Tuesday, December 02, 2008

what's good for GM is -
ahh, to hell with it

So, Ford, Chrysler, and GM walk into a bar...

No, that's not it. Or maybe.

Anyway, GM testified to Congress today that (1) if GM is allowed to collapse, there will be widespread damage to the US economy, (2) GM needs $12 billion to keep afloat, including $4 billion right away, (3) GM plans to cut 20,000 to 30,000 jobs, and (4) GM plans to get concessions from UAW. Like Ford, GM plans to pay its execs a buck as salary, and to quit flying corporate jets around. That, apparently, is management's concession.

Prior to 2005, GM employed 181,000 people in the US. Back then, if anybody remembers, GM had a problem because of rising oil costs and their ridiculous insistence on building gas-guzzlers. But they had a plan to correct their bad financial strain - laying off 25,000 workers. So now, the plan is, with $12 billion from all of us, GM will - do the same goddamn thing again.

In corporate America, incredibly bad foresight is always rewarded by somebody helping you out. It looks like good business, apparently, to cut jobs instead of executive compensation (if you pay your top exec 300 times what a line-worker makes, you effectively cut 300 jobs right there).

All this raises serious question whether the major premise of this (so-to-speak) argument is at all plausible. GM now employs far less than half the people it did when it was a significant part of the US economy. Now that so much of auto manufacturing has been outsourced, GM doesn't really contribute much to employment. Let's take the $12 billion GM wants to spend, while throwing an addition 30,000 people out of work, and instead divide the money among all the potentially affected employees, except executives, should GM go belly-up. $12 billion divided among the remaining 156,000 or so. In fact, I'll round that up to 200,000 people. That gives them all a $60,000 severance package, which they can use to go to college or trade school, live off of while they look for work, pay moving expenses, whatever. GM is out of the taxpayers' hair, no more corporate jet flights because there won't be a corporation, and a handful of failed execs in the street with tin cups.

1 comment:

salguod said...

My reaction was different. Gm announced several things besides cutting the top salary to a buck, cutting the corporate jets (which seem symbolic) and cutting workers. It also talked about restructuring their product offerings including cutting out some brands.

Ford, on the other hand, announced the same plan they've been using and said they'll be fine by 2011 (banking on a short recession, by accounts I've heard), but maybe some loan guarantees won't hurt, you know, just in case.

GM's plan seems to have a bit more fresh thinking and a little more sober judgment. Enough? I dunno. It seems that the Ford folks are content to let GM take the heat and hopefully ride it out OK. Time will tell.

On the SUV's, you can argue the morality of selling them, but from a business standpoint it was the right thing to do. It was what they were good at and they made a bucket of money on every one. If anything, they were short sighted to not invest that in getting their car operations turned around so when the gas price spike of this year happened, they'd be prepared.

In their defense, however, their recent car offerings (Chevy Malibu, Chevy Cobalt) have been miles ahead of where they were.

The reality is there is plenty of blame to go around for GM's woes. Bad product decisions, poor management and union contracts that are out of line with the industry.