Higher Gas Prices Are Killing GM
Megam McArdle is discussing GM's woes.
GM has declared a stunning loss--over $15 billion dollars. Their cash position has fallen by about 10% since last year. That cash cushion used to comfort analysts, the notion being that GM had the reserves to ride out a long rough spell. Now liquidity fears are firming up. I'd put the probability of a GM bankruptcy in the next 10 years at 50%.The Unions want to maximize employment and the Wagner Act gives them lots of clout. What union is going to allow labor saving machinery in a plant that replaces workers? They are after all Labor Unions. They don't collect dues from robots.
The company is scrambling to retool for small cars, and I'm sure we'll hear a loud chorus of voices saying that GM did this to themselves by becoming so dependent on light trucks. Well, they did, but I'm not sure it's fair to blame management.
And then we have the Democrats - those great supporters of unions - preventing the drilling for American oil making the prices sky rocket. Now where do American car companies make their profits? Big vehicles which use a lot of fuel. Americans want those vehicles if the price of fuel is not too high.
What is the Democrat response? Well they are no longer the party of labor. Their support from labor is an anachronism. They are now the party of Ultimate Greens. You know that party. The one that says that there are too many humans consuming too much stuff and it has to stop. Right now.
And you know, in the whole comment section at Megan's post every one is saying it is labor or it is management. No one (except me) has said anything about higher oil prices.
Let me add that the American auto industry is booming. Just look at who and where. It is foreign companies locating in right to work states. American auto companies are unable to take advantage of the laws in those states because the union will not let them. Where is the profit in that for them?
Cross Posted at Classical Values
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1 comment:
Good point. About the oil, that is. I would toss two more factors into the discussion: health care and retirement plans, both of which constitute a huge revenue drain on GM and many other well-established businesses, union or not.
What we are seeing now is a shift from "employer-paid" plans (yes, we know about the cost actually being part of "labor") to employee-paid plans (401-k, IRA's, Roths) which may not shift the load but it does shift the perception of where that "retirement" tit is supplied. Meantime, the old-fashioned defined-benefits pension plans (truly employer-paid)are slowly but surely being pinched off, the sooner the better in the face of market competition with companies not carrying that liability.
And the expense of health care, once a carrot that stole good people from the marketplace as well as the competition, is no longer the juicy treat it used to be. One of Bush's good ideas, which never got a chance to grow, was to uncouple employment from health-care, beginning with doing away with the employer's cost no longer being considered a "business expense" for accounting purposes. It was a great idea that everyone seemed to hate but would have been a good step in the right direction.
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