something about it. Well their hand has been forced now and I, for one, am anxiously waiting to see what comes from the now-in-motion fix being undertaken by General Motors.
Don’t get me wrong- a change is absolutely necessary to save one of America’s largest companies, their subsidiaries, vendors, and ALL of their employees. I am ecstatic to see that there is at least the hope of a serious and real shift in the way that American car companies do business. But being an idealist, I have a couple of critiques (suggestions really) about how this change is being undertaken.
I agree with President Obama in that our government should not own or operate General Motors. And also like him, I feel that the current situation of the Treasury holding about 70% of the shares for the company should be short lived. But, when a floundering giant like GM is gushing money and jobs; when a company that truly fits the bill for “too large to fail” is heading that way, who should take over? For my ideas on that, we have to look at one of the problems that everyone agrees is at the heart of the matter: labor.
It doesn’t matter if you are pro-union, pro-business, right, left, green, or purple- everyone knows that the relationship between the unions and the companies got built up into a deadly cycle that would eventually bring the manufacturing economy to its knees.
When you think about it, between R&D, manufacturing preparation, real estate, utilities, materials, and all the other sundry expenses that go into building a car, it is absolutely amazing that these companies can sell them for $20k and still make a profit… When you throw in wages, benefits, and retirement, it makes it into nothing short of miraculous.
The line employees at your run-of-the-mill GM plant are hard working. The job they do is both physically and mentally taxing. They deserve to be paid well for their toils. They by no means deserve to be paid better than anyone else that does their type of labor. Line employees that build circuit boards do not get pensions. Many airplane line employees do not get pensions- some do not even get benefits. The average pay for veteran factory employees does not reach the pay that GM’s union employees make. How can a company compete?
Now, here is where my liberalism jumps into high gear- I will do my best to keep it to a tolerable level. ALL EMPLOYEES DESERVE HELATHCARE AND A GUARANTEED RETIREMENT AHHH! And that’s all I have to say about that for today. I think I just channeled Sam Kinison for a second.
Until the day (and it is soon in coming, mind you) when we have sound and effective public retirement and healthcare programs, companies can’t be expected to compete if they are on unequal footing to begin with. Toyota, BMW, Hyundai, and many other “foreign” auto makers that build their products with American labor all pay their employees a fair, if not generous, wage. The big difference is that they are not saddled with the legacy costs of retired employees. Their labor costs are approximately half of their American competitors. And yet, the 2009 year model cars from Ford and GM are some of the best on the road. They have definitely got their swing back.
Now that they, once again, have a product that is worth spending some money on- let’s see what we can do to keep them open and save the world while we are at it. Here’s the silver bullet- sell General Motors to the UAW. Not the paltry 17.5% deal that they worked out with the bond holders- sell them a controlling share.
Here are the benefits:
First, we take the burden off of the US government to run a company-whew. We really shouldn’t be in the car business.
Second, free market enterprise is never better than when there is true competition in the market. If the government owns one of the competitors… it might be implied that they have a bit of an advantage.
Third. The union would be in control of its own fate. This one is my favorite. The union would pick board members and would vote on issues that would effect the future of their own success and employment. The company does well- there are bonuses all around. The company comes out with a new Pontiac Aztec (car people know what that means) and heads would roll. A decision about legacy costs would be arrived at before lunch on the first day. The industry standard 401k would instantly replace permanent pensions- and the beauty part is that every employee would know exactly why.
Lastly, at least for this article, General Motors would be liberated to move with market demand than it can in its current form. The big oil influence would be banished from the board room and replaced with the idea that better quality, ecology, safety, variety, and economy means that we all go home with more money to a happier, healthier, and more reliable home.
I am looking forward to being able to walk onto a lot in a couple of years and drive away in my new Cadillac CTSV knowing that it was made by American hands, with American ingenuity, and rest assured that the company made it through a revolution that defined the way that big business will be run from here on out.
Next time I think that I am going to take on that good-old-boys-who-like-to-play-with-airplanes club that we call the airline industry…
Posted by chris
on 3:13 PM.
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We're not necessarily paying for the spoils of labor, but in many ways, you could argue that we are paying for the realities of technology.
Historically, wages were set by the car company for a reason. Henry Ford and Friends realized that they weren't going to make money unless they created their own market. In other words, they had to pay their workers enough money to buy his product. Ford et.al created his own market with the wages and conditions that he set.
As to the pension conditions, well, fact of the matter was that pensions were what took care of people in their old age. Social Security was a post-Depression tool.
Comparing the auto industry to the airplane industry isn't necessarily a fair comparison, either. Boeing is fully aware that their workers aren't the people who are going to buy their products. In that way, GM and all are in completely different situations than other manufacturers.
The condition of the auto manufacturers today is evidence that maybe they were doing things correctly. Look at the current economy. People have less money, which means that auto sales are down. They don't have the money to provide the demand necessary to take care of the supply. Ford had it right!
Now, if you want to argue that GM and the other automakers need to join the 21st century as far as their pension plans, I have few arguments there. I fully understand why the unions are hesitant to do away with the pension plans, especially over the last eight years, when Crazy George was baying to privatize Social Security (the way the market has fallen like a stone, can you IMAGINE what things would be like if that had actually transpired?)
The other problem with technology is with medical technology. Pensions are being paid over more years, simply because people are living longer. Not necessarily something I would like to see change anytime soon.
Nationalization of critical industries is not unheard of. Well, in this country it is, but there were periods where the British, the French, and the Germans nationalized important industries, got them through rough patches, and then re-privatized them. Obama's right to want to get out of the auto industry ASAP, but right now, it's the "worst possible solution, except for all the others".
Alabama Spartan-
Thank you for your comment. I have a couple of questions for you. I'm not necessarily point hunting here, but I am genuinely interested in your thoughts-
1) OK, so you don't like the current situation anymore than I do, so FIX IT! What's your exit strategy, George?
2) When Henry Ford stated that he believed that his employees should be able to afford his product his motives were twofold: first, he really wanted everyone to be able to purchase a vehicle and second, he was terrified that he wouldn't have a lasting market, so he created one for himself. Being that auto factory employees aren't "state of the art" technicians anymore, and given that there are LOTS of people that can afford cars- are the unnaturally high wages paid to these employees still necessary?
3) This one is a bit of a reiteration from the post- how can American automakers compete when they have this enormous burden on their backs? How do you bring their costs down to reasonable levels while at the same time maintaining quality and marketability?
Thanks again for your response- I am looking forward to what you have to say next.
Let's, for a second, put "too big to fail" into perspective. GM's market capitalization of $375.8 million as of last week, is about the size of California Pizza Kitchen's ($340 million) is it too big to fail? It's also one-eleventh that of Harley-Davidson ($4.3 billion). So where do we draw the line? If people stop buying enough pizza I guess another bailout is in order.
How about the fact that the years where GM actually made money were the years where workers were paid higher salaries (even without accounting for inflation, but rather actual dollars) than they earn now. The difference then was that they were producing cars people actually wanted to buy.
It's also worth noting that since 2007, UAW workers have made less money per hour than Toyota and Honda lineworkers in the US at non-union plants. They just do more actual work per hour and have to pay a copay on their healthcare. Oh, and again, they're making cars people actually want to drive.