I’m quite torn on how to react to GM’s most recent statements. Rick Wagoner, CEO and Chairman of GM, recently announced nine plant closings and 30,000 layoffs by the year 2008. Who’s to blame? What’s happened to the largest automobile producer? What can we do?
The United Auto Workers (UAW) is exhausting GM of much needed cash flow through high-priced inefficient labor and unreasonable pensions and benefits. It’s apparent that these “deserving workers” don’t actual deserve it at all. According to an article by Yahoo News, GM’s efforts are to reduce its costs by $7 billion; undoubtedly a large chunk is the bloated labor rates and rising health care costs.
GM has been crippled by high labor, pension, health care and materials costs as well as by sagging demand for sport utility vehicles, its longtime cash cows, and by bloated plant capacity. Its market share has been eroded by competition from Asian automakers led by Toyota Motor Corp. GM lost nearly $4 billion in the first nine months of the year.
The UAW has made no real efforts to help reduce costs by perhaps freezing annual raises or reducing benefits. They’ve just kept pursuing more money and better pensions – pensions that are truly a rarity in our current conditions.
Delphi unions are the perfect example of how GM is failing:
The automaker could be facing a strike at Delphi Corp., its biggest parts supplier, which filed for bankruptcy protection last month. GM spun off Delphi in 1999 and could be liable for billions in pension costs for Delphi retirees.
Obviously Delphi’s inadequacies justify the elimination of all pension plans.
I blame American ‘entitlements.’ I blame stupidity. But most of all, I blame unions. Some of you probably thought that I would point fingers at the Board of Directors at GM or perhaps salesmen (ahem) of foreign products but actually no - unions are to blame. Unions are a plague to American businesses. They create larger gaps between American and international production rates which in turn weaken our GDP. This "downward death spiral" isn’t just American automakers - it’s the American economy.