As GM Goes . . .
Robert Kuttner, co-editor of The American Prospect and occasional contributor to The Boston Globe, is IM-not-so-HO one of the most knowledgeable and insightful writers on economic issues in America.
His column today in the Globe talks about GM's simply astonishing plan to buy out virtually all of its 131,000 GM and Delphi workers in the United States.
Stop and think about that. All its US workers — gone.
This story can't be emphasized enough. Kuttner points out its significance on a number of levels:
Kuttner asks and answers the obvious question: "Who would make the cars? A new generation of lower-paid workers."
This is exactly what The American Prospect meant when it warned recently that outsourcing could ultimately affect 50 million American jobs:
That doesn't mean all those jobs are going to be exported. It does mean that the Americans performing them will be in competition with people who will do the same work for a whole lot less.
And that means Americans who do those jobs will be paid a whole lot less, as appears will be the case soon at GM.
What do the unions say about the loss of jobs and wages? "It is a mark of GM's fragility that the UAW considers this about the best deal the union can get."
The productivity of the US worker isn't GM's problem. According to the Economic Policy Institute, productivity of the US economy in general is up 70% since 1973. But:
Economist Robert Gordon recently calculated that nearly all the fruits of that productivity went to the very top income brackets.
Gee, are you as surprised as I am?
GM's bottom-line blowout is an argument that universal health care makes good economic sense as well as being the right thing to do:
GM's foreign competitors live in nations with universal health insurance, giving domestic automakers a cost disadvantage from the get-go.
Just last year, we learned that GM is spending more on health care than on steel: "That's not an exaggeration. This year, General Motors will spend about $2.7 billion on steel and $5.6 billion on health care."
The me-firsters on the Right like to claim that US manufacturing jobs are in jeopardy because labor costs are too high. Kuttner disagrees, and points out that "total labor costs for automakers are actually about $10 an hour higher in Germany." And why aren't those automakers having the same problems as GM? Simple — "by making terrific cars."
Quality. What a concept. Who'd have thought...
Comments
I have to comment about GM's quality. The company has made great strides toward improving their quality, and JD Power has consistently given GM top scores over the last few years. Their level of quality is among the best - and even higher than that of some foreign automakers. The problem is perception. For years GM had lousy quality and didn't care until market share began to fall. They've turned it around now, but the damage has been done.
My husband happens to be a quality engineer for GM and I hear things from him you won't read about in the press. For instance, people sometimes rate their new vehicle poorly based on problems they experienced years ago with a previous car/truck. JD Power forwards customer's comments to GM and my husband has in turn called customers trying to clarify their problem. Many times he has had customers tell him they were satisfied with their new vehicle, but they were simply venting about an old issue so the company would stay on their toes. JD Power doesn't know that though and the negative rating stands.
Anyway, I just thought I would throw that in. If you check JD Powers you'll find their quality is right up there. The designs are another story though. GM has definitely come up with some odd looking cars, although I have to say some of the foreign ones are strange looking too. I guess there's no accounting for taste. I also suspect some people buy foreign simply because of the snob factor. It sounds cool to say you have a foreign make versus a boring American made car. Our quest for foreign products is now starting to bite us in the rump unfortunately. We're just holding our breath to see if my husband makes it through black Tuesday tomorrow. His job is more hands-on and can't easily be sent overseas, but you just never know anymore.
Posted by: Kathy | March 27, 2006 08:42 AM
Kathy, I hope all goes well for your husband tomorrow. Good luck...
Posted by: abi | March 27, 2006 07:15 PM
Thankfully, my husband made it through this round of job cuts. However, GM plans on eliminating 7% of its 36,000 white collar positions this year, so this is just round one.
Posted by: Kathy | March 28, 2006 11:34 AM
Kathy, glad to hear it.
I know what you mean about round one. I work in the software industry, and have had the Sword of Damocles over my head too many times. All you can do is hang in there and hope for the best. Good luck...
Posted by: abi | March 29, 2006 04:15 PM