A Weblog of Centrist Voices in American Politics
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A Weblog of Centrist Voices in American Politics | |
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March 22, 2006GM Workers, Pick a WorldGM offers workers up to $140K to leave General Motors Corp. is offering its hourly workers as much as $140,000 each to leave the company as the embattled automaker made its latest effort to cut labor costs and end billions of dollars in losses. Read the whole thing. I am sympathetic to all workers who have been promised something and now may not get it. A promise is, after all, a promise. Right? To paraphrase Seinfeld: JERRY: I don't understand, you made a promise, do you have my health insurance? Unfortunately, Jerry was left living the real world, the one where no rental cars were left. Not the ideal one where the reservation literally held the car. Here's the thing...Jerry was 100% in the right, and he still got the shaft. GM workers are facing a decision about the world they think they'll be living in when they retire. I doubt that anyone disputes that in a perfect world, GM workers would get everything that they thought was promised to them. But in the real world, does the promise still hold if GM ceases to exist as a company? If GM goes under, are the taxpayers going to foot the entire bill for the exact same coverage, at absolutely no cost? So if you're offered the 140k, don't say no without making your own judgement about how likely it is that GM will still be around when you retire, and what will happen to you if they aren't. And spend a little time asking yourself whether you think this is the last time GM is going to come to its workers with its hat in its hand, asking for concessions to keep the company alive. Here's the thing: sometimes the first offer is the best offer, or the only offer. If you want some eyewitness testimony about what you might be facing, you might want to google Polaroid, or find some ex-Polaroid workers to talk to. Remember the flick Unforgiven? Gene Hackman's on the ground dying, and Clint Eastwood's holding a gun on him. Hackman says something like, "This isn't fair." Clint says, "Fair's got nothing to do with it," and then he kills him. Posted by Kranky Kritter at March 22, 2006 12:59 PMComments
Little Bill: I don't deserve this...to die like this. I was building a house! William Munny: Deserve's got nothin' to do with it. Little Bill: I'll see you in hell, William Munny. William Munny: Yeah. BOOM! Posted by: Tully at March 22, 2006 01:19 PMWhile I sympathize with workers, no one ever states or discusses alternatives...neither the employer, nor the union, nor the media. GM is failing miserabley losing billions. We know that. The workers were given expensive promises. We know that. Where do they go from here? CAN anything be done for GM to be profitable and keep promises? anything? If not promises don't matter anymore. Market forces, poor management, globalization and overly lofty goals have created circumstances that do not permit the status quo to continue. How does toyota do it? That's what I'd like to know. This is just another reminder, on another note, that something needs to be done about healthcare costs. It's hard enough to compete globally with higher wages, the healthcare costs make it nearly impossible...not just to compete with the third and developing worlds but with countries like Canada. Posted by: John at March 22, 2006 01:21 PMOf course, the analogy breaks down because Little Bill really DID deserve what he got, and probably got better than he deserved. Posted by: Tully at March 22, 2006 01:21 PMTrue enough Tully, I wondered about that too. Hackman did deserve it. The problem is that if you try to compare Unforgiven to the GM story, Clint Eastwood isn't GM or its workers, he's ovwerwhelming global free market forces. Gene Hackman is GM and its workers. Among that pair who deserves what is matter of debate. GM overpromised, labor accepted, both are likely to pay the price. Not to mention taxpayers who fund medicare. Posted by: bk at March 22, 2006 01:28 PMAnd from the political/policy perspective is it better to encourage this process to keep the company going and hopefully preserve future jobs or to insist that the GM keep its promise and satisfy the wants/needs of its present workers and retirees. As an aside regarding healthcare, I'd advise a google on the financial status of the British and French health systems. Making a debt "public" doesn't make it any less of a debt. Posted by: C3 at March 22, 2006 01:37 PMHeh. More relevant is another movie quote. Otter: Flounder, you can't spend your whole life worrying about your mistakes! You fucked up - you trusted us! Hey, make the best of it! Maybe we can help. Flounder: [crying] That's easy for you to say!
