Can GM Be Saved?

While I agree with most of the opinion below, there are a couple of items that also weigh in. First, both GM and Ford have had a model for success since 1985 when "The Machine That Changed the World" was first published concerning Toyota's operating principles.

Both companies chose to ignore the facts (kind of like today's liberals) and take the path of least resistance ultimately shaking down their supply base during the 1990's to "lower their operating costs".

Regarding the UAW, while I agree that it is ridiculous for an unskilled worker to make $33 per hour to put six bolts in a door, it was GM and Ford who chose to accept these stupid contracts instead of taking a strike and forcing the issue when they could still negotiate from a position of strength.

Finally, the Federal Government has a hand in this as well. The Labor department, another unconstituional branch of government overreach, continues to uphold obsolete laws forcing GM and Ford to accept ridiculous demands from the UAW because their options beyond a strike were sorely limited i.e. they couldn't simply close an organized plant and move it elsewhere to hire non-union workers without going through Congressional Inquisitions led by liberal congreement like Conyers and Dingell both of whom are in the pocket of Big Labor.


From IBD:


Posted 3/23/2006
Competition: Losing market share and hemorrhaging cash, General Motors did what any company faced with so few favorable choices would do — it punted. Nothing wrong with that, but it's still not out of the woods.
By offering to "buy out" 130,000 GM and Delphi workers for as much as $140,000 each, GM hopes to cut future payroll and benefit costs enough to generate decent profits. That, in turn, should help provide badly needed cash to reinvest in production plants. It has to be done.

Last year, GM lost $10.6 billion — $2 billion more than first reported — due mostly to its bankrupt Delphi parts unit, which is spewing red ink. Few analysts expect anything other than more losses this year and next for the auto giant, which has watched its share of the U.S. market shrink from more than 50% in the 1950s to just over 24% today. By its own estimate, it's losing $25 million a day.

The big problem is these losses aren't cyclical. They're structural. So anything short of major changes at GM won't help.

As GM loses market share and sheds workers, more nimble foreign competitors like Toyota, Nissan and Hyundai are gaining market share and hiring. GM is losing the fight because its pension and health care costs — legacies of past bad deals with the United Auto Workers — are soaring. At the same time, with its corporate bonds junk-rated and share price off nearly 60% over the last year, its cost of capital is too high to compete.
Through its JOBS Bank program, GM today pays out nearly $800 million a year to people who have been laid off, but still get nearly full pay and benefits. That's a great deal for union members, but a rotten deal for GM, its shareholders and its customers.

Add to that GM's $75 billion in health care liabilities and tens of billions owed in pension payouts, and it becomes unclear whether GM is an automaker or a welfare agency.

GM's problems didn't happen overnight; they were a long time in the making. The dimensions of the mess that current managers inherited have become clear only in the last few years. This may be why they've been so slow to innovate — why, for example, they're still wedded to selling big, gas-guzzling SUVs and haven't adjusted to the new reality of hybrid cars and $60-a-barrel oil.

GM managers deserve criticism for failing to address the problems when they were still manageable. But the real villain is the UAW. It has squeezed the company and other U.S. autoworkers dry, leaving them profitless shells of their former selves.

A recent UAW study crowed that union members earn $33.66 an hour in benefits, but non-union workers just $23.64. Maybe someone should explain to them that's why GM, which employed 520,000 workers in the late 1970s, today employs only about 130,000. And why foreign carmakers build plants and hire workers in the non-union South. The UAW, by bankrupting GM and Ford, is fast putting itself out of business.

And what's the UAW's solution to a problem it helped cause? Let the taxpayers pay for it all by nationalizing health care. Such a plan might just save GM and Ford, but it would bankrupt the rest of us.

No, sadly, GM has the same problem the U.S. government faces with its exploding Social Security and Medicare liabilities: It promised people too much, and now it can't come up with the money.

That's another reason why the GM situation bears close attention. It might yield clues about what to do when Social Security and Medicare go belly-up.