I have long thought that employers should be required to make actuarialy sound contributions to bona fide third-party plans or funds to pay for the pension benefits it promised its workers. The workers did that work for years in return for GM's promise to provide those retirement benefits. Rather than properly account for and set aside funds to fulfill that promise, GM either just didn't bother to fund it, or invested the funds largely in its own stock, running the risk that when massive financial problems hit, the value of the stock would be insufficient to pay for its pension obligations. Rather than the government's pension guarantee program, I want to see a simple requirement that such promises by properly and fully funded. I also fault the unions for not imposing such requirements through contract negotiations. This was not an unforseeable risk. It has happened time and again throughout all types of industries. After years of paying as we went, my own state of Louisiana about 10 years ago finally started getting serious and created real accounts with real investments for all our retirement program contributions. They will soon be completely actuarialy sound, so that the fund will be able to pay our retirement obligations regardless of what happens to state finances. That's the way it should be for everybody who promises retirement benefits to workers. Posted by: PatHMV at March 22, 2006 01:47 PMPart (though certainly by no means the whole thing, or even the biggest part) of the problem is that even "actuarily sound" projections can be wrong. Especially when it comes to health care benefits, where the cost increases are many times inflation. But yeah, GM screwed the pooch. GM employees who want to rail about it should ask some of the United Airline pensioners how that goes. And how well their unions looked out for them. Lesson #1: NEVER trust a corporation farther than you can comfortably spit out a rat. Corporations are legal "persons" to which few of the traditional penalties can be applied. To wax metaphysical, they have no souls, so don't expect goodness and decency from them. The only things corporations are sincerely dedicated to are making money and protecting the cushy butts of upper management. Lesson #2: Unions aren't all that different from corporations. Lesson #3: Government bureaucracies aren't really all that different from unions and corporations. If you want financial security, you're best off making your own arrangments instead of depending on others. Posted by: Tully at March 22, 2006 03:37 PMI still think this is mostly a management problem. I can see a series of steps that IMHO would make the company profitable. If the magic helicopter came and installed me as CEO, I think I could save MOST of the employees. Not all. Some parts of the culture are so bad that maybe they can't be saved. 1) Purge the top of evil and unentrepreneurial execs. Making GM vehicles better and thus worth more is the key. If each vehicle is worth more, you can ask for more money to sell them and make more money. Second, reliability is a big reason GM has trouble making sales volume. Get rid of that, and you get alot more buyers for even the old stuff. If you have lots of money coming in from sales, it gets alot easier to reward workers well. Of course, right now, they have trouble selling much stuff, and therefore it's hard to pay people much. IMO, GM and its workers have never been able to adjust to the different world that exists since US economic dominance ended in the 60s or 70s. Immediately after the war, the US was essentially the only truly functioning economy. With no international competition, the auto companies, in particular, no longer had to fight the unions--it was easier to simply give them what they wanted and pass on the costs, either in terms of dollars or lost productivity. I certainly don't blame the unions for trying to get what they could--why should the shareholders get it all? But the "compact" between the workers and GM was created in a world that no longer exists and the workers are paying the price. The Unions and workers just have to recognize that that world no longer exists. (Of course, that's easy for me to say.) No doubt the healthcare crises contributes mightily to this. IMO, we need to stop worrying about free market dogma (or any economic dogma) and figure out a way to provide health care that is not dependent on employers. I don't think you can simply ignore GM (and the other US automakers) management's role here though. They have consistently turned out cars that underperform (at least relative to the Japanese) and have failed to perceive trends effecting the industry. The latest now is that GM is up in arms about the possibility of CAFE standards being applied to big SUVs. IMO, this is something that a sharp management should have anticipated eventually happening rather than simply hoping that the shoe wouldn't drop. Posted by: Marc at March 23, 2006 09:45 AMThe latest now is that GM is up in arms about the possibility of CAFE standards being applied to big SUVs. IMO, this is something that a sharp management should have anticipated eventually happening rather than simply hoping that the shoe wouldn't drop. Perhaps, but the thing is that most big corporations do "anticipate" such trends. And they're smart enough to see that if such things are going to be costly and harmful to their business, the best response is to fight them. SUVs have fueled the vast majority of domestic automakers success, and it has been achieved through a loophole that treats them as though they were not primarily passenger vehicles. I think it's hard to say that Ford or GM or whoever is wrong, from a business standpoint, to fight to protect the goose that has laid their golden egg. I expect them to do whatever they can to slow down the closing of such loopholes while they try to catch up. And don't forget that the extra costs that burden the domestics ARE a pretty big part of the equation. If Ford and GM pay their workers more per hour _AND_ have to fund more healthcare and retirement for more workers, that DOES present a competitive disadvantage. How big can such extra costs be before you really can't "manage them away" by being clever, nimble, and anticipatory? I don't really blame the big 3 if they do less R&D and move slower on risky strategies involving deciding when the right time was to push hybrids heavily. To some extent they were boxed in. Lower cost competitors were able to push their advantage by pursuing higher-risk but potentially lucrative bets. Honda and Toyota are reaping the benefits of this choice, and so of course this looks like it was obvious. In hindsight. But 3-5 years ago, who was predicting gas at $2.50 per gallon besides the same people who'd been constantly predicting it for a couple decades running? Seriously. Posted by: bk at March 23, 2006 12:04 PMYou know all of the foreign automakers have to put up with the same stuff as the domestics, UAW workers make foreign cars here in the US. They have the same regulatory regime to operate under, the same costs, and the same market to sell in. The only real advantage they have is they don’t have the legacy of retired workers to support. The US automakers decided to gamble that their profits and market share would never decline and made a choice to under fund the pool of money for pensioners back during the salad days. They also made a decision not to innovate; they took the easy way out by gambling on big, high profit SUVs and luxury models and totally surrendered the low-end market to the Japanese. I can’t believe that the heads of the US automakers were so short sighted to believe that cheap oil would go on forever. I don’t know, maybe they just don’t have any people at GM who like reads the newspapers. I was actually surprised to find out that the Auto companies don’t hedge on fuel prices like the airlines do Well, Rick there is also the matter of hourly wage rates. I can't confirm right now, but I believe that Ford and GM also pay substantially higher wages than say Honda does even on domestic plants. An article I read recently cited Form and GM at low mid $20s per hour and Honda around the mid teams. Relying on my memory is a dicey, but I recall seeing $22 and $27 for Ford or GM, and either 13 or 15 for Honda. When you multiply that by $9/per hour by the hours of labor per vehicle, it's not a dismissable cost. Plus the legacy costs you mention. Posted by: bk at March 24, 2006 09:56 AMMy bad. Ford and GM. Teens, not teams. Maybe it has all been a matter of shortsightedness. But IMO, that strains credulity. If every Joe Blow on the street can see the virtues of alternate strategies, why does it makes sense to assume that the Big 3 execs simply dismissed or ignored these strategies out of hand? Especially when bigwigs with stock plans have a vested interest in company success. Here's the thing...a healthy company with a competitive advantage based on lower labor costs can afford to distribute its extra eggs into a variety of diverse strategy baskets. A struggling company with a competitive disadvantage based on higher labor costs (or whatever else) is very often forced to choose the one strategy that presents the most promise, and focus its energies on that. To save money, they streamline things and cut back in areas that while potentially promising, have yet to bear substantive fruit. It's VERY easy in 2006, with the benefit of hindsight, to criticize the big 3 for emphasizing SUV sales, now that gas is $2.50 per gallon. All the people who have viscerally despised SUVs for over 10 or 15 years feel especially vindicated by doing so. But don't lose sight of the fact that anti-SUV sentiment morally based. And now, in hindsight, this moral basis is being transferred onto the idea that SUVs were always bad business. I think that's nonsense. The reason for the success of SUVs is built right into the acronym: utility. People buy cars that meet their needs, that are useful to them. The big three responded to the market by producing cras that met the needs that people said they wanted met. 4 or 5 years ago, fuel efficiency was simply not really on the true radar screens of 90% of customers. Sure, there was lip service. But when decision time came, people held their nose at 13-15 mpg and bought the vehicle with the extra space and the extra safety and the extra adaptability to different purposes and different driving environments. They bought what they wanted, within the confines of what they could afford. That's the dynamic, and its the one that any consumer-based business must respond to. Not that morals aren't marvelous. But the shortsightedness argument suggests that people with a motive to make money and with the experience and training to reach top levels of a very powerful company are idiots who can't tell their arses from their elbows. My hypothesis simply requires that shrewd businessmen make the decisions they have to when faceed with the reality equations of costs, revenue, markets, and investment. Posted by: bk at March 24, 2006 11:30 AMGood post, Brian. Posted by: PatHMV at March 24, 2006 11:43 AMJohn; 1) Purge the top of evil and unentrepreneurial execs.I think I heard of this government program. To the best of my recollection it accomplished all but #6 (although its hard to assess the level of "evil" in executives). I think this secret project was called "Toyota" ;-) Posted by: c3 at March 24, 2006 11:24 PM |
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